How audit committees can evaluate non-GAAP measuresBy Ken Tysiac
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.