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Two related studies on non-GAAP financial measures

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23 Jan 2017

The CFA Institute, a global association of investment professionals, has published 'Investor Uses, Expectations and Concerns on Non-GAAP Financial Measures' and 'Bridging the Gap: Ensuring Effective Non-GAAP and Performance Reporting'.

The first paper is informed by a survey of CFA Institute members and sheds light on investor uses, expectations, and concerns on non-GAAP financial measures. It establishes that company-reported non-GAAP financial measures are useful for investors who apply them for varied reasons but who also make further adjustments including reversing questionable adjustments. The survey also shows that investors have concerns around the communication, consistency, comparability across periods and similar companies, and transparency of non-GAAP financial measures.

The second paper builds on the first one and articulates actions required to improve communication of these measures and enhance the overall performance reporting framework. For instance, the investors surveyed believe that securities regulators have a vital role in imposing discipline around the reporting of non-GAAP financial measures. And they are of the view that concerns around non-GAAP financial measures should serve as a catalyst for the IASB and the FASB to enhance their primary financial statements’ presentation and classification requirements, including defining key subtotals.

Both papers can be downloaded from the CFA Institute's website:

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