Wednesday, October 9, 2019
U.S. firms with Sales in China through 2018.

Wednesday, October 9, 2019
Tracking  Pension Data in Calcbench

Friday, October 4, 2019
In Depth: Leasing Costs in Retail Sector

Thursday, September 19, 2019
Alibaba and Cloud Computing

Monday, September 16, 2019
Introducing Critical Audit Matters

Wednesday, September 11, 2019
Our Fireside Chat on Goodwill Assets

Friday, September 6, 2019
Pulling Forward Share Buybacks

Saturday, August 31, 2019
A Quick Catch-Up on VMWare

Friday, August 23, 2019
By the Numbers: Restructuring Costs Over Time

Wednesday, August 21, 2019
WeWork Liabilities, Part II

Tuesday, August 20, 2019
WeWork’s Liabilities in Perspective

Wednesday, August 14, 2019
Comparing LinkedIn, Twitter Revenue

Wednesday, August 7, 2019
Leasing’s Effect on Retail Balance Sheets

Thursday, August 1, 2019
Using Calcbench to Find China Exposure

Tuesday, July 30, 2019
Leasing Details: The Comcast Example

Monday, July 29, 2019
Easy Fundamental Equity Analysis in Python

Monday, July 22, 2019
Calcbench Data and Tax Reform Insight

Wednesday, July 17, 2019
Downshifting in the Trucking World

Tuesday, July 16, 2019
New Report: Adoption of New Lease Accounting Standard

Friday, July 5, 2019
More Consequences of Lease Accounting

Archive  |  Search:
Feds File Charges Over Non-GAAP Reporting
Wednesday, September 14, 2016

At last, the financial reporting news we’ve all been waiting for this year! Federal regulators have charged someone for improper use of a non-GAAP accounting metric.

Last week federal prosecutors in New York indicted Brian Block, the former head of finance for American Reality Capital Partners, on charges of conspiracy, securities fraud, making false filings to the Securities and Exchange Commission, and submitting false certifications to the SEC. If convicted, Block could face more than 20 years in prison.

The non-GAAP metric in question is “adjusted funds from operations,” or AFFO—a common metric among real estate investment firms like ARCP. Prosecutors say that in 2014, Block knew his firm had erroneously calculated its AFFO before it announced earnings, and then didn’t correct the error in subsequent filings. That added a false 3 cents per share to AFFO, and misled investors into believing the firm was on pace to meet full-year earnings guidance.

The U.S. attorney’s office for Manhattan announced the charges on Sept. 8, and is a rare example of enforcement over misuse of non-GAAP accounting. The charges are all the more newsworthy right now because the SEC has launched a task force to review companies’ use of non-GAAP reporting, and also published fresh guidance in May about how filers can use non-GAAP without drawing regulatory fire.

Calcbench has looked at the prevalence of non-GAAP accounting several times already this year, including our report on non-GAAP net income and a follow-up post looking at non-GAAP net income specifically within the S&P 500.

The SEC itself has not taken any action against Block that we can see. (Although facing criminal charges in federal court is probably headache enough for him.) Under SEC reporting rules, misuse of non-GAAP metrics is a violation of Regulation G. The agency might be investigating other parties on that point; we don’t know. But for all the talk about stepping up enforcement, so far the SEC hasn’t taken enforcement under Regulation G in years.

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