Non-GAAP measures and other key performance indicators (KPI’s) have made headlines recently as more and more companies are including non-GAAP measures in their SEC filings and public communications.
But a lack of transparency regarding their determination, along with inconsistency in how non-GAAP measures are calculated may limit their efficacy. And some question whether non-GAAP reporting is susceptible to bias or misinterpretation without proper context and explanation.
PwC’s new Point of View: Building confidence in non-GAAP measures and other KPIs addresses these concerns head-on, showing how managements can act in a manner that builds confidence, in part by avoiding inappropriate use or emphasis of non-GAAP measures and other KPIs. PwC further notes that audit committees may also want to consider their level of oversight with regard to disclosure of non-GAAP measures and other KPIs.
Building confidence in non-GAAP measures outlines ways that management and other stakeholders can disclose appropriate non-GAAP measures and KPI’s that are useful and transparent including:
- Strategies to build trust and enhance confidence in the non-GAAP measures and KPI’s disclosed.
- A breakdown of other stakeholders involved and how they can contribute to an accurate financial representation of companies.
- The additional requirements and prohibitions under SEC regulations for non-GAAP disclosures.
The full PWC Point of View whitepaper on non-GAAP measures is available online with no registration or charge.