Investor Advisory Group Seeks Audit Standards for Non-GAAP Measures
November 7, 2017
Regulators searching for a reliable way to evaluate non-GAAP financial measures so that they aren’t misleading to investors should define their standards based on key performance indicators (“KPIs”) for specific industries. This guidance is the latest recommendation to come from a working group of the Investor Advisory Group (“IAG”), which is part of the Public Company Accounting Oversight Board (“PCAOB”).
Many public companies feel that U.S. GAAP metrics don’t reflect how they manage their businesses as well as some non-GAAP metrics do. However, non-GAAP measures pose an issue for auditors.
The IAG’s working group is trying to balance the need for consistency and standardization with the need to be flexible in today’s ever-changing, often-disrupted business climate. By choosing KPIs that everyone within a given industry can generally agree on, investors, the public and even those within an organization may be able to choose the specific indicators that do the best job of laying out an accurate financial picture. With KPIs chosen, audit standards may be easier to establish.