Reading the accounts
Adjusted earnings
Also called Non-GAAP earnings or Underlying profit
Company-defined profit that excludes items management considers unrepresentative.
How it works
Adjustments can be entirely legitimate — a genuine one-off legal settlement or restructuring charge does obscure the underlying trend.
They are also entirely at management’s discretion, and the discretion is exercised in a consistent direction.
Where it misleads people
Watch for costs excluded every single year. Share-based pay is a real cost of employing people and is the most commonly adjusted-away item; "recurring one-offs" are not one-offs.
Related terms
- Net incomeWhat is left after every cost, including interest and tax — the profit belonging to shareholders.
- EBITDAEarnings before interest, tax, depreciation and amortisation — a rough proxy for operating cash generation.
- Share-based compensationPaying employees in shares or options rather than cash.
- GAAP and IFRSThe two main sets of accounting rules companies must follow when reporting results.
Mentioned in
More in Reading the accounts
- Assets
- Accrual accounting
- Audit opinion
- Accounts receivable
- Balance sheet
- Book value
- Working capital
- Breakeven
All 51 Reading the accounts terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.