Earnings Adjustments Topped an Average of $1 Billion for Big Companies Last Year

The FY23 and FY24 earnings per share estimates remain largely unchanged. (Pixabay)
The FY23 and FY24 earnings per share estimates remain largely unchanged. (Pixabay)


  • Adjusted net income was higher than its GAAP counterpart by the highest sum in years

Large U.S. companies last year booked earnings adjustments topping more than $1 billion on average compared with official earnings, the highest sum in years, as regulators look to crack down on earnings manipulation.

Adjusted net income, a popular metric that goes beyond U.S. generally accepted accounting principles, was higher than the GAAP version by an average $1.095 billion per company in 2022, according to a report due to be released Thursday by research firm Calcbench on 200 S&P 500 companies’ earnings reports. That figure, which represented about 38% of GAAP net income, is compared with an average of $460 million in 2021, or 14% of GAAP net income that year.

The size of companies’ individual adjustments also grew. These adjustments, known as reconciling items, which include stock-based compensation or reimbursements to employees, rose by 53% to nearly $184 million in 2022 from a year earlier, said Calcbench, which conducted the research in partnership with Suffolk University in Boston.

The heightened use of the measures comes at a time when regulators are scrutinizing non-GAAP calculations and earnings manipulation. The Securities and Exchange Commission in 2016 warned companies that non-GAAP measures that replace GAAP-based methods with individually tailored disclosure could violate its rules. In December, the regulator expanded the guidance with more details on what constitutes a possible violation.

Still, companies are relying increasingly on these measures, often to present an optimistic picture of profitability. Executives usually say that focusing on core operating earnings is the most accurate way to depict financial performance to investors, but their approach may vary. The metrics can be used to help investors disentangle the financial effect of what companies consider a one-time event from the performance of the underlying business.

Companies will likely make more frequent and bigger adjustments to their net income if the economic outlook continues to worsen, said Nick Guest, an assistant professor of accounting at Cornell University. That is because companies tend to point to unusual circumstances underlying their financial performance, such as higher interest rates causing losses on investment securities, job-market concerns spurring layoffs or inflation fueling earnings declines, he said.

“It’s typically the case that more non-GAAP adjustments go hand-in-hand with that kind of abnormal economic event," Guest said.

The five S&P 500 companies with the biggest adjustments account for nearly 37% of the total amount adjusted among Calcbench’s sample in 2022. Those companies were telecommunications giants AT&T and Comcast; financial-services-technology company Fidelity National Information Services; and drugmakers AbbVie and Johnson & Johnson, Calcbench said.

For example, AT&T reported a $24.81 billion write-down of its goodwill tied to its wireline and Mexico business lines. Companies book goodwill on their balance sheets when they acquire a business for more than the value of its net assets. The AT&T charge was 2022’s largest U.S. goodwill impairment, according to financial and risk advisory firm Kroll LLC.

AbbVie and Johnson & Johnson added back $6.39 billion and $4.31 billion, respectively, for the amortization of intangible assets.

AT&T declined to comment. AbbVie and Johnson & Johnson didn’t respond to requests for comment.

Such adjustments more often help profits rather than hurt them. About 83% of the companies adjusted their net income upward in 2022, the same as the previous year, Calcbench said, based on its sample of companies.Although Calcbench didn’t track this before 2021, accounting researchers said the upward adjustments have been commonplace for years.

SEC officials acknowledge that non-GAAP metrics can provide good information for investors—with limits. “We are not at the agency saying non-GAAP can never be used," Lindsay McCord, chief accountant in the SEC’s corporate-finance division, said at a conference earlier in May. “Even as an accountant, when you just want only to see GAAP, I appreciate the value that non-GAAP has for investors. However, there are guidelines or rules over what could mislead an investor."

Write to Mark Maurer at

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