Public companies that tout overly rosy earnings numbers that don’t comply with US accounting rules, watch out.
The Securities and Exchange Commission is blitzing businesses with questions about alternative accounting measures and asking them to justify their use. In some cases they’re telling them to quit showcasing earnings that strip out normal, recurring expenses. Retailers and consumer-facing companies face especially pointed questions, recently released comment letters show.
Academy Sports & Outdoors Inc., Dave & Buster’s Entertainment Inc., and Petco Health & Wellness Company Inc. have all drawn the SEC’s attention for excluding expenses to open new stores or close old ones from supplemental earnings metrics that don’t follow US generally accepted accounting principles, or GAAP. The missives follow new SEC guidance from December about which unofficial accounting adjustments are acceptable and which are out of bounds.
Source: Retailers’ ‘Borderline Misleading’ Accounting Targeted by SEC