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  • The Impact of the Disclosure of Non-GAAP Earnings in Australian Annual Reports on Non-Sophisticated Users

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    Accepted Manuscript (AM)
    Author(s)
    Johnson, Amber
    Percy, Majella
    Stevenson-Clarke, Peta
    Cameron, Robyn
    Griffith University Author(s)
    Cameron, Robyn
    Year published
    2014
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    Abstract
    The disclosure of non-GAAP earnings in Australian annual reports has risen steadily in recent years. These non-statutory earnings measures are generally disclosed in the unaudited section of the annual report and are not consistent with statutory profit as defined under generally accepted Australian accounting standards (GAAP). Recent research conducted in the United States has provided evidence that non-sophisticated investor decisions are influenced by the presence and prominence of non-GAAP earnings information. Further evidence suggests that investor perception changed after non-GAAP earnings disclosures became subject ...
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    The disclosure of non-GAAP earnings in Australian annual reports has risen steadily in recent years. These non-statutory earnings measures are generally disclosed in the unaudited section of the annual report and are not consistent with statutory profit as defined under generally accepted Australian accounting standards (GAAP). Recent research conducted in the United States has provided evidence that non-sophisticated investor decisions are influenced by the presence and prominence of non-GAAP earnings information. Further evidence suggests that investor perception changed after non-GAAP earnings disclosures became subject to regulation in that jurisdiction. Australia has high investor participation rates by international standards, including investors operating self-managed superannuation funds, resulting in a significant number of active individual investors. This study employs an experimental design to investigate the impact on non-sophisticated investors of the reporting of non-GAAP earnings information in addition to GAAP earnings information in Australian annual reports. The results of this study show a positive association between the prominent disclosure of non-GAAP earnings information and non-sophisticated investor reliance on this information. These results provide important evidence to Australian regulators as these narrative disclosures are not subject to regulation, in contrast to the United States where mandatory regulation has been in place since 2003.
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    Journal Title
    Australian Accounting Review
    Volume
    24
    Issue
    3
    DOI
    https://doi.org/10.1111/auar.12034
    Copyright Statement
    © 2014 CPA Australia Ltd (CPA Australia). This is the peer reviewed version of the following article: The Impact of the Disclosure of Non-GAAP Earnings inAustralian Annual Reports on Non-Sophisticated Users, Australian Accounting Review, Volume 24, Issue 3, September 2014, Pages 207–217, which has been published in final form at https://doi.org/10.1111/auar.12034. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving (http://olabout.wiley.com/WileyCDA/Section/id-828039.html)
    Subject
    Accounting, auditing and accountability
    Auditing and accountability
    Sustainability accounting and reporting
    Publication URI
    http://hdl.handle.net/10072/63601
    Collection
    • Journal articles

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