Beyond-GAAP Corporate Reporting : Insights for Practice and Opportunities for Research

This paper focuses on the increasingly important area of corporate reporting beyond the audited GAAP financial statements and notes. Framed by comments received from Chief Financial Officers (CFOs) and by issues raised in the research literature, the paper investigates the literature and draws conclusions about the value of such reporting and about numerous practical and conceptual issues deserving additional research. Our analysis demonstrates that reporting beyond the GAAP statements is a central part of corporate disclosure and resulting valuation, and is central to the CFO's function, but is currently under-researched. Other prominent issues addressed in this paper include the role of disclosure regulation in influencing useful disclosure, calculating and managing the costs of disclosure, overcoming weaknesses in GAAP, determining what disclosures institutional and other investors need and use, managing relations with analysts, and reducing undesired effects of external disclosure on internal management. Our various extrapolations from limited research support the analysis and also represent research opportunities. The analysis and conclusions consider the perspectives of CFOs, information users, regulators and researchers. Among more than 30 conclusions are that reporting beyond GAAP has incremental value to GAAP, partly derived from its relationship with GAAP; that any increased regulation of beyond-GAAP reporting should focus on disclosure and reconciliation to GAAP rather than on content details in order to preserve reporting of useful firm-specific information; and that though the costs of beyond-GAAP reporting have not been studied, it is cost-effective and likely more so than GAAP reporting. Our intent throughout is to provide useful insights and generate increased interest among CFOs, users and regulators to encourage further research and among researchers to conduct it