The Securities and Exchange Commission requires companies to compile financial reports using U.S. Generally Accepted Accounting Principles. Although companies are allowed to supplement reports with non-GAAP metrics, some companies in the healthcare industry are adjusting earnings too much, according to The Wall Street Journal.
In May, the SEC clarified the rules on this issue, stating that GAAP figures should be given prominence in financial reports and that the use of adjustments should be kept to a minimum, according to the report.
Sheryl Skolnick, an analyst with Mizuho Securities USA, told WSJ she expects several healthcare companies to make changes in their financial reporting due to the SEC's clarification.
The Mizuho team specifically pointed to Louisville, Ky.-based Kindred Healthcare's financial reporting. Mizuho told WSJ that some of Kindred's adjustments to GAAP earnings, such as adding back retirement and severance costs, are a concern.
Kindred did not return WSJ's request for comment.
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