“Financial accounting metrics at companies ranging from Uber Technologies to Beyond Meat to We Co. have gotten creative, going far beyond the guidelines that fall under generally accepted accounting principles,” the Wall Street Journal reports. The article continues: “The number of companies reporting non-GAAP numbers has proliferated. In 1996, only 59% of filers used non-GAAP figures according to Audit Analytics. By 2017, that had grown to 97%.”

Required

a) What arguments do companies make in favor of disclosing non-GAAP (pro forma) numbers?

b) What should investors be concerned about with respect to non-GAAP disclosures by companies?

c) What steps has the SEC taken to minimize the potential abuse non-GAAP disclosures?

Answer rating: 100% (QA)

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