The Determinants and Informativeness of Non-GAAP Revenue Disclosures

The Accounting Review, Vol. 97, pp. 23-48, 2022

Posted: 10 Apr 2020 Last revised: 6 Dec 2022

See all articles by John L. Campbell

John L. Campbell

University of Georgia - J.M. Tull School of Accounting

Kurt H. Gee

The Ohio State University

Zac Wiebe

University of Arkansas - Sam M. Walton College of Business

Date Written: January 13, 2022

Abstract

Nearly all research on non-GAAP measures focuses on earnings or earnings per share. Disclosure of non-GAAP revenue has recently attracted SEC scrutiny. Because revenue, unlike earnings, is a top-line number related primarily to core (i.e., persistent) business activities, it is unclear what adjustments could provide a more useful measure of performance. We present the first archival analysis of non-GAAP revenues based on a large, hand-collected sample of disclosures from 2015-2018. Approximately one in five earnings announcements contains a non-GAAP revenue disclosure, focused on revenue growth. Our evidence suggests that firms disclose non-GAAP revenue when GAAP revenue is incomparable with prior periods, and not to compensate for poor GAAP performance. Furthermore, non-GAAP revenue growth predicts future revenue growth better than GAAP revenue growth, and the market responds to this information. Overall, non-GAAP revenue disclosures are motivated by economic fundamentals rather than opportunism, on average, and they provide investors with relevant information.

Keywords: Non-GAAP financial measures; revenue; voluntary disclosure; predictive value; confirmatory value; standard setting; SEC scrutiny

JEL Classification: M40; M41; M48

Suggested Citation

Campbell, John L. and Gee, Kurt H. and Wiebe, Zac, The Determinants and Informativeness of Non-GAAP Revenue Disclosures (January 13, 2022). The Accounting Review, Vol. 97, pp. 23-48, 2022, Available at SSRN: https://ssrn.com/abstract=3564204 or http://dx.doi.org/10.2139/ssrn.3564204

John L. Campbell (Contact Author)

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States
706.542.3595 (Phone)
706.542.3630 (Fax)

Kurt H. Gee

The Ohio State University ( email )

2100 Neil Avenue
Columbus, OH 43210
United States

Zac Wiebe

University of Arkansas - Sam M. Walton College of Business ( email )

Fayetteville, AR 72701
United States

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