These questions are based on the article titled “Has Non-GAAP Reporting Become an Accounting Chasm?” that appeared in the digital magazine CFO on September 23, 2019.

This article discusses the pervasive (and seemingly aggressive) use of non-GAAP reporting that is creating a crisis in how investors, analysts, and the media report financial performance and value companies.

In its early stages of financial reporting, unaudited non-GAAP measures were used to “isolate the impact of significant one-time events”. As stated in the article, “97% of companies in the S&P 500 used non-GAAP financials in 2017, up from 59% in 1996, while the average number of different non-GAAP metrics used per filing rose from 2.35 to 7.45 over two decades

After reading the article “Has Non-GAAP Reporting Become an Accounting Chasm?”, answer the following questions:

1. Do you feel that non-GAAP adds value to financial statement stakeholders? Explain.

2. Do you feel the SEC’s approach to managing non-GAAP reporting is effective? Explain.

3. Search for a set of publicly available financial statements of a company that interests you. After reviewing them, determine if there is any non-GAAP reporting (you will most likely find this is the notes to the financial statements). Comment on the disclosure of the non-GAAP item (i.e., how it enhanced your understanding of the financial disclosure). If no non-GAAP reporting is provided, explain whether you feel it would have added value to the financial statement disclosure.