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A Blueprint for Digital Companies’ Financial Reporting

Harvard Business

Currently, firms’ first report net profits and then back out many of these one-time items to present a non-GAAP (Generally Accepted Accounting Principles) profit number. Because investors consider these non-GAAP numbers to be value-relevant, we propose a more direct way for them to be calculated. For example, a firm could mislabel a product-enhancement expense as a product-development outlay or overestimate the lifetime value of a customer.

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Why We Need to Update Financial Reporting for the Digital Era

Harvard Business

Digital companies, however, consider scientists’ and software workers’ and product development teams’ time to be the company’s most valuable resource. This notion, that risk is a desirable feature, can seem like sacrilege to anyone who’s taken an introductory finance course. Analysts increasingly rely on non-GAAP metrics. Martin Konopka/EyeEm/Getty Images.

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The Dangers of Digital Protectionism

Harvard Business

These solutions lie at the intersection of technology development by companies and policy formulation by governments. India’s finance ministry has proposed such an approach to the central bank. Fifth, in contexts where digital trade agreements do not exist and are unlikely in the foreseeable future, develop nonbinding norms and principles, leaving implementation to national governments. Philippe Intraligi/Getty Images.

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Calculating the Market Value of Leadership

Harvard Business Review

In recent years, investors have learned that defining the market value of a firm cannot just be based on finances. GAAP and FASB standards require financial reporting of earnings, cash flow, and profitability – all measures that investors have traditionally examined. The leadership ratings index we have developed has two dimensions, or domains: individual and organizational.

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