Tag: EPS
Fix your data tagging!
In this announcement, the SEC’s Office of Structured Disclosure advises that many of us have been tagging our basic and diluted earnings-per-share data incorrectly. The announcement indicates that this data should be tagged using GAAP Financial Reporting taxonomy elements “us-gaap:EarningsPerShareBasic” and “us-gaap:EarningsPerShareDiluted.” That’s true even where the numbers for basic and diluted EPS are the same number and are presented only once on the face of the income statement. In that case, the company “should tag that amount twice using both tags.” Why is this important? Because, according to the announcement, “[i]ncorrect tagging for EPS would negatively impact the usability of the data.” For example, in the case where the company tags the data only once, either the basic or diluted EPS information would be lost.
Should we get rid of EPS?
Much has been written about the problems associated with the prevalence of short-term thinking in corporate America. As noted in a post from The Harvard Law School Forum on Corporate Governance and Financial Regulation, an academic study revealed that “three quarters of senior American corporate officials would not make an investment that would benefit a company over the long run if it would derail even one quarterly earnings report.” (See this PubCo post and this article in The Atlantic.) Apparently, that was no joke. As reported in Forbes, for the first six months of 2018, companies in the S&P 500 spent $367 billion on stock buybacks—which can drive increases in quarterly EPS without increasing the underlying long-term economic value of the company—while capex totaled only $317 billion. ls there a way to engineer a course correction?
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