4.6 Metrics and Key Performance Indicators | DART – Deloitte Accounting Research Tool

Financial or operational metrics, sometimes called key performance indicators (KPIs), may also be included in an IPO registration statement to illustrate the size, profitability, and growth of the business or other relevant trends such as customer acceptance or retention. The SEC has indicated that registrants should consider the need to disclose KPIs or metrics that management uses in managing its business within MD&A, because such information may be material to an investor’s understanding of the company’s performance. Examples of metrics include items such as number of Web page views, total customers/subscribers, customer retention rates, average revenue per user, occupancy percentage, or same-store sales.

Metrics may be based on GAAP amounts, non-GAAP amounts, nonfinancial amounts, or any combination thereof. When using metrics, registrants should first consider whether an existing regulatory framework applies. For example, metrics based on non-GAAP measures would be subject to the requirements in Regulation G and Regulation S-K, Item 10(e) (see Section 4.5). If metrics are not subject to an existing framework, registrants should consider what additional information they may need to present for investors to understand the metric presented. As clarified in interpretive guidance issued by the SEC in January 2020, the SEC would generally expect the following disclosures to accompany all KPIs and metrics in MD&A:

A clear definition of the metric and how it is calculated.
A statement indicating the reasons why the metric provides useful information to investors.
A statement indicating how management uses the metric in managing or monitoring the performance of the business.
Whether there are estimates or assumptions underlying the metric or its calculation that may be important for investors to understand.
Disclosures accompanying any changes in the calculation or presentation of KPIs and metrics from period to period.

The guidance also reminds registrants of the importance of maintaining effective DCPs related to KPIs and metrics, including maintaining consistency and accuracy of disclosures.

In addition, for additional background and guidance on the presentation and use of metrics and KPIs, see Section 2.4 of Deloitte’s Roadmap Non-GAAP Financial Measures and Metrics.