While the idea of clamping down on creative accounting is a good one, S&P's new category of 'core earnings' is likely to depress profits further
Corporate earnings come in all shapes and sizes and are coloured to appeal to specific constituencies. During the stock market boom, companies adopted pro forma earnings, basically anything they wanted them to be, to portray financial results in the best possible light to boost the share price. Over the years, companies have taken similar liberties with operating earnings, which conceptually are what an investor in any company wants to glean. Many so-called 'non-recurring expenses'' curiously recurred quarter after quarter. 'Operating earnings have been outperforming reported earnings...
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