Non-GAAP and IFRS Earnings Disclosure Case of French Companies
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The purpose of this paper is to investigate the recent trend in the disclosure of non-GAAP earnings (NGE) by French listed companies and to examine competing explanations for their disclosure. The annual reports of forty listed companies are examined for the period from 2004 to 2013 to identify those emphasising a NGE measure rather than the audited net profit after tax (NPAT) figure, as prepared under GAAP. We find that The number of companies reporting NGE figures has increased substantially over this period of time, and in 2009 and 2010 NGE figures were significantly higher than the audited NPAT figures. We conclude the motivation for reporting NGE figures is likely to result from management’s desire to convey a more favourable impression of performance rather than simply explaining the changes resulting from the initial adoption of IFRS. The increasing trend in the number of companies reporting NGE figures in French has resulted in the Financial Markets Authority issuing draft guidelines to reduce the likelihood that users of this information will be misled by managers acting opportunistically.
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