1.2 Prevalence of Non-GAAP Information

1.2.1 Who Uses Non-GAAP Measures?

Non-GAAP financial measures are used commonly not only by registrants but also by companies seeking to gain access to the U.S. capital markets through an initial public offering or de-SPAC transaction. Two recent publications provide insight into the prevalence of non-GAAP measures and how they differ from comparable GAAP measures.

One is a study published in June 2025 by Calcbench and Suffolk University that analyzed the 2024 annual earnings releases of the S&P 500 and found that 71 percent of such companies reported either non-GAAP net income or non-GAAP earnings per share. Of those 71 percent, 89 percent reported non-GAAP earnings measures that were higher than the comparable GAAP measure.

The other is the FASB’s November 2024 ITC on potential standard setting related to financial KPIs. In the document, the Board noted that on the basis of data from Calcbench, “[f]rom 2013 to 2022, the proportion of SEC filers reporting a Financial KPI increased from 36 percent to 53 percent. Among the S&P 500, which reflects large public companies, the increase was from 65 percent to 85 percent over the same period.” In addition, the FASB observed that these increases were present throughout a variety of industry sectors and that in 2022, the five most common financial KPIs reported by companies in the S&P 500 were (1) EBITDA or adjusted EBITDA, (2) adjusted EPS, (3) adjusted net income, (4) adjusted operating income, and (5) free cash flow or adjusted free cash flow.

Although the analyses outlined above are based on different sets of registrants and reporting periods, the message is clear — non-GAAP measures are prevalent, and they generally present a more positive financial picture than their GAAP counterparts.

1.2.2 Why Do Registrants Use Non-GAAP Measures?

Many registrants assert that non-GAAP measures are meaningful and provide valuable insight into the information management considers important in running the business. Registrants may believe that GAAP numbers do not provide a full picture of their business or their results of operations and liquidity unless they are supplemented with non-GAAP measures that they believe are useful. While the SEC staff allows registrants to use non-GAAP measures “to tell their story,” registrants must comply with the appropriate SEC rules and guidance and provide appropriate disclosures.

Reasons why registrants may use non-GAAP measures include the following:

Management compensation and incentive plans may be based on non-GAAP measures.
Debt covenants or other requirements may be based on non-GAAP measures.
Investors, analysts, and others may find non-GAAP information useful for a variety of reasons; for example, the information may provide meaningful insight into items affecting a company’s performance and comparability of results to others in the industry.
Forecasts and budgets used by management may be based on non-GAAP measures.
Certain non-GAAP measures, such as EBITDA, may be used for assessing business valuations in analyses of either earnings multiples or comparable transactions.

In some situations, the SEC staff may seek to corroborate a registrant's assertion regarding the usefulness of a measure by asking about the information provided to the company's board or about which measures the company uses in financial planning. See also Section 3.4 regarding disclosure of the use and purpose of non-GAAP measures.

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This SEC Reporting Interpretations manual provides comprehensive guidance; however, the manual does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.