Are Non-GAAP Measures Helpful Or Harmful?

U.S. Generally Accepted Accounting Principles (GAAP) are a set of rules and procedures that accountants typically follow to record and summarize business transactions. These guidelines provide the foundation for consistent, fair, honest and accurate financial reporting. Private companies generally aren't required to follow GAAP, but many do. Public companies don't have a choice; they're required to follow GAAP.

Over the years, the use of non-GAAP measures has grown. These unaudited figures can provide added insight when they're used to supplement GAAP performance measures. But they can also be used to mislead investors and artificially inflate a public company's stock price. Here's more on this controversial trend — and why it's led to a backlash from some business groups and regulators.