Question

In: Accounting

1.) Does the use of Non-GAAP reports impair the ability to compare prior periods and competitors...

1.) Does the use of Non-GAAP reports impair the ability to compare prior periods and competitors reports?

2.) Does the Non-GAAP numbers provide a reasonable source of reliable information?

3,) Should corporations be REQUIRED to report ALL numbers in accordance with GAAP...even during the quarterly, non-audited venue?

4.) Is there a need to translate complex GAAP based information into more useful financial data?

Solutions

Expert Solution

1.) Does the use of Non-GAAP reports impair the ability to compare prior periods and competitors reports?

Answer:- Yes. Non GAAP reports impair the ability to compare prior periods and competitors reports. The basic objective of using GAAP in preparing financial statments is to, prepare those financial statments in such a way that they should be able to compare internally with its previous reports and also compare with their competitors statments also. It is impossible to compare non GAAP reports with prior periods and also with competitors.

For Example:- If our company is using Acrual method of accounting and our competitor is using Cash basis of accounting...It is meaning less to comare both financial statments. So, Non GAAP reports which does not follow maintaining Accrual basis of accounting asccording to GAAP, not possible to compare.

2.) Does the Non-GAAP numbers provide a reasonable source of reliable information?

Answer:- No, Non - GAAP numbers does not provide a reasonable source of reliable information. Because in non GAAP reports future losses are not taken into account and it is a non reialble information which effects the Financial statments. At the same time source from which the financial information is obtained is also not reliable when numbers are based on Non - GAAP financial information. And the principles used in GAAP are more scientific and systematic which are absent in Non GAAP financial information.

3,) Should corporations be REQUIRED to report ALL numbers in accordance with GAAP...even during the quarterly, non-audited venue?

Answer: Yes, all corporations are REQUIRED to report ALL numbers in accordance with GAAP, at present in the global world our financial information may be accessed by any other foreign company. And it can understand our true fianancial status only when our financial statment numbers are in accordance with GAAP. And it is also required by companies law to maintain our financial records under GAAP. All numbers should be in accordance with GAAP even during the Quarterly and non - audited venue. Which enables the corporations to compare its quarterly results most accurately as possible.

4.) Is there a need to translate complex GAAP based information into more useful financial data?

Answer:- Yes, most of the times the persons who use finanacial data like stake holders who want to invest, purchase shares or for any other purpose may not be able to understand financial data if it is prepared under Complex GAAP rulings. So, it is needed to translate complex GAAP based information into more useful financial data. But it depends on the type of people who are using our financial data. If they are educated and having accounting knowledge there is no need to transalte, in case those people are poor in understanding accounting and financial information it should be needed to translate Complex GAAP. Because our Financial information is the only thing which communicates in a very better way about our financial status, than any other media. If it communicates in a undersandable manner it will be good for our corporation.


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