QMCI - Putting the Supplemental Back into Non-GAAP Disclosures

Public companies are required to use Generally Accepted Accounting Principles (GAAP) established by the Financial Accounting Standards Board (FASB). Companies often report non-GAAP financial measures such as adjusted earnings or earnings before interest, taxes, depreciation and amortization (EBITDA) as a supplement to GAAP financial measures. There has been considerable debate about companies that use non-GAAP metrics for executive compensation and whether firms may manipulate metrics to boost compensation or meet terms of debt agreements or covenants that are based on EBITDA. In 2015, the Securities and Exchange Commission Chair expressed concern about the use of unaudited performance figures and the potential for non-GAAP information to become the key message to investors thus supplanting the GAAP presentation. Should there be more restrictions on the use of non-GAAP financial reporting or greater standardization? Below are the bull and bear cases for reporting non-GAAP financial information.Read More >>