An interesting phenomenon has emerged over recent years in financial accounting which could prove relevant to marketing. This is non-GAAP reporting by companies. (GAAP being Generally Accepted Accounting Principles). The term non-GAAP reporting, although originating in the US, can be used for any reporting that is not covered by the regular financial accounting rules and customs.
Non-GAAP Reporting Less Likely To Be Seen as Evidence of Fraud
While specific financial accounting rules can, and should, be criticized, there is a good reason for rules to exist. The challenge of firms reporting whatever they want to is that it may be misleading to investors. The regulators, especially in the US, have thus had a history of seeing non-GAAP reporting as a fraud risk.
This perspective — that non-GAAP reporting is evidence of something nefarious — seems to be fading away though. As Dirk Black and his colleagues say, now “regulators recognize that non-GAAP metrics can be informative to investors and have laid the groundwork for firms to disclose the metrics in a transparent manner” (Black, 2018, page 259). It is indeed fascinating to see how views of non-GAAP measures have evolved in Black and his colleagues review paper.
How Can Marketing Benefit?
What does this mean for marketing? The key point is that marketing generally isn’t well served by GAAP. The question being: how then can firms use this new found freedom to inform investors about their marketing efforts? This could be a major area in coming years.
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Read: Dirk E. Black, Theodore E. Christensen, Jack T. Ciesielski, and Benjamin C. Whipple. “Non‐GAAP reporting: Evidence from academia and current practice.” Journal of Business Finance & Accounting 45, no. 3-4 (2018): 259-294.