Valeant Shows the Perils of Fantasy Numbers "...The tide of companies making up their own earnings calculations is rising, said Jack Ciesielski, publisher of The Analyst’s Accounting Observer. In a recent report, he noted that 334 companies in the Standard & Poor’s 500-stock index reported non-GAAP earnings last year, up from 232 such companies in 2009. The dollar amount of cost adjustments made to those companies’ profits totaled $132 billion last year, more than double the amount in 2009. “There is a lot more of this going on,” Mr. Ciesielski said in an interview. “The companies are really pushing it.” This creativity is common practice in the pharmaceutical industry, so Valeant is certainly not atypical. But the difference between the company’s real earnings and its adjusted numbers is far greater than it is for its large competitors, making Valeant a prime example of this problem... ...Consider a 2002 study on non-GAAP numbers by Mark T. Bradshaw, an associate professor of accounting at Boston College, and Richard G. Sloan, a professor of accounting at the University of California, Berkeley. The fantasy numbers had “displaced GAAP earnings as a primary determinant of stock prices,” its authors wrote."..." http://www.nytimes.com/2015/11/01/b...ils-of-fantasy-numbers.html?ref=business&_r=0
Here is what happens when the illusion is broken. This looks an aweful lot like the stock market will look:
A good trader must be also good in game theory and conspiracy theory! http://www.elitetrader.com/et/index...-in-game-theory-and-conspiracy-theory.291766/
How to lose millions and still report a profit - What divides profits from losses? Interpretation "Is Twitter making money or losing it? The question may sound straightforward, but for the troubled tech company and others, it all comes down to interpretation. For instance, according to the earnings numbers reported by much of the press and used by analysts, Twitter made $67 million in the third quarter, or 10 cents per share. But when the company computes its bottom line according to generally accepted accounting principles, it finds that it had a loss of $132 million, or 20 cents per share...." http://www.cnbc.com/2015/11/02/what-divides-profits-from-losses-interpretation.html