The Gap between GAAP and Non-GAAP

Theresa F. Henry, PhD, CPA, Rob R. Weitz, PhD, and David A. Rosenthal, PhD

In BriefMany companies have increasingly turned to the reporting of non-GAAP measures, which fall outside the realm of generally accepted accounting principles and must be reconciled to more familiar GAAP measures. Proponents claim that non-GAAP measures provide better indicators of performance; critics contend that they obscure problems and impede comparability. The authors analyzed a wide array of non-GAAP measures and found that this reporting did provide some useful insights into the companies that used them, but at the expense of clarity and transparency.