Typically that work falls to the Financial Accounting Standards Board (FASB), and they have some fresh news on that front.

FASB is working on a new project to study financial key performance indicators. The group recently published a call for people in the financial analysis world (that would be you) to comment on what makes for good financial KPIs, and we encourage our readers to give FASB’s request a read and offer your opinion.

Oh, and the data that FASB used to do its preliminary research on KPIs came from Calcbench. #HumbleBrag

Why is FASB undertaking this project, and why should you care? Because more and more companies are disclosing financial KPIs in their earnings releases, but those KPIs —  EBITDA, adjusted EPS, free cash flow, or various others — are not part of U.S. Generally Accepted Accounting Principles, which means they aren’t subject to the same rigor and uniform structure as GAAP.

For example, when you look at a GAAP disclosure (revenue, inventory, liabilities, net income, and so forth), you can be confident that all filers calculate those disclosures in the same manner. That’s not the case for, say, adjusted EBITDA, adjusted EPS, or other financial KPIs; companies must calculate such KPIs consistently from one period to the next, but each company can perform those calculations in its own way. 

But back to that point about so many companies now disclosing financial KPIs. If so many companies are doing so, perhaps FASB should try to bring some order to that chaos? That’s the question this KPI project is trying to answer. See Figure 1, below, which shows the five financial KPIs most often cited by public filers.

Finding KPIs in Calcbench

You can find financial KPIs in Calcbench in several places.

First, if you’re researching a specific company using our Company-in-Detail page, you have an option to see the non-GAAP financial metrics that company might report. You’ll find that by looking for the “Show Guidance and non-GAAP Metrics” tab immediately above the data display. Figure 2, below, shows an example from Ingredion ($INGR). 

The red arrow points to the relevant tab you want to activate. It appears as “Hide Guidance and Non-GAAP” above because we’ve already pressed it; and when we did, those three KPIs — adjusted net income, adjusted EPS, and adjusted operating income — all appeared. 

For example, if you look further down the table, you’ll see GAAP operating income too, which is only $268 million compared to the non-GAAP adjusted operating income of $282 million. You’d see the same for net income and EPS too, but we clipped them from the image for the sake of brevity.

You can also use our Multi-Company page to research the financial KPIs of several companies at once. Figure 3, below, shows several of Ingredion’s peer companies and a few of the financial KPIs they disclose. Note that they all disclose adjusted revenue and EBITDA, but only some report non-GAAP operating income.

You can also search for non-GAAP financial metrics via our Disclosures and Footnotes Query page. For example, you could select a group of companies and then search their earnings releases for telling phrases, such as “adjusted net income.” We did that for S&P 500 companies that filed earnings releases in the last 30 days, and found two: Medtronic ($MDT) and Dollar Tree ($DLTR). 

Presumably we found only two because most S&P 500 companies had filed their latest earnings releases in October, along with their Q3 2024 results. Anyway, that quickly let us see what adjusted net income those two companies filed, along with other non-GAAP financial metrics also disclosed nearby.

Speak up!

Back to FASB’s call for comment. FASB lists numerous questions it has about financial KPIs, where the group would welcome comment from investors and companies alike. Such as:

• If you use financial KPIs in your analysis, are the financial KPIs you use comparable across different entities?

• If your company and your company’s peers present financial KPIs outside the financial statements, are the financial KPIs comparable?

• Would you benefit from standardized GAAP definitions of commonly used financial KPIs? 

• Should the FASB provide criteria for entities to use to determine when a defined financial KPI needs to be disclosed? 

And so on and so forth. We all want better, more rigorous financial data, and projects like these are what allows such data to happen. So if you care about financial reporting and have feelings on KPIs, do share them with FASB. And if we can help with your other non-GAAP financial analysis challenges, drop us a line at us@calcbench.com to tell us what’s on your mind!