Adjusted earnings: an initial investigation of EPS disclosures in annual reports
In the last decade an increasing number of companies have been reporting adjusted (or nonstatutory) earnings in their press releases. However, there has been relatively little systematic study of adjusted earnings disclosures in annual reports, despite the importance of annual reports as corporate communication devices. This study documents Australian listed company voluntary disclosures of earnings per share (EPS) in their annual reports and examines the statutory nature of those disclosures. Nearly one third of these disclosures are found to be based on adjusted earnings but generally little information is provided on what adjustments were made. A majority of these adjusted EPS numbers are found to be greater than the company’s statutory EPS. Companies reporting adjusted EPS are not found to differ significantly in size or profitability from companies voluntarily reporting only statutory EPS but there is a greater concentration of information and communication technology companies in the subsample of those reporting adjusted EPS. The paper contributes to our understanding of adjusted EPS disclosures and the companies disclosing them.
Harrison, JL & Morton, A 2010, 'Adjusted earnings: an initial investigation of EPS disclosures in annual reports', Euro-Mediterranean Economics and Finance Review, vol. 5, no. 2, pp. 62-74.
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