Non-GAAP financial measures: Investor and analyst perspectives

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08/06/2014 by PwC Investor Resource Institute
Non-GAAP financial measures: Investor and analyst perspectives

At a glance

Companies often use non-GAAP financial measures to provide insights into their business. Investment professionals share their perspectives on the value to investors, their effect on transparency, and perceptions on management.

What is the value and impact to investment professionals of non-GAAP financial measures?

Investors have told PwC that non-GAAP financial measures provide valuable insights:

  • They facilitate an investment professional's understanding of a company's underlying operational performance, which is useful for forecasting future cash flows.
  • They provide insight into management's perspectives on changes to the business that are organic to the company's operations or if the changes are unusual and infrequent.

Other findings from our analysis of investor perspectives on non-GAAP financial reporting:

  • Non-GAAP financial measures are most effective when accompanied by clear and transparent disclosure of what is included or excluded from the measure, along with the supporting rationale.
  • There may be a correlation between how a company defines and presents its non-GAAP financial measures and how its management is perceived by the investment community.

Further insights can be found in this report on Insights from the Investment Community.

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