• Accounting regulation
• Controls on non-GAAP disclosure
• Disclosure quality
• Motivations of voluntary accounting information
• Non-GAAP disclosure
• Standardization of non-GAAP disclosure

The disclosure of measures that fall outside Generally Accepted Accounting Principles (GAAP) sparks the interest of researchers, investors, preparers, the financial press, and policymakers. Non-GAAP measures, which are disclosed in addition to mandatory accounting information, involve adjustments to items in the primary financial statements. These measures include indicators of profitability, liquidity, and solvency performance. The use of non-GAAP measures by companies worldwide has increased significantly. In the 1990s, it was a practice limited to particular industries, like dot-com companies; nowadays, it has become a widespread phenomenon scrutinized by academics and major securities market regulators. This growth is driven by the ability of non-GAAP measures to offer alternative, and sometimes contrasting, performance metrics compared to official accounting results. Consequently, these measures have attracted significant interest, prompting scholars to investigate their nature, determinants, and the impact of such disclosure on investors' decision-making processes.

On the one hand, non-GAAP measures can be a valuable tool for providing stakeholders with more useful information than traditional financial statements alone. On the other hand, since these indicators fall under voluntary disclosure and are not subject to audit, they could be used to present a more favorable view of a company's performance. Hence, non-GAAP disclosure may potentially overshadow the official accounting results. In any case, the use of non-GAAP measures threatens the reliability and comparability of a company's financial communications. This concern has drawn the attention of supervisory authorities like the SEC and ESMA, as well as major standard setters such as the FASB and IFRS. They are now considering how to restructure the format and content of financial statements, impacting the way firms present and disclose accounting information, and mitigating the use of non-standardized figures.

The growing interest of policymakers is also driven by the vibrant debate in academic accounting literature over the past twenty years. Non-GAAP indicators have been extensively studied in the United States. Many researchers highlight the widespread use of these indicators, while others emphasize the additional informational value of alternative metrics. Some studies have also focused on their potential use for opportunistic purposes. Additionally, the regulation of non-GAAP indicators by the US SEC is considered the most advanced. These indicators have also been studied in other countries such as the UK, France, Germany, Australia, New Zealand, China, Japan, Brazil, and South Africa. However, there is a notable lack of comprehensive research in Europe that examines the diffusion, determinants, and consequences of non-GAAP disclosure across multiple countries and sectors.

Therefore, the extensive debate around non-GAAP measures, recent interventions by supervisory authorities and standard setters, and the impact on daily accounting practices underscore the importance of the topic. There is a need to organize two decades of empirical research on the non-GAAP topic. It is particularly important to highlight the concerns related to non-GAAP measures and to examine how current control mechanisms address these issues. Additionally, upcoming regulatory changes and their expected impact on non-GAAP measures must be considered. Finally, specific gaps in non-GAAP disclosure from European companies should be addressed, especially in light of forthcoming changes in accounting rules. Chapter 1 sets the stage by identifying non-GAAP measures within the broader context of corporate reporting. In this sense, it provides a detailed definitional contribution of non-GAAP performance indicators to capture the nuances of this unique category. An exploratory investigation is also conducted to identify the most commonly communicated non-GAAP measures among European companies. This data collection reveals that non-earnings non-GAAP measures represent a non-trivial portion of the overall non-GAAP disclosure. However, research and policymakers' efforts are almost entirely focused on measures derived from the Income Statement.

Afterward, the literature review examines the two main areas of non-GAAP disclosure research: informativeness and opportunism (Chapter 2). Particular focus is given to opportunism due to concerns about potential opportunistic behavior highlighted by policymakers. The chapter concludes with an original analysis about the informativeness of non-GAAP earnings among European listed companies. The investigation deals with the informative power of GAAP and non-GAAP earnings. This analysis reveals hints of some opportunistic behavior.

Chapter 3 analyzes extant control mechanisms to mitigate the risk of opportunistic non-GAAP disclosure, examining both internal and external controls. Thus, corporate governance, external audit, and current regulations are scrutinized. This chapter also presents results of an investigation on compliance with European guidelines about non-GAAP measures. The results highlight a generally unsatisfactory level of adherence. Acknowledging the limitations of existing control mechanisms, Chapter 4 discusses recent initiatives by major standard setters that could impact non-GAAP disclosure, although these changes have yet to take effect. The chapter reflects on the motivations behind these interventions, the approaches used, and their potential impacts on non-GAAP reporting.

The discussion of non-GAAP disclosure from different perspectives (definition, academic findings, controls, and standardization) underscores the necessity of implementing some form of regulation to mitigate the risk of opportunism. These interventions could range from guidelines issued by securities market supervisory authorities to standardized calculation methods established by standard setters. However, while the goal is to enhance comparability and transparency, these interventions may also reduce the richness of the information content. The debate on regulation reflects differing views on the informativeness of non-GAAP disclosure. The structure of this work can assist researchers, regulators, and standard setters in finding an effective balance between mitigating opportunism and maintaining the relevance of accounting information.

This work aims to provide a systematic overview of the most significant empirical findings from over two decades of research, complemented by new studies on non-GAAP disclosure in an IFRS accounting environment, such as the European one. For this reason, it contributes not only to the general non-GAAP literature but also to a deeper understanding of non-GAAP disclosure among European companies. The scientific literature has yet to extensively examine non-GAAP practices across multiple European countries simultaneously. This work can serve as a base for more advanced and detailed studies on non-GAAP disclosure provided by European firms. It is also a valuable resource for regulators and standard setters, especially as it is among the first to comment on recent updates to accounting standards.

This monograph contributes also to the broader debate on the relevance of accounting information, as some authors attribute the rise of non-GAAP measures to a perceived decline in the usefulness of traditional accounting metrics. Specifically, there is a pressing need to balance the one-size-fits-all approach with the importance of relevant financial information. In certain industries today, a misalignment exists between how companies generate value and the ways current GAAP standards represent these activities. Issues like the mismatch of revenue and expenses and the heavy reliance on intangible assets create a favorable environment for non-GAAP measures to flourish. As business moves increasingly into the digital sphere, exploring the role of non-GAAP measures also invites a reconsideration of GAAP’s role in today’s evolving landscape.