Pull up a chair, fans of financial reporting! Calcbench and Suffolk University have just released our annual analysis of non-GAAP adjustments to net income at large companies — this year bigger and better than ever!

This is our fourth annual non-GAAP analysis report, and for the first time ever, this year we managed to examine the entire S&P 500 to see which firms did or didn’t report adjusted net income or EPS in their 2024 earnings reports. We found 351 firms that did, or 71 percent of the entire S&P 500. 

Altogether the firms reported 2,249 separate adjustments to “traditional” GAAP net income, worth a total of $304 billion. Nearly 90 percent of companies reported adjustments that led to non-GAAP net income being higher than GAAP net income.

You can download the full report from our Research page. Today we also begin a series of blog posts on the findings, to explore some of the larger trends in non-GAAP reporting and how financial analysts should think about the issue.

For starters, let’s look at the primary findings.

• Among the 351 firms we identified as reporting non-GAAP numbers, 89 percent reported non-GAAP adjustments that led to higher earnings compared to GAAP net income. 

• Those 351 companies reported a total of 2,249 individual reconciling items, with an average value of $135 million per item (23 percent higher than last year). The total value of all non-GAAP adjustments was $304 billion.

• Adjusted net income exceeded GAAP net income by an average of $870 million per company, roughly 30 percent higher than average GAAP net income. 

• Average adjusted net income for 2024 was $3.8 billion, compared to $3.1 billion for 2023.

• Companies had an average of 6.4 reconciling items per company in 2024, up only slightly from 6.3 adjustments in 2023. The types of non-GAAP adjustments also held roughly steady. 

• Among the 11 types of adjustments we tracked, amortization of intangible assets accounted for roughly 31 percent of the total adjusted amount and was the single largest adjustment category by dollar volume. 

• Adjustments related to restructuring programs accounted for 19 percent of total dollars adjusted, up from only 11 percent in 2023.

In other words, the use of non-GAAP adjustments to earnings is widespread and significant. Most companies report non-GAAP net income materially higher — in some instances, multiple times higher — than GAAP net income. This calls into question the information value of as-reported net income and whether the calculation of GAAP net income should be changed, since so many companies report substantially different adjusted net income numbers.

Charting Non-GAAP Earnings

OK, so lots of companies report non-GAAP net income, and that non-GAAP number tends to be higher than traditional GAAP net income — but how much higher, exactly? 

The scatterplot in Figure 1, below, shows the range of adjustments as a percentage of GAAP net income. The vast majority of companies adjusted net income upward up to 100 percent of GAAP net income; a smaller group adjusted net income even higher, from 100 to 600 percent; and a smattering of companies adjusted net income downward from GAAP net income.

(Note that seven companies in our sample are outside the range of our Figure 1 scatterplot since their adjustments ranged from 731 to 2,077 percent of GAAP net income, and were too large to include easily.) 

Our report classifies all earnings adjustments into 1 of 11 categories, listed in Figure 2, below. (Foreign currency adjustments are a new category added this year.)

We also have those 2,249 individual adjustments grouped into 11 categories. Some were more common than others, while some were for a larger dollar total than others. See Figure 3, below.

Or, for those who like pie charts more than table-format data, we have Figure 4.

Our complete report also compares this 2024 data to 2023 and 2022, so we do encourage you to download the full report and read it in detail.

In our next post, we’ll examine those 11 categories of adjustments more closely: which ones tend to be most common, which ones tend to be the largest in dollar terms, how that frequency has changed over time, and more.