Beyond GAAP: A Case Study Analyzing Non-GAAP Financial Measures and SEC Comment Letters through the Lens of the FASB Conceptual Framework

Abstract

Non-GAAP financial measures are disclosed by companies to provide information to investors and other stakeholders beyond what is required by traditional GAAP-based financial statements. Although these voluntary non-GAAP measures may provide useful information for decision-making, their limited regulation and standardization may mislead investors. This case exposes students to several aspects of non-GAAP measures. First, students will be able to locate, compare, and analyze differences in GAAP and non-GAAP measures in various disclosure mediums and subsequently describe the benefits and disadvantages in different contexts. Next, using EDGAR, students will be able to locate and discuss specific issues regulators have taken with these disclosures by analyzing SEC comment letters. Finally, students will be able to compare the usefulness of GAAP and non-GAAP measures using the FASB conceptual framework. Overall, this case provides students with an increased understanding of how companies use differential financial disclosures in the broader financial reporting environment.