Accounting & Tax

Balancing Act

The concern is that earlier releases often did not reconcile with GAAP.
Leslie SchultzJuly 1, 2001

In April, Financial Executives International (FEI) and the National Investor Relations Institute (NIRI) joined forces to issue guidelines for earnings press releases that they hope will establish industry best practices for these sometimes too-rosy reports. The guidelines were the result of prodding by the Securities and Exchange Commission’s chief accountant, Lynn Turner, who earlier in the year had expressed displeasure with what industry insiders refer to as EBS releases–that is, “everything but the bad stuff.”

Earnings press releases generally come out several weeks before 10- Qs are filed with the SEC. The releases frequently include pro forma financial results that are broader than those reported in 10-Qs, which follow the framework of generally accepted accounting principles (GAAP). The concern, especially in the investment community, is that the earlier releases often did not reconcile with GAAP.

“What the guidelines stress are press releases with a more-balanced picture of a company’s condition that also reconciles its results with GAAP disclosures,” says Dean Krogman, a vice president at the FEI. — Leslie Schultz

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