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. In the meanwhile, companies increasingly resort to provision of proforma and non-GAAP reports, even though this practice is looked down upon by the SEC and is opportunistically misused by a few companies. Analysts increasingly rely on non-GAAP metrics. Martin Konopka/EyeEm/Getty Images.

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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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The Dangers of Digital Protectionism

Harvard Business

These solutions lie at the intersection of technology development by companies and policy formulation by governments. 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. International Financial Reporting Standards (IFRS), developed through a principles-based approach, are followed by over 100 countries.

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Why Leaders Are Still So Hesitant to Invest in New Business Models

Harvard Business

According to our research at the SEI Center for Advanced Studies in Management , it’s the beliefs of leaders that drive organizational investments, board selection, and management team development and selection, and these beliefs do not change quickly. Finally, Generally Accepted Accounting Principles (GAAP) used to manage businesses and report to investors often ignore intangible assets or miscategorize them as expenses.

GDP Is a Wildly Flawed Measure for the Digital Age

Harvard Business

Gross Domestic Product (GDP), our core measure of prosperity, was developed during the industrial age. As the market, including customers, employees, and investors, shifts the mix of what is done and what is consumed, this most important and commonly used economic indicator, along with Generally Accepted Accounting Principles (GAAP), tells a concerning story. HBR STAFF. Germany, Switzerland, and Japan are now in negative interest rate territory. So are Denmark and Sweden. And U.S.

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How B2B Software Vendors Can Help Their Customers Benchmark

Harvard Business

Software and other companies that develop data mirrors and scores can grow their top and bottom lines with little or no marginal costs by building investable indices that correlate their unique insight and data to investor returns. Imagine if all manufacturers had, for example, a supply chain efficiency score, or all companies had a leadership development score. Gillian Blease/Getty Images.

Calculating the Market Value of Leadership

Harvard Business Review

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. Leadership development specialists charged with developing leaders can focus less on personal characteristics of leaders and more how investors might view them.

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