Schrand and Walther's (2000) archival evidence suggests that managers strategically disclose prior‐period benchmarks in current earnings announcements, which, in turn, influences investors' judgments. Using a controlled experimental setting, I present evidence confirming that a transparent description of a transitory prior‐period gain or loss affects how investors apply prior‐period earnings when evaluating currentperiod earnings. I also provide evidence that this effect is likely to be unintentional on the part of investors, resulting from limitations in their memory for the prior‐period event. Overall, the experimental results suggest that a quantitative description of the transitory prior‐period gain or loss in a current earnings announcement helps investors to evaluate company performance. The results also highlight the need for consistency in reporting non‐GAAP financial performance measures.

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