Recent developments have suggested that the topic of earnings management should be broadened beyond the traditional view of conformance vs. non conformance to GAAP to include the possibility that use of non-GAAP measures can be misleading to investors and that the SEC should expand their enforcement efforts to scrutinize that area of reporting as well.
For this Discussion Forum, state your position on whether the SEC should expand its examination of non-GAAP measures reported along with public company financial statements. You can cite the difficulty in defining misleading statements under a rule based system (GAAP), let alone defining misleading measures under a system without rules; you can argue the outright fraud is a small percentage of restatements, but misrepresentation of financials is ten times more prevalent; you can argue that frauds the size of Enron are essentially gone, but use of non-GAAP measures is more pervasive and lacks any standards, so the SEC should step in investigate potential abuse.
For this Discussion Forum I am looking for your position on SEC enforcement expansion into non-GAAP measures to be supported by facts and critical thinking. Just rephrasing my points in the paragraph above not result in a passing grade. I am looking for your position supported by facts, additional considerations and possibly citations of other articles. The references above are attached as documents in their entirety, but not all of which may be useful.
