SEC Issues Guidance on Use of Non-GAAP Financial Measures
Continuing its efforts to focus attention on the pervasive use of non-GAAP financial measures by public companies, the SEC recently issued new Compliance and Disclosure Interpretations (CDIs) on the subject. The SEC has urged public company management and audit committees to examine more critically any non-GAAP financial reporting and to eliminate or revise disclosure that may be misleading. The new CDIs address practices that are misleading or prohibited and provide examples of disclosures that would cause a non-GAAP measure to be more prominently disclosed in violation of the rules. As an example of a specific prohibition, CDI 102.05 states “non-GAAP liquidity measures that measure cash generated must not be presented on a per share basis in documents filed or furnished with the Commission, consistent with Accounting Series Release No. 142.” Read the SEC’s non-GAAP CDIs. Read our prior discussion of Non-GAAP Financial Measures in the Spotlight.