NACD Library

NACD Audit Committee Chair Advisory Council: Audit Committee Oversight of Non-GAAP Financial Measures

NACD Audit Committee Chair Advisory Council: Audit Committee Oversight of Non-GAAP Financial Measures Cover
Publication Date: June 28, 2016
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In brief: Regulators and the media have sharpened their focuses on the expanding use of financial metrics not based on Generally Accepted Accounting Principles (GAAP). Companies may use non-GAAP metrics to supplement reported earnings with relevant information for shareholders about the company’s performance.

At a recent meeting of the NACD Audit Committee Chair Advisory Council, Fortune 500 directors discussed board and committee roles in the oversight of non-GAAP financial measures. The discussion revealed several questions audit committee members should consider, including:

  • What is management’s rationale for using a given non-GAAP financial metric, and do we agree with it?
  • How do non-GAAP measures influence compensation plan design and incentive calculations?

This resource can help your board:

  • Engage with management in discussions about non-GAAP metrics.
  • Consider whether non-GAAP metrics are reported in a way that is both transparent and consistent.

Most relevant audiences: Audit committee members