Question

(8) In case Exhibit 9, Panel A, the company provides a reconciliation of the $5.66 EPS figure to the income statement’s reported EPS figure of $8.78. Also referred to as “Core EPS” in a PepsiCo-related press release, this figure, $5.66, is a non-GAAP financial measure many companies choose to report. What does a non-GAAP financial measure mean? What does the terminology “core” suggest to you? What is the reason that many companies provide non-GAAP financial information in their financial reports?

Answer 1

Answer:

i)Non-GAAP financial measure mean:

Non-GAAP financial measure means standards which are not as per U.S. Proper accounting rules (GAAP), i.e., the modifications made are not following the US GAAP and relies upon an organization.

A few examples of changes are:

• Tax reductions related with rearrangements of activities
• Gains or losses identified with mergers, acquisitions, divestitures and other basic changes
• Charges or adjustments identified with the institution of new laws, rules or guidelines, for example, important tax law changes
• Amounts identified with the goals of tax positions
• Annuity and retiree medical related things
• Resource weaknesses (non-cash)
• Re measurement of net fiscal resources
• Quantities identified with mark-to-advertise gains or losses (non-money)
• Debt redemption, money delicate or trade offers
• Charges identified with rebuilding programs

ii) The terminology "core" suggest to you:

The core outcome is a non-GAAP monetary measure which precludes certain things from the historical outcomes. Core EPS is the EPS balanced for increment or diminishing in investors' value ascending from tasks less acknowledged and unrealized gains and losses, any motivating force expenses (or) incentive fee owing to such net acknowledged and unrealized gains and losses and any income taxes identified with such acknowledged or realized gains.

iii)The reason that many companies provide non-GAAP financial information in their financial reports:

Non-GAAP fiscal estimates consider the working and key decisions, including the planning of the operating plan, assessment of the general business execution and in deciding compensation for certain employees. Presenting non-GAAP financial measures gives valuable data to help correlation of past operating outcomes and patterns in basic working outcomes, and gives extra lucidity on the most proficient method to appraise a business.