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It is common practice among listed companies to strip out stock-based compensation charges, acquisition-related charges and other non-cash charges as part of th

by kirsty 15y ago

It is common practice among listed companies to strip out stock-based compensation charges, acquisition-related charges and other non-cash charges as part of their financial information. [1] Their argument for this is generally because these charges are seen as "accounting mumbo-jumbo" by the rest of the world rather than real costs incurred in the running of the business. I agree that stripping out marketing costs to acquire customers is harder to understand in this way and would seem to be somewhat out of the ordinary. [1] for example ARM Holdings plc is listed on LSE and NASDAQ and shows its Q2 earnings press release with "normalised" figures quoting as being based on IFRS, adjusted for acquisition-related charges, share-based payment costs, restructuring charges, profit on disposal and impairment of available-for-sale investments and Linaro™-related charges http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTAxMTA1fENoaWxkSUQ9LTF8VHlwZT0z&t=1 http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9M...

VladRussian 15y ago
Groupon stripping out "discretionary online marketing expenses that are incurred primarily to acquire new subscribers” is akin to airline stripping out fuel costs as "discretionary expenses that are incurred primarily to acquire new miles". Anyway, for example, during its last years, the well known large company i worked at, was steadily posting near neutral quarters on non-GAAP, excluding one time charges, basis. The only thing is that each quarter there would be at least a one "one time charge" that would result in the quarter being deep in red. Not surprisingly at all if one understands that the life and business in particular is just a sequence of one time events :) (there is of course a very reasonable use of one-time charges - if company generates a profit, then good accountants would dig out some "one time charges" that would allow to decrease/avoid the profit tax)
rob08 15y ago
While I agree that there are many companies that do strip out stock-based compensation charges, in my opinion their reasoning, as you put it: "accounting mumbo-jumbo" charges" I do not agree with. Share-based compensation is very much a real cost for investors. Also, when companies do these adjustments, they should carry it consistently throughputs its full extent, i.e. by estimating the dilution

by kirsty 15y ago

VladRussian 15y ago

Groupon stripping out "discretionary online marketing expenses that are incurred primarily to acquire new subscribers” is akin to airline stripping out fuel costs as "discretionary expenses that are incurred primarily to acquire new miles". Anyway, for example, during its last years, the well known large company i worked at, was steadily posting near neutral quarters on non-GAAP, excluding one time charges, basis. The only thing is that each quarter there would be at least a one "one time charge" that would result in the quarter being deep in red. Not surprisingly at all if one understands that the life and business in particular is just a sequence of one time events :) (there is of course a very reasonable use of one-time charges - if company generates a profit, then good accountants would dig out some "one time charges" that would allow to decrease/avoid the profit tax)

rob08 15y ago

While I agree that there are many companies that do strip out stock-based compensation charges, in my opinion their reasoning, as you put it: "accounting mumbo-jumbo" charges" I do not agree with. Share-based compensation is very much a real cost for investors. Also, when companies do these adjustments, they should carry it consistently throughputs its full extent, i.e. by estimating the dilution