Which approach should Forbes use when reporting non-GAAP metrics?

Which approach should Forbes use when reporting non-GAAP metrics?

• A. Use widely without reconciliation
• B. Use cautiously and reconcile to GAAP
• C. Never use non-GAAP metrics
• D. Only disclose but not reconcile

Answer: (B)

Non-GAAP metrics can highlight underlying performance by excluding items management believes aren’t part of ongoing results. The best approach is to use them cautiously and provide a clear reconciliation to GAAP. This means presenting the GAAP result and showing exactly which adjustments were made to reach the non-GAAP figure, so readers can understand how the non-GAAP measure is derived and compare it over time and across peers. Label the metric clearly, explain why it’s useful, and indicate whether the adjustments are recurring or one-time. This transparency helps prevent misinterpretation and supports consistent, honest communication with investors. Reporting non-GAAP metrics without reconciliation can mislead by disconnecting the figure from GAAP, while completely avoiding non-GAAP metrics or only disclosing them without reconciliation deprives readers of useful context.

Non-GAAP metrics can highlight underlying performance by excluding items management believes aren’t part of ongoing results. The best approach is to use them cautiously and provide a clear reconciliation to GAAP. This means presenting the GAAP result and showing exactly which adjustments were made to reach the non-GAAP figure, so readers can understand how the non-GAAP measure is derived and compare it over time and across peers. Label the metric clearly, explain why it’s useful, and indicate whether the adjustments are recurring or one-time. This transparency helps prevent misinterpretation and supports consistent, honest communication with investors. Reporting non-GAAP metrics without reconciliation can mislead by disconnecting the figure from GAAP, while completely avoiding non-GAAP metrics or only disclosing them without reconciliation deprives readers of useful context.