For those not yet in the know, Calcbench released our annual analysis of non-GAAP adjustments to net income earlier this week. The report, done in conjunction with Suffolk University, researches the number and type of non-GAAP adjustments to net income that companies among the S&P 500 make to their annual earnings. 

In our first post about this year’s report, we reviewed key findings and the overall volume of non-GAAP adjustments; in our second, we examined how the various categories of adjustment have changed over time. 

So now let’s get to the good stuff: which specific companies reported the largest non-GAAP adjustments. We have a table — in fact, we have several!

Table 1, below, lists the 10 companies with the largest upward adjustments to net income.

Some companies on Table 1 reported multiple specific adjustments. For example, Broadcom ($AVGO) reported an adjustment for amortization of intangibles worth $9.27 billion, as well as an adjustment for stock-based compensation worth $5.67 billion; plus assorted smaller adjustments that altogether equal the $17.84 billion in the table above.

We should also note that most companies reported non-GAAP net income that was higher than “traditional” GAAP net income, but that wasn’t always the case. Table 2, below, shows the five firms with the largest downward non-GAAP adjustments to net income.

Why might a company adjust its net income in a way that leads to a lower number? For any number of reasons, really, such as an unusually large tax item or a divestiture charge. Rules from the Securities and Exchange Commission only specify that companies reporting non-GAAP net income do so consistently from one quarter to the next; you can’t change up your calculations from one period to the next so that you always end up with a higher number. 

Non-GAAP Adjustments by Industry

Our report also examined non-GAAP adjustments by industry, according to companies’ SIC codes. Every public company has one, and the first digital denotes the broad industry category for the firm:

• 0 - Agriculture

• 1 - Mining and Construction

• 2, 3 - Manufacturing

• 4 - Transportation and public utilities

• 5 - Wholesale and retail trade

• 6 - Finance, insurance, real estate

• 7, 8 - Services

• 9 - Public administration

Adjustments vary greatly among industries in both their magnitude and type. For example, adjustments made by companies in the manufacturing sector (codes 2 and 3) accounted for 60 percent of all adjustments made, but those manufacturing companies comprised only 49 percent of all firms in our sample group. Manufacturing firms also adjusted their GAAP net income upward by an average of 31 percent, while those in wholesale and retail trade (code 5) had an average upward adjustment of 47 percent.

The heat map in Figure 3, below, shows the different categories of adjustments as a percentage of total adjustment amounts for each industry. This allows us to see which are the most significant categories of adjustments for each industry. 

You can download the full Non-GAAP Adjustments report from our Research page, which has lots more information than what we’ve shown here. If you’re looking for each industry’s major adjustment category (either by dollar amount or frequency), or for the largest individual companies making adjustments in each of the 11 non-GAAP categories we tracked, then download the full report ASAP!