CPA Ontario President and CEO Carol Wilding on Non-GAAP Measures
January 25, 2017
Financial Executives International Canada, Toronto Chapter
Carol Wilding, FCPA, FCA
President and CEO, CPA Ontario
Thank you for joining us and I hope you enjoy the upcoming discussion.
When asked to speak with you this evening about thought leadership, I spent some time considering what that looks like for the CPA profession.
One of our goals at CPA Ontario is to ensure that CPAs and the profession are recognized for demonstrating forward thinking that is based on our deep skills and expertise.
But we also want to learn from partners across the capital markets.
At CPA Ontario, we’re in the early days of fulfilling this mandate. And this is one of the reasons I was pleased to accept the opportunity to speak with you.
We believe that CPAs benefit from opportunities to position the profession as a collection of individual thought leaders.
Thought leaders who provide thinking on issues related to finance and financial reporting.
Thought leadership is especially valuable in areas where we don’t yet have a defined robust set of accepted rules.
We believe that by engaging in thought leadership activities — we can help our members garner business benefits.
As they’ll become known as the go-to providers for their expertise and knowledge.
And the profession as a whole benefits when we’re able to address issues of importance to our members and the public at large.
At CPA Ontario we are entrusted with the self-regulatory authority precisely because of our professional commitment to the public good.
Many of the issues we are facing raise complex questions involving sophisticated players.
And we need to be forward thinking in order to address these issues.
To highlight some imminent challenges facing our profession — we need only consider the Panama Papers, corporate whistleblowing…
And what we will be discussing tonight — non-GAAP financial measures.
More often than not, these issues cannot be addressed by simply applying a series of robust rules and regulations.
We, as CPAs, need to apply our professional judgment.
Turn to our moral compasses and act with strong ethical intention.
We need to do the right thing.
Ultimately, we have to evaluate an issue that somehow falls outside of the traditional rule book.
And act with integrity with a view to always protecting — the public’s interest.
For me, personally, we only succeed as a profession when both business and society win.
CPAs have to navigate changing landscapes.
And we have to determine how to respond to what may be legally acceptable in practice — but may be questionable in terms of what is ethically acceptable.
If we’re navigating the non-GAAP landscape, we must acknowledge that these are measures not derived from a common set of rules which define how they should be calculated.
They may or may not be used consistently across companies and industries.
And we know businesses use these measures to convey select information that they believe will be relevant for investors.
We know this practice isn’t a new one.
Types of non-GAAP measures we commonly see public companies reporting are EBITDA (Ee-bid-dah), pro forma earnings and free cash flow.
There is nothing wrong with reporting these types of measures.
In fact, many would argue that financial statement users, like investors and analysts, are demanding this type of reporting.
Because they believe it provides a more relevant metric to assess a company’s performance over traditional GAAP reporting.
The challenge is maintaining objectivity and consistency when reporting these measures.
And resisting the urge to only report positive metrics.
When businesses are able to literally pick and choose what numbers tell their story — well, this is where we may start to have problems.
Non-GAAP by its nature means it is not governed by a set of rules like the IFRS standards.
But rather is subject to the consideration of regulatory guidance — combined with an accountant’s application of professional judgment.
The use of non-GAAP measures isn’t necessarily a bad thing.
It is the HOW, that the measures are calculated, presented and explained that is relevant.
Tonight, I’m joined by leaders who bring different perspectives to the discussion of non-GAAP financial measures.
I’ll be asking each panelist to provide context and their perspective on the issue.
And once we’ve heard from each panelist, I’ll follow up with questions.
Finally, we will open the floor to hear from you — the audience.