The accountant as an artist: Continuing issues with Alternative Performance Measures


We all know accounting profit figures can be “massaged” to some extent but I prefer nowadays to describe accounting profits as malleable.

The term malleable creates a direct analogy between accounting profits and the forging of metal i.e.”able to be hammered or pressed into shape without breaking or cracking.”

An accountant pursuing aggressive earnings management will bend the rules as far as possible without breaking but it appears that accounting regulators have been allowing a degree of flexibility that would make a yoga instructor proud.

As one example,  a sample of 380 of the S&P 500 companies reported a 2015 6.6% growth in non-GAAP* profit and yet had an 11% decline in GAAP profit (Ciesielski, J., 2016).

* GAAP: Generally Accepted Accounting Principles (essentially the accounting rules for a given jurisdiction). 

Fake-news and post-truth became popular media terms in 2016/2017. It seems that we are now able to apply these terms retrospectively to a lot of financial statements from the last few years. In Europe, ESMA have produced guidelines on the use of Alternative Performance Measures (APMs) in Financial Statements but it is still too early to tell how effective these guidelines will be (see other blog posts for further information).

For those interested, I have attached links to two related short articles from The Economist and The New York Times:

The Economist

The New York Times






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