SEC's Division of Corporation Finance Releases New Guidance Related to Non-GAAP Financial Measures – May 23, 2016
White & Case
Description
on a company’s filed documents to bring the two types of information in line with each other and ensure
that the company provides consistent public disclosure.
•
Ensuring Non-GAAP measurements are appropriate and not misleading. Non-GAAP measurements
should be used to supplement, not supplant, information in the financial statements. Registrants should
take care to ensure that such non-GAAP measures would not be considered misleading. Preparers
should carefully consider whether significant adjustments to profitability outside of customary measures
such as EBITDA or non-recurring items, are appropriate and properly presented.
•
Management oversight of the use of non-GAAP measures.
In a recent speech, SEC Chief Accountant James Schnurr indicated that a company’s management and audit committee should increase their focus on the use of non-GAAP measures beyond merely determining that they comply with SEC rules and consider why the proposed non-GAAP measure is an appropriate way to measure the company’s performance and is useful to investors. Companies should consider the application of disclosure controls and procedures to non-GAAP measures. • Appropriate use of, and clear explanations regarding, non-GAAP measures. Recently, the staff has issued a number of comments objecting to the use of, or disclosures regarding, non-GAAP measures, in particular, companies’ disclosures as to why their non-GAAP measures are useful.
Companies should pay particular attention to providing thorough, thoughtful explanations for the use of non-GAAP measures. White & Case LLP 1155 Avenue of the Americas New York, New York 10036-2787 United States T +1 212 819 8200 In this publication, White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities. This publication is prepared for the general information of our clients and other interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice. Client Alert White & Case 4 .
In a recent speech, SEC Chief Accountant James Schnurr indicated that a company’s management and audit committee should increase their focus on the use of non-GAAP measures beyond merely determining that they comply with SEC rules and consider why the proposed non-GAAP measure is an appropriate way to measure the company’s performance and is useful to investors. Companies should consider the application of disclosure controls and procedures to non-GAAP measures. • Appropriate use of, and clear explanations regarding, non-GAAP measures. Recently, the staff has issued a number of comments objecting to the use of, or disclosures regarding, non-GAAP measures, in particular, companies’ disclosures as to why their non-GAAP measures are useful.
Companies should pay particular attention to providing thorough, thoughtful explanations for the use of non-GAAP measures. White & Case LLP 1155 Avenue of the Americas New York, New York 10036-2787 United States T +1 212 819 8200 In this publication, White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities. This publication is prepared for the general information of our clients and other interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice. Client Alert White & Case 4 .
