Home » BLOG » Valeant Pharmaceuticals’ use of non-GAAP financial reporting highlights widespread problems, former Biovail board member says

Valeant Pharmaceuticals’ use of non-GAAP financial reporting highlights widespread problems, former Biovail board member says

When it comes to guidance, Valeant doesn't use GAAP measures because it says it would be difficult to quantify certain unknown amounts such as debt repayment, legal settlements or gains and losses from asset sales.

MONTREAL – Valeant Pharmaceuticals International Inc.’s long fall is warming up the controversy over whether the company is having its own reporting metrics to sugarcoat a bitter financial situation, leading a former board person in the drugmaker’s predecessor Biovail to speak out against a trend that’s been adopted by some of Canada’s largest businesses.

“It may not be illegal, but it is misleading,” said Spencer Lanthier, a chartered accountant who sat on the board of Biovail from 2008 until its September 2010 reverse merger with Valeant. 

Lanthier is referring to using adjusted net earnings, adjusted sales and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) – ways of reporting financial results that deviate from Generally Accepted Accounting Principles (GAAP), a common set of standards and procedures legally required by securities regulators.

The use of such non-GAAP disclosures strips away items for example one-off costs, moving companies say allows investors to higher judge the performance from the underlying business. 

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