When Forbes uses non-GAAP metrics, what is the recommended practice?

• A. Reconcile to GAAP and disclose reasons for non-GAAP
• B. Use non-GAAP metrics without disclosure
• C. Replace GAAP with non-GAAP in all reports
• D. Do not use non-GAAP metrics at all

Answer: (A)

When Forbes uses non-GAAP metrics, the practice is to present a clear reconciliation to GAAP and explain the reasons for the non-GAAP measure. This keeps reporting transparent and lets readers compare performance against GAAP metrics, which serve as the baseline.

Non-GAAP figures can highlight underlying performance by excluding items that are irregular or not indicative of ongoing operations, but every adjustment should be defined and justified, with a line-by-line reconciliation showing how the non-GAAP number is derived from the GAAP measure. Providing this context helps readers understand what is being emphasized and why, and it supports apples-to-apples comparisons across periods and peers.

For example, if a company reports an adjusted EBITDA figure, the report should show how that figure relates to GAAP net income, including each adjustment (what was added back or excluded and why), so readers can see the impact of those changes.

Other options undermine transparency or comparability: using non-GAAP without disclosure hides the adjustments; replacing GAAP with non-GAAP would mislead and misalign with standard accounting practice; and not using non-GAAP metrics at all would omit potentially useful context.