A Literature Review and Preliminary Analysis of Non-GAAP Reporting in Korea: Implications for the Upcoming Implementation of Management-defined Performance Measures

The recently introduced IFRS 18 incorporates the management-defined performance measures (MPMs)―a subset of non-GAAP measures― and requires extensive disclosures and explanations. This paper aims to support the effective implementation of MPMs in the Korean capital market, where non-GAAP reporting remains relatively uncommon. We begin with a trend analysis of non-GAAP reporting practices in Korea and other jurisdictions, revealing that Korean firms report non-GAAP measures less frequently and provide less information than firms in other countries. A subsequent literature review examines the ongoing debate regarding the motivation behind non-GAAP reporting―whether informative or opportunistic― along with a detailed overview of reported measures and regulatory oversight. This paper then presents preliminary empirical evidence suggesting that the use of non-GAAP measures may enhance the value relevance of earnings among Korean firms. It also provides interviews with a prepare and a researcher about non-GAAP reporting practices and related challenges in Korea. This paper contributes to stakeholders’ understanding of non-GAAP measures by offering insights into their potential benefits and risks for the Korean capital market.