(Don't) Mind the GAAP

As an accounting major, Dominic Rinaldi, BSBA ’25, spent most his undergraduate career learning generally accepted accounting principles (GAAP). It’s the accounting standard adopted by the US Securities and Exchange Commission (SEC), and the default used by companies based in the United States.

When it comes to measuring a company’s performance against other companies, GAAP is a way of comparing apples to apples, and it’s what Rinaldi and all undergraduate accounting students learn at Suffolk University’s Sawyer Business School and then use in their careers in public accounting.

So Rinaldi was surprised when his professors told him and many of his fellow students that they were going to learn about a whole other way of reporting financials: non-GAAP. In addition to GAAP, some companies use non-GAAP measures, which give them a different view of financial performance than what’s shown in their GAAP-compliant financial statements. Non-GAAP measures adjust or exclude certain items from the standard GAAP calculations to provide what the company believes is a more relevant or useful picture for investors.

“Knowing why companies are doing these sort of adjustments is important,” says Rinaldi. “If the company feels confident about an adjustment but it’s not reflected in their GAAP reporting, I can look more closely at it and understand why they’re doing it.”

Over the past few semesters, Rinaldi and other students in Suffolk’s winter internship program explored non-GAAP reporting and compiled detailed data from company disclosures. Calcbench, a nationally recognized data analysis platform, then analyzed the students’ data and shared key findings, which were then reported in Barron’s in early summer.

“Students not only learn how to extract non-GAAP data from earnings reports, but how to question non-GAAP adjustments, including investigating industry trends, as part of this research collaboration with Calcbench,” says Accounting & Business Law Professor Tracey Riley.

"Why are we learning about this?"

At first many of the students questioned why they were learning about non-GAAP reporting when, for their entire Suffolk career, they had focused on GAAP. After all, they’re going to be accountants; non-GAAP reports are created by the companies, not accountants at firms like Deloitte or EY.

“Given the widespread use and acceptance of non-GAAP reporting, it’s important for our future accounting professionals to understand whether non-GAAP earnings are an indicator of future performance,” says Riley.

This is the fourth year that Calcbench and Suffolk University have collaborated, and the process has become more and more integrated. Students took three different classes: one to learn about the concepts of non-GAAP, then another about the process of digging into the data, and then a third, immersive class that includes a trip to New York City and engagement with industry leaders such as Dow Jones and Calcbench. Each course builds on the one before it, allowing students to deepen their understanding through applied learning.

Riley believes understanding non-GAAP gives Sawyer Business School grads an important edge when it comes to getting hired. It certainly didn’t hurt Rinaldi, who completed a winternship at EY and has a job waiting for him after he finishes up his master’s in accounting at Suffolk.