Beyond the GAAP Income Statement

More often than not, a company’s income statement isn’t a definitive disclosure of its revenue and expenses that investors can interpret clearly, easily and accurately.  This is largely because income and expenses, as classified under GAAP, can be difficult to define.  According to McKinsey & Company, savvy investors often have to reengineer statements to come up with figures that they’re even remotely comfortable with to use as a starting point in valuing future performance.  In a well-written and straight forward article, McKinsey & Company explains the trouble with GAAP-based income statements and offers their “modest” proposal for revisions that would result in accuracy in reporting and ease in interpretation.