Non-GAAP measures

April 2013
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Non-GAAP measures

At a glance

Companies in the United States typically follow generally accepted accounting principles (GAAP) when preparing financial statements. A non-GAAP measure is defined as a measure that excludes (or includes) amounts that are included (or excluded) in the most directly comparable measure calculated in accordance with GAAP. However, non-GAAP measures do not include operating and statistical measures (e.g., unit sales or numbers of employees) or measures of performance for each segment required to be disclosed by the accounting standards.

For non-GAAP measures included in SEC filings, the regulation (included in Regulation S-K) has four requirements and several prohibitions. It requires a presentation of:

  • the most comparable GAAP measure with equal or greater prominence
  • a reconciliation between the non-GAAP measure and the GAAP measure
  • a statement disclosing why the measure is useful; and
  • if material, any other purposes for which management uses the non-GAAP measure.