Non-GAAP Measure

Companies often present non-GAAP or alternative performance measures alongside their official results, arguing that they better reflect underlying performance. Common adjustments exclude restructuring costs, acquisition-related costs, share-based compensation, impairments and the amortization of intangible assets from acquisitions.

For example, a company might report a statutory net profit of 50,000,000 and an adjusted profit of 80,000,000, after excluding 20,000,000 of restructuring costs and 10,000,000 of amortization from acquired intangibles.

These measures can be useful, but they can also present an overly favourable picture. Companies choose what to exclude, sometimes removing costs that recur every year.

Regulators set rules for how non-GAAP measures are presented. In the United States, the Securities and Exchange Commission requires companies to reconcile them to the closest official measure and not give them more prominence. European regulators have similar guidelines for alternative performance measures. Investors should always compare non-GAAP figures with official results and examine each adjustment.