A medium sized listed company has approached your practice with an unusual request concerning the validity of non-GAAP reporting. A shareholders' group have complained to the company’s management - claiming that the annual report is too complex and contains too many different measures. In particular they want reporting that is not required by accounting standards (non-GAAP reporting) to be removed. However, Dave Richards the CEO of the company disagrees and believes that the extra information is useful. In fact he thinks that there should be more of it included within the financial statements to make them more useful to the shareholders.
Your practice has been commissioned to write a report to all interested parties (including the shareholders group who are mainly non-accountants) providing advice (including actionable recommendations) on whether to include non-GAAP reporting in the annual report (and, if so, how much).
One of the partners at your practice has identified you as a promising graduate and has tasked you with writing the draft report. They request that you first provide a report plan (part 1) before completing the report (part 2).
The client have requested that the report (part 2) contains (but is not necessarily restricted to) responses to the following aspects of the issue:
1.The meaning of the term non-GAAP reporting, including the provision of examples from at least two companies’ annual reports to illustrate.
2.Explanation of how non-GAAP reporting may assist with or detract from the objective of financial reporting as defined in the IASB conceptual framework.
3.With regard to the qualitative characteristics of financial information as laid out in the IASB conceptual framework, consideration of how non-GAAP reporting may contribute to or impede high quality financial reporting.
4.A careful consideration of both sides of the argument and a recommendation on the extent of non-GAAP reporting which the company should provide.
In addressing each of these aspects, please incorporate information from at least two companies (as referred to in 1 above). Please note: You are required to include response to marker feedback on part-1 as per the rubric. You are aware of some excellent literature on the validity of non-GAAP reporting that you will also incorporate in this report. You can include any information in the report which you think will assist the client to make these important decisions regarding the provision of information. You must support your arguments and hence use at least ten resources to inform your discussion.

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