Insights from Lisa LaViers, an Assistant Professor of Accounting at the A.B. Freeman School of Business at Tulane University. This article draws on her analysis originally published in Newsweek.
Every month in 2024, more than 150,000 American workers lost their jobs to layoffs. Amazon recently announced a 10 percent cut to its white-collar workforce. John Deere trimmed 200 factory positions. The headlines come and go, the stock prices often tick upward, and the quarterly reports look cleaner. But according to one accounting expert, what investors are seeing on those financial statements is, at best, an incomplete picture — and at worst, a deeply misleading one.
Lisa LaViers argues that the way U.S. accounting regulations handle layoffs is fundamentally broken — and that investors, regulators, and the public are all paying a price for it.
“Investors should not accept this level of opacity,” LaViers writes. “They should actively demand more details about layoffs in conference calls and by contacting firms’ investor relations departments.”
The Accounting Trick Hidden in Plain Sight
At the heart of LaViers’ argument is a structural asymmetry in how companies are required to account for physical assets versus human ones — and the distortion it creates every time a company announces a round of layoffs.
When a firm sells a factory, two things happen on its financial statements. It records the loss of the physical asset and gains the value of the cash received in return. Investors can see both sides of the transaction clearly and assess the true net impact on the company’s value.
Layoffs work entirely differently. When employees are let go, only one thing changes on the financial statements — employee expenses go down, which mechanically makes the company look more profitable on paper. No loss is recorded anywhere. No asset disappears from the books.
“By definition, profit equals revenue minus expenses,” LaViers explains. “The firm is not required to recognize any losses. As a result, laying off employees will always result in the firm being relatively more profitable on paper than they would have been otherwise.”
The current disclosure requirements don’t fill that gap. The Worker Adjustment and Retraining Notification Act requires 60 days’ notice for large layoffs, and companies must file a public announcement — known as an 8-K — disclosing the date of the layoff and estimated future cash costs like severance. Neither requirement forces companies to explain what the organization actually loses when those employees walk out the door.
The Asset That Doesn’t Appear on Any Balance Sheet
The reason this matters, LaViers argues, goes beyond accounting technicality. When companies lay off employees, they aren’t just reducing a salary line item. They are destroying human capital — the accumulated knowledge, skills, relationships, and institutional expertise that workers build over the course of their careers.
She illustrates this with a concrete example: a programmer at Apple working on iPhone software. Over time, that engineer develops specific technical knowledge and generates ideas for future product lines that exist nowhere else. If she’s laid off, those ideas go with her. The next iPhone may be less innovative or take longer to build. That loss is real and material — but it appears nowhere on Apple’s financial statements.
The Intel layoffs of 2024 make the same point at scale. When the company cut 15 percent of its global workforce, its profits improved on paper. CEO Pat Gelsinger voluntarily disclosed that the company would be scaling back research as a result — an acknowledgment that highly capable scientists were leaving and long-term innovation capacity would diminish. But Intel was not required to formally record any of that as a loss.
“Despite the departure of highly capable scientists,” LaViers notes, “Intel is not required to formally record any losses — even though it’s obvious to investors that the human capital at the company will be dramatically reduced.”
A Regulatory Gap the SEC Has Failed to Close
LaViers traces the problem to a foundational distinction in accounting rules: physical capital can be recorded as an asset on the balance sheet, while the cost of employees must be treated as an expense. Money spent on a factory becomes an asset that persists. Money spent on employees disappears from the books entirely — even though it generates the human capital that drives a company’s long-term value.
The Securities and Exchange Commission has received years of investor pressure to address this imbalance. A 2020 proposal for expanded employee-related disclosures raised hopes — but LaViers is direct about its prospects. Given the current regulatory environment under the Trump administration, she writes, meaningful change from that proposal is unlikely to materialize.
That leaves investors with a choice: wait for regulators to act, or start demanding answers themselves.
What Needs to Change
LaViers lays out a clear agenda for reform. The SEC, she argues, should require companies to disclose not just the number of employees being laid off, but the composition of those layoffs — what types of workers, what functions, what levels of expertise. Beyond that, companies should be required to explain how losing those specific employees will diminish their capabilities and what new risks the organization now faces.
“Formally recognizing these losses would help investors better understand the effect of the layoff on future profitability and price the firm accordingly,” she writes.
Until those rules exist, LaViers urges investors not to wait. Conference calls, investor relations departments, and shareholder pressure are all levers available right now. The information gap isn’t just a regulatory problem — it’s one that active, informed investors have the power to start closing today.
Lisa LaViers is an Assistant Professor of Accounting at the A.B. Freeman School of Business at Tulane University. Her research focuses on financial disclosure, labor economics, and accounting regulation.