How audit committees can evaluate non-GAAP measures

March 17, 2018

How audit committees can evaluate non-GAAP measures

By Ken Tysiac 
March 16, 2018

Evaluating a company’s use of non-GAAP measures in financial statements can be a challenge for audit committee members.

Used correctly, non-GAAP measures can provide companies with an opportunity to tell their story more fully in the financial statements. If misused, however, non-GAAP measures can present a distorted picture that’s more favorable than the company’s true results would indicate.

The possibility that some companies were presenting a too-rosy view is one reason the SEC recently made non-GAAP measures an area of focus, updating its Compliance & Disclosure Interpretations in the area of non-GAAP reporting in 2016 and 2017.

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