The Application Of Non-GAAP Measures In China

Non-GAAP financial measure originated in the United States and has a long history of development.As an important part of the voluntary information disclosure by management,the financial statements have been supplemented to provide external users with more detailed and persuasive information related to the company's operating conditions and cash flows,which effectively alleviates the information asymmetry and improves the transparency of the information.However,with the more and more extensive disclosure of Non-GAAP measures,certain problems have emerged in practical applications,such as management's manipulation behavior,information readability,and executive compensation setting risks.Non-GAAP measures started late in China's capital market.This paper starts with the three non-GAAP measures commonly used in core profit,EBITDA,and free cash flow,analyzes the related theories,and takes two Hong Kong shares companies in China as an example to analyze the important role of Non-GAAP measures disclosure to the transmission of information of Listed Companies in China and possible problems that may accompany it.In the future,as China's capital market matures,there will be more and more listed companies adopt Non-GAAP-based adjustments.In order to maintain a good information disclosure environment and promote the healthy development of the securities market,it is necessary to supervise and guide them effectively.Therefore,this paper starting from the current regulatory framework in the United States,summarizes the development of non-GAAP measures in the United States by sorting out the regulatory history of the relevant departments,drawing on experience and lessons learned,and making recommendations based on the status quo of China's capital market development and the actual situation of listed companies.It will provide an effective reference for the introduction,application and development of China Non-GAAP measures in the future.