Almost all public companies use non-GAAP earnings measures, which can be valuable if used properly. However, there is a need to rationalise the use of alternative performance measures (APMs) to avoid the use of non-GAAP performance reporting to ignore inconvenient charges.

Gary R Kabureck argues that, in the current accounting environment, there is a lack of guidance from both IFRS Standards and US GAAP on defining and reporting operating results such as recurring income, earnings from core business operations, EBIT (earnings before interest and tax) and operating profit. He writes: “Unfortunately, today’s APMs are anything but uniformly applied. The challenge for us is to put some order and structure into the reporting of financial performance while simultaneously providing relevant information that faithfully represents the performance of the company.”

Kabureck's article addresses the challenges of providing guidance and definitions for these alternative metrics and looks at what the International Accounting Standards Board (IASB) is doing to address this. Click here for the full article. 

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CTMfile take: Does your company use non-GAAP performance measures such as EBIT, recurring income, earnings from core business operations or operating profit? Do you welcome the IASB's initiative to address this?