U S Chamber Comments KPI FASB Final
Published
May 08, 2025
Dear Chair Jones:
The U.S. Chamber of Commerce (“Chamber”) appreciates the opportunity to comment on the Financial Accounting Standards Board (“FASB” or “Board”) Invitation to Comment on Financial Key Performance Indicators for Business Entities (“ITC”). The Chamber values the FASB’s commitment to soliciting stakeholder input and to due process by using an invitation to comment with an extended comment period.
The ITC is intended to help inform the Board on whether to add a project on Financial Key Performance Indicators (“Financial KPIs”) to its technical agenda. The Chamber recommends that the Board not do so.
The topic of Financial KPIs does not meet the criteria for FASB to prioritize it for standard-setting, as the subject lacks an identifiable and sufficiently pervasive need to improve Generally Accepted Accounting Principles (“GAAP”). Further, any attempt to identify and define[1] one or more measures of Financial KPIs to incorporate in GAAP as “standardized” – meaning elements that would be broadly decision-useful, cost-benefit effective, and that would withstand the test of time – would be fraught with significant challenges, as subsequently discussed, based on information provided in the ITC and other evidence. FASB’s resources would be better allocated to other priorities and projects.
The discussion below highlights some of the considerations supporting our recommendation. Following overarching comments, the discussion focuses on sources of Financial KPIs by companies and others, along with a few additional considerations.
Discussion
The ITC defines a Financial KPI as any financial measure that is calculated or derived from the financial statements (prepared in accordance with U.S. GAAP) and/or underlying accounting records that is not presented in the GAAP financial statements.[2] This broad definition encompasses an extensive and varied list of measures, including financial ratios long used in financial statement analysis. Singling out any one measure, or even a few, for inclusion in GAAP is problematic. For example, it would elevate selected financial statement components and certain types of financial statement analyses over others.
Further, there are no obvious elements of Financial KPIs that would result in broadly decision-useful information. To illustrate, the ITC helpfully provides data on the frequency of communications of Financial KPIs by both SEC filers and the subset of public companies in the S&P 500.[3] For example, the ITC discloses that in 2022, 53 percent of SEC filers and 85 percent of S&P 500 companies reported Financial KPIs. The percentage of SEC filers and S&P 500 companies reporting various measures also differed within and between groups.
The most frequently reported measure by SEC filers was earnings before interest, taxes, depreciation, and amortization (“EBITDA”) or adjusted EBITDA. Yet, only 33 percent of SEC filers reported either. The frequency decreased to 28 percent for S&P 500 companies reporting EBITDA or adjusted EBITDA.[4]
Moreover, on the ITC’s list of commonly reported measures, only two were reported by more than half of S&P 500 companies – adjusted earnings per share (“EPS”) (68 percent) and adjusted net income (54 percent).[5] GAAP already defines EPS and net income and adjustments to these and other measures would continue even after a FASB project on “standardizing” Financial KPIs.
Companies as Sources of Financial KPIs
The ITC focuses on a potential project on the reporting of Financial KPIs by business entities. Public companies use Financial KPIs to communicate information to investors and others about company operations “through the eyes of management.” The information communicated involves choices about relevant measures and determinations of amounts for the components of the measures. These choices depend on a variety of facts and circumstances.
This context helps explain the variation in the types of Financial KPIs reported by companies and the reporting of entity-specific and adjusted measures. Relevant measures can also be industry-specific and comport with industry-developed definitions.[6]
Both public and private companies communicate KPIs at the direction of specific stakeholders such as lenders. For example, private companies generally provide KPIs at the direction of banks or private equity investors based on measures and definitions specified in lending and investment agreements, respectively.
Considering this context, none of these communications by public or private companies would benefit from a FASB project on identifying and defining one or more “standardized” Financial KPIs to incorporate in GAAP.
Relatedly, the ITC recognizes that public company communications are subject to SEC requirements on non-GAAP financial measures.[7] SEC Regulation G applies whenever any material information that includes a non-GAAP financial measure is disclosed or released publicly (e.g., in press releases) and, among other matters, requires reconciliation of non-GAAP financial measures to GAAP financial measures.
In addition, Item 10(e) of Regulation S-K applies to all SEC filings that include non-GAAP financial measures with requirements consistent with Regulation G. Item 10(e) has incremental requirements, which include disclosures on why management believes the non-GAAP financial measure provides investors with useful information and the additional purposes for which management uses the non-GAAP financial measure. These disclosures occur, for example, in the Management Discussion and Analysis (“MD&A”) section of Form 10-K and Form 10-Q filings.
[1] Measures based on financial statement elements, totals, and subtotals are defined in accounting and financial statement analysis texts and related literature. The ITC uses “defining” in the context of FASB developing a taxonomy to specify the inclusion (exclusion) of financial statement amounts (i.e., amounts within elements, totals, or subtotals) to “standardize” the computation of a Financial KPI.
[2] The definition does not include nonfinancial KPIs (such as same-store sales, churn, and number of subscribers) that FASB also has been encouraged to include in a “standardization” project. The Chamber agrees that nonfinancial KPIs are beyond the purview of FASB.
[3] For example, see the ITC, pages 4 and 5 and Appendix E.
[4] Ibid.
[5] Ibid.
[6] For example, Nareit has developed a definition of Funds from Operations (“FFO”) as a metric to measure the operating performance of Real Estate Investment Trusts (“REITs”). FFO is recognized by the Securities and Exchange Commission (“SEC”) as a supplemental earnings measure and the SEC does not object to the presentation of FFO on a per-share basis.
[7] See Appendix C of the ITC, page 14.
U S Chamber Comments KPI FASB Final
About the author
Tom Quaadman
Tom Quaadman develops and executes strategic policies to implement a global corporate financial reporting system, address ongoing attempts of minority shareholder abuse of the proxy system, communicate the benefits of efficient American capital markets, and promote an innovation economy and the long-term interests of all investors.
