Thursday, September 01, 2016

SEC staff comments on latest non-GAAP C&DIs spotlight ‘prominence’

A new paper by Mark S. Nelson, J.D., legal editor at Wolters Kluwer Legal & Regulatory U.S., surveys recent staff comment letters and issuer replies regarding the updated non-GAAP Compliance & Disclosure Interpretations issued by the SEC’s Division of Corporation Finance in May 2016. Although the bulk of the letters focus on the prominence companies give to non-GAAP financial measures, several other new or revised C&DIs also drew staff comments on companies’ disclosures.

The SEC’s focus on non-GAAP disclosures follows several high profile speeches, including by Chief Accountant James Schnurr, who said this past March that he had detected a “troubling increase” in issuers’ use of non-GAAP measures and the prominence analysts and the media attach to these measures. Schnurr noted that non-GAAP financial measures should “supplement,” not “supplant,” GAAP disclosures and he urged issuers’ managements and audit committees to remain alert to the SEC’s publicly available comment letter dialogs. Chair Mary Jo White, shortly after CorpFin issued the new C&DIs, reiterated much of what Schnurr said by reminding issuers that the Commission will act in this area through the disclosure review process, rulemakings, and potentially via enforcement proceedings.

To view the full paper, please click here.