What is Non-GAAP financial measure?
In short
A measure of performance or financial position that excludes or includes amounts in a way that differs from the most directly comparable measure under US Generally Accepted Accounting Principles (GAAP) is a non-GAAP financial measure. Adjusted earnings is a common example.
Key takeaways
- Public companies must present the most directly comparable GAAP measure with equal or greater prominence.
- A quantitative reconciliation to that GAAP measure is required.
- Misleading adjustments, such as excluding normal recurring cash operating expenses, are prohibited.
Where it's tested
BAR: Public Company Reporting Topics — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A non-GAAP financial measure presented in an earnings release must: