Non-GAAP Metrics in the Crosshairs: SEC Issues New Guidance

19 May 2016
View Client Update

Key takeaways

  • The SEC issued twelve new C&DIs on the use and presentation of non-GAAP financial measures.
  • The C&DIs follow recent SEC statements of concern about abuse and overly-aggressive use of non-GAAP financial measures as well as the potential for investor confusion and touch on several key issues including: misleading non-GAAP financial measures; prominence of non-GAAP financial measures; non-GAAP revenue recognition; use of non-GAAP per share measures; presentation of free cash flow; and income tax effects related to adjustments.
  • Registrants should expect renewed focus by the SEC’s Division of Corporation Finance on the use of non-GAAP financial measures, in filed documents as well as press releases and on websites and other venues, and should revisit their use and presentation of non-GAAP measures in light of the SEC’s guidance.