Apple GAAP

Topics: Generally Accepted Accounting Principles, Income statement, Revenue Pages: 3 (703 words) Published: December 15, 2014
GAAP v. non-GAAP: Impacts on Financial Statements

A non-GAAP financial measure is a numerical measure of past or future financial performance, financial position or cash flows that includes amounts that are excluded from the most directly comparable GAAP measure or excludes amounts that are included in the most directly comparable GAAP measure. Some common examples of non-GAAP earnings measures are cash earnings, operating earnings, EBITDA and FFO.

The non-GAAP numbers impact revenue numbers without the use of subscription accounting. Companies that disclose operating income that excludes “nonrecurring” items such as restructuring expenses or impairment charges are using non-GAAP financial measures. Companies can use this to issue supplementary disclosures to communicate adjusted accounting numbers that better predict future performance. Because of this, companies tend to emphasize measures that portray the most favorable performance thus impacting their financial statements. This adjusted calculation may lead investors to depend on the non-GAAP numbers for form their expectations for future earnings. The non-GAAP does not adjust for the estimated costs associated with bundled upgrades or features that are free of charge to buyers of cell phones and provider services. Companies create these non-GAAP financial statements to provide a different set of numbers that might provide a different narrative for the company than the GAAP numbers.

GAAP numbers prevents an entity from simply choosing a measurement method that puts its finances in the best possible light. The purpose of GAAP's influence on financial statements is to ensure that companies use a uniform set of standards to compile the statements. The impact on financial statements is strictly dictated by GAAP requirements. For example, GAAP requires that costs be reported during the same time period as any related assets that were created through those costs. GAAP places a stronger weight on...
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