Financial reporting: the alphabet soup: "Posted by Mark Fuchs, Chief Accountant
Warning: Financial reporting minutiae below. Proceed with caution.
We're going to provide a bit more information with our October 20 earnings announcement. In this and future announcements, we're going to include a so-called pro-forma, or non-GAAP, diluted earnings per share (EPS) number as a supplement to our GAAP EPS number.
In the past, we've only provided GAAP EPS. But because Wall Street analysts typically estimate and describe our results with non-GAAP EPS numbers, that resulted in some confusing apples-to-oranges analyses of our results. (By the way, we review non-GAAP results when we analyze our own performance.) By providing both, we hope it will be easier to understand our results.
Now, if you’ve got your green eyeshade handy, read on. What follows is in accountant-speak.
Earnings per share is calculated by dividing profit (net income) by the number of outstanding shares. That's GAAP. To compute our non-GAAP EPS, we’ll add back to our net income things such as charges for stock-based compensation. (Before adding back stock-based compensation – or other certain charges – we’ll factor in related taxes. What does that mean? When we add back a charge, we subtract the tax benefit related to it that we would get under GAAP accounti"
