Activity 1: GAAP & Non-GAAP Measures Reported by Companies Non-GAAP financial measures refer to financial information that is calculated or presented in ways other than those permitted under generally accepted accounting principles, or GAAP (SEC 2002). Non-GAAP measures may be reported within 10-K filings, or they may be disclosed in areas outside of the financial statements, such as in earnings press releases. Non-GAAP Measures in Company Annual Reports: 1. Find and examine PepsiCo, Inc.s annual report (10-K) for fiscal year 2020 (this may be found via the SECs EDGAR website or the companys own website) and identify two non-GAAP measures that the company discloses in the Managements Discussion & Analysis section of the 10-K. Answer the following questions about the non-GAAP measures that you identified: a. What are the names of the non-GAAP measures you identified? What are the dollar or numeric values of these measures? b. What are the equivalent GAAP measures for the non-GAAP measures you identified in part a.? What are the dollar or numeric values of the GAAP measures? c. Are the non-GAAP measures you located in part a. higher or lower (in dollar or numeric value) than the equivalent GAAP measures you identified in part b.? d. What are the main items being added or subtracted from the GAAP measures to calculate the non-GAAP measures (e.g., are there specific expense/revenue items that are added or subtracted)? e. Explain potential benefits investors may get from the disclosure of these non- GAAP measures. Focus on how the disclosures may help inform the investing decisions of these stakeholders, rather than whether the particular disclosures would increase or decrease the likelihood of investing. 2. Find and examine Coca-Cola, Inc.s annual report (10-K) for fiscal year 2020 and note that the company does not disclose any non-GAAP measures in the Managements Discussion & Analysis section of the 10-K. Explain potential issues with Pepsi including non-GAAP measures and Coca-Cola excluding non-GAAP measures in these communications to investors. Also explain any other potential issues with how Pepsi has reported the non-GAAP measures. Focus on how the disclosures may help inform the investing decisions of these stakeholders, rather than whether the particular disclosures would increase or decrease the likelihood of investing.