Non-GAAP Measures: A Roadmap for Audit Committees

March 16 2018

Published: The Caq

Presenting themes that emerged at a series of 2017 roundtables, Non-GAAP Measures: A Roadmap for Audit Committees provides a set of key considerations for audit committees, including leading practices to assess whether a company’s non-GAAP metrics present a balanced representation of the company’s performance. GAAP information serves as a foundation for confidence in financial statements, but financial statement users also value non-GAAP financial measures, when presented appropriately.

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The CAQ suggests that the audit committee:

– Put itself in the shoes of investors when evaluating if the presented non-GAAP measures and related disclosures align with the company’s overall strategy and performance.

– Ask management whether it has an internal policy that provides guidelines for determining how non-GAAP measures are generated, calculated, and presented.

– Discuss with management how the company makes changes to the non-GAAP measures it presents, and the rationale for why it would or would not make changes.

– Ask the organization to compare or benchmark its non-GAAP measures alongside its peers.

– Use outside auditors as a resource when evaluating non-GAAP measures.

– Discuss with investors directly or through investor relations to ensure that the presented non-GAAP measures aid investors’ understanding of the company’s performance.

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