Google to report pro forma, not just net
Search giant meets Wall Street halfway in how it posts earnings, seeking to dispel confusion.
The Web search leader said it would present its third-quarter results on Oct. 20 in operating terms, excluding items such as the after-tax effect of expensing employee stock options, for the first time. It currently reports results in net terms only.
Mark Fuchs, chief accountant of the Mountain View, Calif.-based company, detailed the plan in a statement released on Google's company blog.
In the first four quarters after its successful initial public offering in August 2004, Google sought to challenge Wall Street conventions by fully expensing stock options in a single presentation of net income.
That practice--an attempt to strictly abide by U.S. Generally Accepted Accounting Principles, or GAAP--put Google at odds with many U.S. listed companies, especially in the technology sector.
Quarterly earnings reports from most of these companies include a second set of so-called pro forma figures that distinguish between operating and non-operating items.
"In the past, we've only provided GAAP EPS (earnings per share)," Fuchs writes. "But because Wall Street analysts typically estimate and describe our results with non-GAAP EPS numbers, that resulted in some confusing apples-to-oranges analyses of our results."
Wall Street analysts often say they prefer this latter accounting presentation because it allows them to gain a clearer picture of a company's operating performance.