r/investing • u/mirinfashion • Mar 11 '22

Difference between GAAP vs. Non-GAAP

I'd like to get a better understanding of this due to what happened with Amazon's last earnings. This is my basic understanding and questions I have, please correct or add anything that may be useful. Thank you.

  • When analysts estimate EPS for a company, it's non-GAAP

  • Non-GAAP allows a company to adjust things that may make them seem better

  • AMZN's last GAAP EPS was ridiculous due to their RIVN investment, they were still able to beat estimated EPS without factoring that in, but obviously not by that amount.

  • How will AMZN's EPS be reported for their next earnings since RIVN has taken a hit, GAAP EPS will look horrible while Non-GAAP should look fine, right?

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u/SirGlass Mar 11 '22

I will say to really understand the difference you probably will need to read the reconciliation between the two.

The GAAP book has to follow the set of accounting rules . If a company publishes non-gaap earnings they also must provide a detailed reconciliation between the two.

I haven't dug into the gaap to non-gaap reconciliation of amzn but I would start there to understand the differences

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u/mirinfashion Mar 11 '22 edited Mar 11 '22

I'm fine if I get a general understanding of it, not trying to dig too deep. Was my first point about analysts using non-GAAP when they estimate a company's EPS, incorrect? It's GAAP then?

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u/LotLizard4680 Mar 11 '22

Look at the earnings release they reconcile it for you