美國證管會監管信函對非GAAP與GAAP盈餘可比較性之影響

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Graduate Institute of Accounting College of Management

National Taiwan University Master Thesis

GAAP GAAP

The Effect of SEC’s Comment Letters on the Comparability of Non-GAAP and GAAP Earnings

Ting-Wei Yen

Advisor Chi-Chun Liu, Ph.D.

Lin-Hui Yu, Ph.D.

108 6

June 2019

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(3)

i

106

2019/07/04

(4)

ii

GAAP Non-GAAP Earnings

SEC GAAP

GAAP GAAP

2003 Regulation G 2010 C&DIs

Regulation G C&DIs GAAP

GAAP GAAP

GAAP

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iii

Abstract

As non-GAAP performance measures are widely used, the SEC has expressed concerns about this phenomenon and believes that non-GAAP earnings measures may be misleading to investors because of the lack of comparability. Comparability is an important part of accounting information quality. In order to diminish the non-GAAP earnings measurement, the SEC has issued various regulatory for non-GAAP earnings measurement. Regulation G, which was implemented in 2003, and C&DIs released in 2010, as well as filing reviews and comment letters issued afterward, are the regulation to regulate this alternative measurement. A large number of studies have been conducted on the release of Regulation G and C&DIs for non-GAAP earnings measurement, but few about comment letters issued by the SEC have been discussed.

We find that the SEC can effectively improve the comparability of the company's non-GAAP earnings measurement when it issues comment letters against the company's exposure to non-GAAP earnings. And when the company receives comment letters for non-GAAP earnings measurement, it does not affect the GAAP earnings. We also conduct robustness tests on these empirical results, which are consistent with our empirical results. This proves that the comment letter issued by the SEC can enhance the comparability of non-GAAP earnings measures disclosed by the company.

Keywords: Non-GAAP Earnings, SEC, Comment Letters, Comparability

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iv

... I

... II

ABSTRACT ...III ... IV

... VI

... 1

... 5

1.2.1 GAAP ... 5

1.2.2 ...13

...21

...27

3.2.1 ...27

3.2.2 ...28

...30

...32

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v

...34

...36

...38

...40

...56

...57

GAAP ...59

...60

GAAP ...60

GAAP ...61

GAAP ...62

GAAP ...63

GAAP ...64

...65

401(b) ...65

408 ...65

REG.GRULE 100 ...67

REG.S-K(10) ...70

C&DIS ...84

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vi

1 GAAP ...45

2 GAAP ...45

3 ...46

1 ...47

2 ...48

3 ...49

4 ...50

5 ...51

6 ...52

7 ONE WAY CLUSTER ...53

8 ...54

9 GAAP GAAP ....55

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1

Non-GAAP Earnings

GAAP G Regulation G Reg. G

GAAP GAAP

1

Audit Analytics ² 2006 S&P500 76%

GAAP 8-K 10-K 2016 96% S&P500

GAAP United States Securities

and Exchange Commission, SEC

Financial Accounting Standards Board, FASB GAAP

GAAP

Reg. G Compliance and

1 Black, Christensen, Ciesielski, and Whipple 2017 1990 2000

2 David McCann, Report Details Ubiquity of Non-GAAP Metrics, CFO, October 15, 2018 http://www.cfo.com/financial-reporting-2/2018/10/report-details-ubiquity-of-non-gaap-metrics/

(10)

2

Disclosure Interpretations C&DIs ³ ⁴ GAAP

8-K 10-K 10-Q Filing Reviews

GAAP Gomez,

Heflin, and Wang 2017

5

Generally Accepted Accounting

Principles GAAP GAAP

GAAP

GAAP GAAP ⁶

Russell Golden 2017 ⁷

GAAP

Reg. G 2003 Heflin and Hsu

3 2003 Regulation G Regulation S-K 2010

C&DIs C&DIs

4 Registrants 500 1,000

5 Gomez et al. 2017 GAAP

GAAP C&DIs

6 Google Uber GAAP

GAAP

7 https://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176168752402

(11)

3

2008 Nichols, Grey, and Street 2005

GAAP 2002

2006 Chen, Lee, and Lo 2017 S&P500

GAAP

Comment Letters

Brown, Tian, and Tucker 2018 Chen et al. 2017

GAAP

GAAP GAAP

(12)

4

GAAP

GAAP GAAP

(13)

5

1.2.1

2001 12 ⁸ GAAP

Pro Forma Public

Company Accounting Reform and Investor Protection Act of 2002, SOX Act 401(b)

9

GAAP

10

GAAP GAAP GAAP

GAAP

GAAP GAAP

GAAP

8 SEC, Cautionary Advice Regarding the Use of “Pro Forma” Financial Information in Earnings Releases, December 4, 2001 https://www.sec.gov/rules/other/33-8039.htm

9 https://www.sec.gov/rules/final/33-8176.htm#P69_8857

10 IOSCO (2002), An IOSCO Technical Committee Release: Cautionary Statement Regarding Non- GAAP Results Measures

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6

GAAP GAAP

GAAP

11 GAAP

Securities Exchange Act of

1934 Cease and Desist ¹²

2002 7 30 GAAP

401(b) GAAP GAAP

13

11 4 401(b) 33-8145

GAAP Reg.

G Regulation S-K, Reg. S-K 2003 3

11 Trump Hotels & Casino Resorts Inc. GAAP GAAP

https://www.sec.gov/news/headlines/trumphotels.htm

12 Cease and Desist

13

(15)

7

GAAP

14 GAAP

Reg. G GAAP

1 GAAP

GAAP 2

GAAP GAAP

GAAP

GAAP Earnings

Before Interest, Taxes, Depreciation and Amortization, EBITDA GAAP

Adjusted EBITDA

14 https://www.sec.gov/rules/final/33-8176.htm#P33_4269

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8

GAAP

Reg. G

Audit Analytics ¹⁵ 2006 S&P500 76%

GAAP 8-K 10-K 2016 96% S&P500

GAAP

International Accounting Standards Board, IASB GAAP

International Financial Reporting

Standards, IFRS GAAP

GAAP

1990 2000 GAAP

GAAP GAAP

2001 12

16 GAAP

17 GAAP

2003 Reg. G Reg. S-K

15 David McCann, Report Details Ubiquity of Non-GAAP Metrics, CFO, October 15, 2018 http://www.cfo.com/financial-reporting-2/2018/10/report-details-ubiquity-of-non-gaap-metrics/

16 SEC, Cautionary Advice Regarding the Use of “Pro Forma” Financial Information in Earnings Releases, December 4, 2001 https://www.sec.gov/rules/other/33-8039.htm

17 401(b)

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9

GAAP Prominence GAAP

2010 1 C&DIs GAAP

2011 2016 2017

Howard Scheck Chief Accountant of the Division of Enforcement GAAP

Fraud Risk Factor ¹⁸

GAAP GAAP

2016 Mary Jo White

GAAP

GAAP Mary Jo White GAAP

19 2016 Chief

Accountant James Schnurr ²⁰ GAAP

GAAP GAAP

Troubling Increase

GAAP GAAP

GAAP GAAP GAAP

18 Marie Leone, What’s on the SEC’s Radar? CFO, September 29, 2010 http://www.cfo.com/accounting-tax/2010/09/whats-on-the-secs-radar/

19 https://www.sec.gov/news/speech/keynote-2015-aicpa- white.html.

20 https://www.sec.gov/news/speech/schnurr-remarks-12th-life-sciences-accounting-congress.html

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10

GAAP

GAAP GAAP

GAAP

GAAP GAAP

2016

C&DIs ²¹ GAAP

GAAP

Lynn Turner GAAP

22

GAAP GAAP

Russell Golden GAAP

GAAP

21 Michael Rapoport, SEC Probes Whether Companies Are Misusing Adjusted Earnings Metrics, the Wall Street Journal, October 27, 2016 https://www.wsj.com/articles/sec-probes-whether-companies-are- misusing-adjusted-earnings-metrics-1477577108

22 Dow Jones Newswires, SEC Probes 4 Firms for Possible Abuses for Pro-Forma Results, the Wall Street Journal, June 19, 2001.

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11

GAAP

GAAP ²³

GAAP

Hans Hoogervorst GAAP

GAAP GAAP

1 2

3 4

GAAP

24 25

2005 5 19 International Organization of Securities

Commissions, IOSCO

23 https://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176168752402

24

http://archive. ifrs.org/Alerts/Conference/Documents/2015/Speech-Hans-Mind-the-Gap-speech-Korea- March-2015.pdf

http://archive.ifrs.org/About-us/IASB/Members/Documents/Hans-Hoogervorst-EAA-Annual- Conference-11-May- 2016.pdf

25 Black, Christensen, Ciesielski, and Whipple 2017 GAAP

IFRS IFRS

non-IFRS non-GAAP

(20)

12

8-K 10-K 10-Q

GAAP

GAAP GAAP

GAAP

26

GAAP

Center for Audit Quality, CAQ 2017

27 GAAP

1 2

GAAP

26 IOSCO (2002), An IOSCO Technical Committee Release: Cautionary Statement Regarding Non-GAAP Results Measures

27 Center for Audit Quality (2018), A Roadmap for Audit Committees

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13

GAAP GAAP

GAAP

GAAP GAAP

Bhattacharya, Black, Christensen, and Larson 2003 GAAP

GAAP Bradshaw and Sloan 2002

1.2.2

GAAP

Reg. G Reg. S-K

GAAP

(22)

14

28 2004

Freedom of Information

Act, FOIA FOIA

2004 2004

29

2002 408 ³⁰

Division of Corporation Finance 8-K 10-

K 10-Q

Management's Discussion and Analysis GAAP

31 1

28 Bozanic, Dietrich, and Johnson 2017

www.sechistorical.org 1930 Letter

of Comment Comment Letter

29 www.sec.gove/news/press/2004-89.htm

30

31 https://www.sec.gov/divisions/corpfin/cffil ingreview.htm

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15

2

32 3

Bozanic et al. 2017 1

33

2006 14% 2012 ³⁴ 80%

2

32 Shelley Parratt

https://www.sec.gov/news/speech/2009/spch110909sp.htm

33 2006 The SEC’s 2006 Audit Report #401

515 80% 1.25

8.88

34 https://www.sec.gov/divisions/corpfin/cffilingreview.htm

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16

3

4

5

Commission’s Rules of Practice

Rule 83 ³⁵

Redacted Version EDGAR

10

No Further Comment

35 https://www.sec.gov/foia/conftreat.htm

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17

EDGAR

36 2017 4,200

2002 2012

2013 54% ³⁷ 2005

2014 40%

4,000 8,000 ³⁸ ³⁹ GAAP

GAAP

36 SEC, Agency financial report fiscal year 2017

https://www.sec.gov/files/sec-2017-agency-financial-report.pdf

37 Bozanic, Dietrich, and Johnson 2017 2013 54%

38 Heese, Khan, and Ramanna 2017 2012 2014 40%

39 2002 2012 2014 4,000 8,000

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18

GAAP

8-K GAAP

GAAP Audit Analytics

GAAP ⁴⁰ GAAP

GAAP

3 1 3 8-K 10-K 10-Q

GAAP

1 1 2016 2017

GAAP GAAP

3

1

Audit Analytics ⁴¹ GAAP

Reg. S-K⁴² GAAP GAAP

C&DIs⁴³

40 Deloitte 2017

41 https://blog.auditanalytics.com/trends-in-sec-non-gaap-comment-letters-2016-2018/

42 Reg .S-K 10(e)(1)(i)(A)

43 C&DIs Q102.10

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19

GAAP

GAAP GAAP

GAAP

GAAP GAAP GAAP

GAAP GAAP

GAAP

GAAP GAAP

C&DIs 100.01 ⁴⁴

C&DIs 100.03 ⁴⁵

44 C&DIs Q100.01

45 C&DIs Q100.03

(28)

20

2 GAAP

GAAP

2

(29)

21

GAAP Opportunism

Informativeness Lynn Turner

GAAP

46

Bowen, Davis, and Matsumoto 2005 Elliott 2006

GAAP Guillamon-Saorin, Osma, and Jones 2012

GAAP Graham, Harvey, and Rajgopal 2005

GAAP GAAP

Walker and Louvari 2003 GAAP

GAAP GAAP

Black and Christensen 2009 GAAP

GAAP GAAP

GAAP

GAAP GAAP Black, Christensen,

Kiosse, and Steffen 2017 GAAP

46 Dow Jones Newswires, SEC Probes 4 Firms for Possible Abuses for Pro-Forma Results, the Wall Street Journal, June 19, 2001.

(30)

22

De Franco,

Kothari, and Verdi 2011 GAAP

GAAP Bradshaw

and Sloan 2002 GAAP GAAP

Johnson and Schwartz 2005 GAAP

GAAP

Reg. G

Reg. S-K GAAP

GAAP Heflin and Hsu 2008 Nichols

et al. 2005 Kolev, Marquardt and McVay 2008 GAAP

Bentley, Christensen, Gee, and Whipple 2018 Black, Black, Christensen, and Heninger 2012

Reg. G GAAP

Black et al. 2017 GAAP

Reg. G Kolev

et al. 2008 GAAP Reg. G

(31)

23

Reg. G

GAAP Bowen et

al. 2005 GAAP

2011

C&DIs Reg. G Bond, Czernkowski, Lee, and

Loyeung 2017 Reg. G GAAP

2011 C&DIs GAAP

Duro, Heese, and Ormazabal 2019

2004 EDGAR

Cunningham, Schmardebeck, and Wang 2016

Johnston and Petacchi 2012

Bozanic et al. 2017

GAAP

(32)

24

Gomez et al. 2017 GAAP

GAAP

1 GAAP

2 GAAP GAAP 3

GAAP 4 GAAP

GAAP

GAAP GAAP

GAAP

Bhattacharya et al. 2003 Bradshaw and Sloan 2002 Black et al. 2012

GAAP GAAP

(33)

25

GAAP

GAAP Bozanic et al. 2017

Chen et al. 2017 GAAP

GAAP GAAP

1a

1a GAAP

GAAP

Yip and Young 2012 Cascino and Gassen 2015

GAAP

De Franco et al. 2011 GAAP

GAAP GAAP

GAAP

GAAP 1a

1b

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26

1b GAAP

GAAP

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27

P

G

3.2.1

De Franco et al. 2011 ⁴⁷

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2 i t 16 Return_it

Earnings_it α$_i β%_i i

Earnings_it = α_i + β_iReturn_it + ε_it…… 2

3 Return_it

E(Earnings)_iit

E(Earnings)_iit = α$_i + β%_iReturn_it…… 3

47 Black, Christensen, Ciesielski, and Whipple 2018 De Franco et al. 2011 GAAP

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28

i

Return_it 4 j t Return_it

j α$_j β%_j E(Earnings)_ijt

E(Earnings)_ijt = α$_j+ β%_jReturn_it…… 4

De Franco et al. 2011 i j 16 i j

Comparability_ijt=- ¹

16× ∑^t_t–15'E(Earnings_iit)-E(Earning_ijt)'…… 5

E(Earnings_iit) t i i

E(Earning_ijt) t i j

5 i j

SIC code 2-digit i

3.2.2

1a GAAP

1b GAAP

COMP_it= α+ β₁ POST_it+β_n CONTROL_it+ ε_it…… 5

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29

1a COMP_it i t GAAP

POST_it i t GAAP

POST_it 0 POST_it 1

1b COMP_it i t GAAP POST_it

i t GAAP POST_it

0 POST_it 1

Francis, Pinnuck, and Watanabe 2014 Cascino and Gassen 2015

1

(38)

30

Gomez et al. 2017

GAAP 8-K

GAAP Louis, Robinson,

and Sbaraglia 2008 Davis and Tama-Sweet 2012

10-K 10-Q

Black et al. 2017 GAAP

GAAP 8-K

Compustat 2000 2017

I/B/E/S

16

GAAP I/B/E/S

CRSP

Audit Analytics GAAP

8-K 2000

2017 2004

2000

(39)

31

48

POST=1

POST=0 2009 2013

GAAP 2009

2007 2008 POST=0 2009 2010

POST=1 2013

4 ⁴⁹

2

48 Gomez et al. 2017

49 GAAP

GAAP

(40)

32

A

3

GAAP

3 3 2005 2016

2004

2003 Reg. G 2016

C&DIs 2016 GAAP

GAAP 2016

GAAP

3

4 5

1% 99%

GAAP NG_COMP

GAAP G_COMP GAAP

GAAP

(41)

33

GAAP GAAP

POST_2 0

1 0.553

STD_SALE 0.037 0.025

0.041 STD_OCF 0.023

0.018 0.018

SALE_GRWTH 0.123 0.067 0.400

OCF 0.080 0.084 0.088

LOSSPROB 0.296 0.188

50% BIG4

1

4

5

(42)

34

A

6 POST COMP

1% R 0.346

GAAP GAAP

GAAP

GAAP 0.1

GAAP

6

GAAP

0.106 5% R 0.369

GAAP

(43)

35

6

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GAAP

GAAP POST

R 0.436 0.429

1b GAAP

GAAP ⁵⁰

50 GAAP GAAP GAAP

GAAP GAAP

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36

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7

8 POST

GAAP GAAP

8

Audit Analytics GAAP

51 2000 2017

8-K 8-K

GAAP

POST

GAAP 9

GAAP

51

(45)

37

GAAP GAAP

9

(46)

38

A

GAAP

GAAP 2003

GAAP GAAP

De Franco et al. 2011

De Franco et al. 2011 GAAP

GAAP

GAAP GAAP

GAAP

De Franco et al.

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39

2011 16 GAAP

16

GAAP

2010 C&DIs 2016 2017

GAAP

S&P500

GAAP GAAP

GAAP

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40

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2002 355

(53)

45

1 GAAP

2 GAAP

(54)

46

3

(55)

47

1

COMP GAAP GAAP

POST GAAP

1 0

STD_SALE 16

STD_OCF 16

SALE_GRWTH OCF

MTB ROA LEV SIZE BIG4

LOSSPROB 16

(56)

48

2

Audit Analytics 8-K 598

8-K GAAP (60)

538

GAAP (196)

GAAP 342

1,130 2,000

(57)

49

3

8K

GAAP GAAP

2004 8 28 24 111

2005 44 118 441 2305

2006 34 140 867 3156

2007 13 66 570 2593

2008 17 58 461 2929

2009 17 63 842 4160

2010 17 48 455 3458

2011 20 60 424 2731

2012 16 52 568 2537

2013 15 33 386 2151

2014 11 31 285 1687

2015 23 60 325 1487

2016 76 193 927 1742

2017 31 71 790 1494

342 1021 7365 32541

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NG_COMG_COMPOST_2 STD_SALESTD_OCFSALE_GRWTHOCFMTBROALEVSIZE BIG4 LOSSPROBNG_COM1.00G_COM0.60***1.00POST_20.07**0.051.00STD_SALE -0.12***-0.07**-0.05*1.00STD_OCF-0.19***-0.09***-0.040.43***1.00 SALE_GRWTH0.010.040.03-0.030.041.00OCF0.40***0.33***0.03-0.06*-0.08**-0.07**1.00

MTB 0.10***0.050.03-0.030.10***0.030.13***1.00 ROA0.32***0.45***-0.01-0.03-0.020.09***0.47***0.09***1.00 LEV-0.09***-0.08**0.040.11***0.05*-0.05*0.030.06**0.021.00 SIZE0.19***0.08**0.04-0.13***-0.20***-0.000.17***0.010.20***0.28***1.00 BIG40.020.02-0.010.00-0.03-0.02-0.02-0.010.030.06*0.25***1.00LOSSPROB -0.44***-0.53***-0.050.13***0.18***0.09***-0.47***-0.06**-0.43***-0.05-0.37***-0.10***1.00

N=1019

*p < 0.1,** p < 0.05, *** p < 0.01

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ObservationsMeanStdDev.Q1MedianQ3

NG_COM1130 -1.0821.342-1.140-0.715-0.490

G_COM1019 -2.5912.669-2.970-1.710-1.100

POST1130 0.5530.4970.0001.0001.000

STD_SALE1130 0.0370.0410.0150.0250.044

STD_OCF1130 0.0230.0180.0130.0180.027

SALE_GRWTH1130 0.1230.400-0.0220.0670.186

OCF1130 0.0800.0880.0490.0840.122

MTB1130 3.2118.0371.3872.2013.655

ROA1130 -0.0010.181-0.0140.0310.062

LEV1130 0.5330.2960.3460.5420.678

SIZE1130 7.5371.6556.2347.4708.788

BIG4 1130 0.9130.2821.0001.0001.000

LOSSPROB1130 0.2960.2960.0620.1880.500

N1130

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6

NG_COMP G_COMP

2 4 2 4

POST 0.100* 0.106** 0.147 0.155

(1.652) (2.395) (1.162) (1.561)

STD_SALE -0.060 -1.291 -2.885 -4.259**

(-0.070) (-1.350) (-1.266) (-2.120)

STD_OCF -12.099*** -8.971*** -2.004 0.944

(-2.798) (-3.244) (-0.388) (0.255)

SALE_GRWTH -0.129 -0.005 0.529*** 0.639***

(-1.210) (-0.045) (2.694) (3.366)

OCF 2.345** 2.788*** 1.787 1.328

(2.526) (3.608) (1.157) (1.248)

MTB 0.009** 0.005 -0.003 -0.004

(2.364) (1.536) (-0.274) (-0.489)

ROA 0.793 0.437 4.438*** 3.296***

(1.261) (1.389) (4.780) (6.091)

LEV -0.103 -0.312** -0.545 -1.019***

(-0.487) (-2.538) (-1.510) (-3.624)

SIZE 0.033 0.070*** -0.142** -0.061

(1.262) (3.383) (-2.359) (-1.394)

BIG4 -0.071 -0.237*** -0.000 -0.312*

(-0.658) (-2.900) (-0.002) (-1.954)

LOSSPROB -1.287*** -1.256*** -3.972*** -4.182***

(-6.629) (-8.059) (-10.301) (-14.225)

Constant -1.768*** -0.874* 0.682 -0.050

(-5.762) (-1.951) (1.030) (-0.062)

Industry FE Y Y Y Y

Observations 1,130 2,000 1,019 1,828

Adjust R² 0.346 0.369 0.436 0.429

*** p<0.01, ** p<0.05, * p<0.1

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7 ONE WAY CLUSTER

NG_COMP G_COMP

2 4 2 4

POST 0.100* 0.106** 0.147 0.155

(1.667) (2.129) (1.162) (1.328)

STD_SALE -0.060 -1.291 -2.885 -4.259*

(-0.062) (-1.096) (-0.969) (-1.824)

STD_OCF -12.099** -8.971** -2.004 0.944

(-2.359) (-2.269) (-0.309) (0.177)

SALE_GRWTH -0.129 -0.005 0.529** 0.639***

(-1.205) (-0.045) (2.299) (2.778)

OCF 2.345** 2.788*** 1.787 1.328

(2.232) (2.954) (1.054) (1.003)

MTB 0.009** 0.005 -0.003 -0.004

(2.105) (1.354) (-0.241) (-0.419)

ROA 0.793 0.437 4.438*** 3.296***

(1.350) (1.449) (4.691) (7.213)

LEV -0.103 -0.312** -0.545 -1.019***

(-0.603) (-2.294) (-1.257) (-2.608)

SIZE 0.033 0.070** -0.142* -0.061

(1.074) (2.307) (-1.712) (-0.982)

BIG4 -0.071 -0.237* -0.000 -0.312

(-0.493) (-1.919) (-0.002) (-1.438)

LOSSPROB -1.287*** -1.256*** -3.972*** -4.182***

(-5.178) (-5.774) (-7.798) (-10.461)

Constant -1.768*** -0.874*** 0.682 -0.050

(-4.530) (-2.703) (0.779) (-0.077)

Industry FE Y Y Y Y

Observations 1,130 2,000 1,019 1,828

Adjust R² 0.346 0.369 0.436 0.429

*** p<0.01, ** p<0.05, * p<0.1

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8

NG_COMP G_COMP

6 8 10 6 8 10

POST 0.094** 0.097** 0.094** 0.093 0.086 0.097 (2.390) (2.536) (2.543) (1.027) (1.012) (1.193) STD_SALE -2.481** -2.219** -2.004** -4.303** -4.499** -5.184***

(-2.118) (-2.070) (-1.969) (-2.192) (-2.422) (-2.931) STD_OCF -7.152*** -6.350*** -7.414*** 0.334 0.008 0.041 (-3.060) (-2.941) (-3.660) (0.095) (0.002) (0.013) SALE_GRWTH 0.063 0.090 0.117 0.590*** 0.589*** 0.532***

(0.618) (0.926) (1.204) (4.038) (4.310) (4.015) OCF 2.683*** 2.955*** 2.855*** 1.172 2.155** 2.129**

(4.119) (5.016) (5.328) (1.308) (2.326) (2.539)

MTB 0.005* 0.004 0.005** -0.008 -0.010 -0.005

(1.943) (1.558) (1.964) (-0.788) (-0.964) (-0.495)

ROA 0.334 0.359 0.408 2.856*** 2.939*** 2.912***

(1.280) (1.403) (1.603) (6.012) (6.076) (6.201) LEV -0.506*** -0.514*** -0.528*** -1.309*** -1.188*** -1.265***

(-4.059) (-4.532) (-4.712) (-4.675) (-4.860) (-5.318) SIZE 0.094*** 0.095*** 0.094*** -0.008 0.016 0.023 (4.754) (5.230) (5.543) (-0.205) (0.438) (0.691) BIG4 -0.196*** -0.218*** -0.197*** -0.379** -0.450*** -0.386***

(-2.638) (-3.220) (-2.936) (-2.345) (-2.905) (-2.580) LOSSPROB -1.231*** -1.195*** -1.185*** -4.255*** -3.993*** -3.890***

(-9.148) (-9.826) (-10.578) (-16.518) (-17.157) (-17.722) Constant -0.916** -0.938** -0.931** -0.158 -0.490 -0.587

(-2.036) (-2.091) (-2.090) (-0.196) (-0.645) (-0.791)

Industry FE Y Y Y Y Y Y

Observations 2,626 3,077 3,395 2,424 2,851 3,158

Adjust R² 0.358 0.357 0.366 0.42 0.423 0.427

*** p<0.01, ** p<0.05, * p<0.1

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9 GAAP GAAP

NG_COMP

2 4

POST -0.029 -0.049

(-0.189) (-0.243)

STD_SALE 5.462 1.710

(1.053) (0.592)

STD_OCF 12.483 7.164

(0.924) (0.830)

SALE_GRWTH -0.319 0.013

(-0.744) (0.033)

OCF 5.478*** 4.748***

(3.844) (4.518)

MTB -0.035* -0.025*

(-1.937) (-1.717)

ROA 2.404*** 1.693***

(3.275) (4.033)

LEV -0.456 -0.821

(-0.810) (-1.636)

SIZE 0.106 0.095

(1.034) (1.070)

BIG4 -0.066 -0.106

(-0.211) (-0.343)

LOSSPROB -1.077** -1.615***

(-2.080) (-2.989)

Constant -1.734 -0.390

(-1.554) (-0.385)

Industry FE YES YES

Observations 261 467

Adj R² 0.744 0.636

*** p<0.01, ** p<0.05, * p<0.1

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Generally Accepted Accounting Principles, GAAP Cease and Desist

Center for Audit Quality, CAQ Comment Letters

Commission’s Rules of Practice

Compliance and Disclosure Interpretations, C&DIs Division of Corporation Finance

Division of Enforcement Filing Reviews

Financial Accounting Standards Board, FASB Fraud risk factor

Freedom of Information Act, FOIA

International Accounting Standards Board, IASB International Financial Reporting Standards, IFRS International Organization of Securities Commissions,

IOSCO

Management's Discussion and Analysis, MD&A Non-GAAP Earnings

Pro Forma Prominence

Public Company Accounting Reform and Investor Protection Act of 2002, SOX Act

Registrants

Regulation G G

Regulation S-K S-K

Securities Exchange Act of 1934

United States Securities and Exchange Commission, SEC

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Earnings_it = α_i + β_iReturn_it + ε_it …… 1 E(Earnings)_iit = α"_i + β#_iReturn_it …… 2 E(Earnings)_ijt = α"_j+ β#_jReturn_it …… 3

Comparability_ijt=-₁₆¹ × ∑^t_t–15%E(Earnings_iit)-E(Earning_ijt)% …… 4

2016 Amazon GVKEY=064768 i Office

DEPOT & OfficeMAX GVKEY=014624 j SIC 59

12 31

1 α β 2015

α"_i 0.00048773 β#_i 0.00080821 j α"_j 0.0107037 β#_j -0.00706682

E(Earnings)_iit = 0.00048773 + 0.00080821 Return_it…… 5 E(Earnings)_ijt = 0.01070370 – 0.00706682 Return_it…… 6

Amazon 2013 2016 2

2013 2016

Amazon 2013 2016 3

2013 2016

4

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i j

Returnit E(Earnings)iit Returnit E(Earnings)ijt

2013 0.06226330 0.000538052 0.06226330 0.010263696 0.009725645 2013 0.04202789 0.000521697 0.04202789 0.010406696 0.009884999 2013 0.12585981 0.000589451 0.12585981 0.009814271 0.009224820 2013 0.27555653 0.000710438 0.27555653 0.008756392 0.008045954 2014 -0.15653610 0.000361216 -0.15653610 0.011809912 0.011448696 2014 -0.03444170 0.000459894 -0.03444170 0.010947093 0.010487200 2014 -0.00720490 0.000481907 -0.00720490 0.010754616 0.010272709 2014 -0.03749530 0.000457426 -0.03749530 0.010968673 0.010511247 2015 0.19896891 0.000648539 0.19896891 0.009297623 0.008649084 2015 0.16659498 0.000622374 0.16659498 0.009526403 0.008904030 2015 0.17922556 0.000632582 0.17922556 0.009437145 0.008804563 2015 0.32038132 0.000746665 0.32038132 0.008439623 0.007692957 2016 -0.12169140 0.000389378 -0.12169140 0.011563671 0.011174293 2016 0.20547803 0.000653799 0.20547803 0.009251624 0.008597824 2016 0.17004835 0.000625165 0.17004835 0.009501999 0.008876834 2016 -0.10442970 0.000403329 -0.10442970 0.011441686 0.011038357 -0.009583701

De Franco et al. 2011 SIC59

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GAAP

Uber Non-GAAP

https://s23.q4cdn.com/407969754/files/doc_financials/2019/Q1/Q1-2019-supplemental- slides.pdf

Google Non-GAAP

https://abc.xyz/investor/static/pdf/2019Q1_alphabet_earnings_release.pdf

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GAAP

International Paper Company.

8-K 2016 7 28

2016 9 22

https://www.sec.gov/Archives/edgar/data/51434/000000000016094091/filename1.pdf

Dear Ms. Roberts:

We have limited our review of your filing to those issues we have addressed in our comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure.

Please respond to these comments within ten business days by providing the requested information or advise us as soon as possible when you will respond. If you do not believe our comments apply to your facts and circumstances, please tell us why in your response.

After reviewing your response to these comments, we may have additional comments.

Form 8-K Filed July 28, 2016

1. We note that you describe second quarter 2016 earnings as “strong overall results”

in the headline caption and this appears to refer solely to your non-GAAP results.

In future earnings releases, please include an equally prominent descriptive characterization of the comparable GAAP results. See Question 102.10 of the updated Non-GAAP Compliance and Disclosure Interpretations issued on May 17, 2016. In addition, consider whether the term “overall” is appropriate to describe results that exclude significant expenses.

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GAAP

Hertz Global Holdings Inc.

8-K 2016 8 9

2016 9 28

Dear Mr. Kennedy:

1. You present a full non-GAAP income statement when reconciling non-GAAP measures to the most directly comparable GAAP measures. Please reconcile without presenting a full non-GAAP income statement in your next earnings release. See Question 102.10 of the updated Non-GAAP Compliance and Disclosure Interpretations issued on May 17, 2016.

2. Your computation of free cash flow differs from the typical calculation (cash flows from operating activities as presented in the statement of cash flows under GAAP, less capital expenditures). See Question 102.07 of the Non-GAAP Compliance and Disclosure Interpretations and revise the title of this non-GAAP measure.

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GAAP

Air Products and Chemicals, Inc.

8-K 2016 1 29

2016 2 26

Dear Mr. Crocco:

We have limited our review of your filing to the financial statements and related disclosures and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure.

Form 8-K Filed on January 29, 2016

1. In your earnings release, we note you provide disclosures that you identify as

“EPS”, “Net Income”, “Operating Income”, and “EPS Guidance” that actually relate to non- GAAP financial measures. Please revise future disclosures related to non-GAAP financial measures to not use GAAP terminology when you refer to non-GAAP financial measures.

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GAAP Apache Corporation

8-K 2016 8 4

2016 9 22

Dear Mr. Riney:

Form 8-K Filed August 4, 2016

1. We note that the adjustments to arrive at adjusted earnings are presented “net of tax.” Please present the income tax effects of your non-GAAP adjustments as a separate adjustment and explain how you calculated the income tax effects related to these adjustments in your next earnings release. See Question 102.11 of the updated Non- GAAP Compliance and Disclosure Interpretations issued on May 17, 2016.

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GAAP

Abbott Laboratories

8-K 2017 1 25

2017 3 29

Dear Mr. Yoor:

We have limited our review of your filing to the issue we have addressed in our comment. In our comment, we ask you to provide us with information so we may better understand your disclosure.

Please respond to the comment within ten business days by providing the requested information or advise us as soon as possible when you will respond. If you do not believe our comment applies to your facts and circumstances, please tell us why in your response.

After reviewing your response to the comment, we may have additional comments.

Form 8-K filed January 25, 2017 Exhibit 99.1

1. Please refer to the non-GAAP reconciliations of financial information from continuing operations on pages 14 and 15. For each reconciliation and for each line item (other than intangible amortization), provide us a schedule of the "specified items" showing the amount and description of each specified item.

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401(b)

(b) COMMISSION RULES ON PRO FORMA FIGURES.

Not later than 180 days after the date of enactment of the Sarbanes-Oxley Act of 2002, the Commission shall issue final rules providing that pro forma financial information included in any periodic or other report filed with the Commission pursuant to the securities laws, or in any public disclosure or press or other release, shall be presented in a manner that

(1) does not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the pro forma financial information, in light of the circumstances under which it is presented, not misleading; and

(2) reconciles it with the financial condition and results of operations of the issuer under generally accepted accounting principles.

408

(a) REGULAR AND SYSTEMATIC REVIEW.

The Commission shall review disclosures made by issuers reporting under section 13(a) of the Securities Exchange Act of 1934 (including reports filed on Form 10–K), and which have a class of securities listed on a national securities exchange or traded on an automated quotation facility of a national securities association, on a regular and systematic basis for the protection of investors. Such review shall include a review of an issuer’s financial statement.

(b) REVIEW CRITERIA.

For purposes of scheduling the reviews required by subsection (a), the Commission shall consider, among other factors,

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(1) issuers that have issued material restatements of financial results;

(2) issuers that experience significant volatility in their stock price as compared to other issuers;

(3) issuers with the largest market capitalization;

(4) emerging companies with disparities in price to earning ratios;

(5) issuers whose operations significantly affect any material sector of the economy;

(6) any other factors that the Commission may consider relevant.

(c) MINIMUM REVIEW PERIOD.

In no event shall an issuer required to file reports under section 13(a) or 15(d) of the Securities Exchange Act of 1934 be reviewed under this section less frequently than once every 3 years.

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Reg. G Rule 100

(a) Whenever a registrant, or person acting on its behalf, publicly discloses material information that includes a non-GAAP financial measure, the registrant must accompany that non-GAAP financial measure with:

(1) A presentation of the most directly comparable financial measure calculated and presented in accordance with Generally Accepted Accounting Principles (GAAP); and (2) A reconciliation (by schedule or other clearly understandable method), which shall be quantitative for historical non-GAAP measures presented, and quantitative, to the extent available without unreasonable efforts, for forward-looking information, of the differences between the non-GAAP financial measuredisclosed or released with the most comparable financial measure or measures calculated and presented in accordance with GAAP identified in paragraph (a)(1) of this section.

(b) A registrant, or a person acting on its behalf, shall not make public a non-GAAP financial measure that, taken together with the information accompanying that measure and any other accompanying discussion of that measure, contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the presentation of the non-GAAP financial measure, in light of the circumstances under which it is presented, not misleading.

(c) This section shall not apply to a disclosure of a non-GAAP financial measure that is made by or on behalf of a registrant that is a foreign private issuer if the following conditions are satisfied:

(1) The securities of the registrant are listed or quoted on a securities exchange or inter- dealer quotation system outside the United States;

(2) The non-GAAP financial measure is not derived from or based on a measure calculated and presented in accordance with generally accepted accounting principles

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in the United States; and

(3) The disclosure is made by or on behalf of the registrant outside the United States, or is included in a written communication that is released by or on behalf of the registrant outside the United States.

(d) This section shall not apply to a non-GAAP financial measure included in disclosure relating to a proposed business combination, the entity resulting therefrom or an entity that is a party thereto, if the disclosure is contained in a communication that is subject to

§ 230.425 of this chapter, § 240.14a-12 or § 240.14d-2(b)(2) of this chapter or § 229.1015 of this chapter.

Notes to § 244.100:

1. If a non-GAAP financial measure is made public orally, telephonically, by Web cast, by broadcast, or by similar means, the requirements of paragraphs (a)(1)(i) and (a)(1)(ii) of this section will be satisfied if:

(i) The required information in those paragraphs is provided on the registrant's Web site at the time the non-GAAP financial measure is made public; and

(ii) The location of the web site is made public in the same presentation in which the non-GAAP financial measure is made public.

2. The provisions of paragraph (c) of this section shall apply notwithstanding the existence of one or more of the following circumstances:

(i) A written communication is released in the United States as well as outside the United States, so long as the communication is released in the United States contemporaneously with or after the release outside the United States and is not otherwise targeted at persons located in the United States;

(ii) Foreign journalists, U.S. journalists or other third parties have access to the

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information;

(iii) The information appears on one or more web sites maintained by the registrant, so long as the web sites, taken together, are not available exclusively to, or targeted at, persons located in the United States; or

(iv) Following the disclosure or release of the information outside the United States, the information is included in a submission by the registrant to the Commission made under cover of a Form 6-K.

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Reg. S-K (10)

(a)Application of Regulation S-K.

This part (together with the General Rules and Regulations under the Securities Act of 1933, 15 U.S.C. 77aet seq., as amended (Securities Act), and the Securities Exchange Act of 1934, 15 U.S.C. 78aet seq., as amended (Exchange Act) (parts 230 and 240 of this chapter), the Interpretative Releases under these Acts (parts 231 and 241 of this chapter) and the forms under these Acts (parts 239 and 249 of this chapter)) states the requirements applicable to the content of the non-financial statement portions of:

(1) Registration statements under the Securities Act (part 239 of this chapter) to the extent provided in the forms to be used for registration under such Act; and

(2) Registration statements under section 12 (subpart C of part 249 of this chapter), annual or other reports under sections 13 and 15(d) (subparts D and E of part 249 of this chapter), going-private transaction statements under section 13 (part 240 of this chapter), tender offer statements under sections 13 and 14 (part 240 of this chapter), annual reports to security holders and proxy and information statements under section 14 (part 240 of this chapter), and any other documents required to be filed under the Exchange Act, to the extent provided in the forms and rules under that Act.

(b)Commission policy on projections.

The Commission encourages the use in documents specified in Rule 175 under the Securities Act (§ 230.175 of this chapter) and Rule 3b-6 under the Exchange Act (§

240.3b-6 of this chapter) of management's projections of future economic performance that have a reasonable basis and are presented in an appropriate format. The guidelines set forth herein represent the Commission's views on important factors to be considered in formulating and disclosing such projections.

(1)Basis for projections. The Commission believes that management must have the

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option to present in Commission filings its good faith assessment of a registrant's future performance. Management, however, must have a reasonable basis for such an assessment. Although a history of operations or experience in projecting may be among the factors providing a basis for management's assessment, the Commission does not believe that a registrant always must have had such a history or experience in order to formulate projections with a reasonable basis. An outside review of management's projections may furnish additional support for having a reasonable basis for a projection. If management decides to include a report of such a review in a Commission filing, there also should be disclosure of the qualifications of the reviewer, the extent of the review, the relationship between the reviewer and theregistrant, and other material factors concerning the process by which any outside review was sought or obtained. Moreover, in the case of a registration statement under the Securities Act, the reviewer would be deemed an expert and an appropriate consent must be filed with the registration statement.

(2)Format for projections. In determining the appropriate format for projections included in Commission filings, consideration must be given to, among other things, the financial items to be projected, the period to be covered, and the manner of presentation to be used. Although traditionally projections have been given for three financial items generally considered to be of primary importance to investors (revenues, net income (loss) and earnings (loss) per share), projection information need not necessarily be limited to these three items. However, management should take care to assure that the choice of items projected is not susceptible of misleading inferences through selective projection of only favorable items. Revenues, net income (loss) and earnings (loss) per share usually are presented together in order to avoid any misleading inferences that may arise when the individual items reflect contradictory trends. There

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may be instances, however, when it is appropriate to present earnings (loss) from continuing operations in addition to or in lieu of net income (loss). It generally would be misleading to present sales or revenue projections without one of the foregoing measures of income. The period that appropriately may be covered by a projection depends to a large extent on the particular circumstances of the company involved. For certain companies in certain industries, a projection covering a two or three year period may be entirely reasonable. Other companies may not have a reasonable basis for projections beyond the current year. Accordingly, management should select the period most appropriate in the circumstances. In addition, management, in making a projection, should disclose what, in its opinion, is the most probable specific amount or the most reasonable range for each financial item projected based on the selected assumptions. Ranges, however, should not be so wide as to make the disclosures meaningless. Moreover, several projections based on varying assumptions may be judged by management to be more meaningful than a single number or range and would be permitted.

(3)Investor understanding.

(i) When management chooses to include its projections in a Commission filing, the disclosures accompanying the projections should facilitate investor understanding of the basis for and limitations of projections. In this regard investors should be cautioned against attributing undue certainty to management's assessment, and the Commission believes that investors would be aided by a statement indicating management's intention regarding the furnishing of updated projections. The Commission also believes that investor understanding would be enhanced by disclosure of the assumptions which in management's opinion are most significant to the projections or are