On October 16, 2017, Clermont Partners released a survey on the reliance of active investors on non-GAAP versus GAAP reporting, intangible assets and non-financial metrics. Unlike passive investors who invest in index funds, active investors select securities to buy and sell. Fifty-six active investors, focused on a variety of industries and investment strategies, participated in the 14-question survey. Highlights of the survey include the following:

  • 74% of the respondents rely on non-GAAP more than GAAP reporting when evaluating a company's performance.
  • 44% of the respondents believe that non-GAAP measures have become more important over time.
  • 90% of the respondents will frequently make their own adjustments to a company's GAAP results based on what they believe is relevant in evaluating performance.
  • 64% of the respondents believe that intangible assets are important factors in evaluating performance.

The results of the survey suggest that non-GAAP metrics are viewed more favorably by active investors as they buy and sell securities and that the SEC rules emphasizing GAAP metrics are largely ignored by active investors. A copy of the survey is available here.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved