May 25, 2016

Non-GAAP Measures: Are The New CDIs Kosher?

The first thing I need to note is that I have moved up the date of our webcast – “Non-GAAP Disclosures: What Is Permissible?” – to Thursday, June 9th at 11 am eastern. Meredith Cross has joined the all-star panel too. So put that on your calendar as companies are scrambling to rethink their non-GAAP disclosures in the wake of Corp Fin’s CDIs.

A number of members have emailed me with questions akin to this Keith Bishop blog entitled “Did The SEC Staff Bypass The APA In Issuing New And Revised Non-GAAP Financial Measure C&DIs?” – one similar comment I received from a member was:

I bet the Staff rationalizes their breach of the APA with their repeated use of the word “could.” Somehow, the optionality/flexibility suggested by “could” will be lost by the time they reference it in comment letters.

Another comment I received was:

The Staff tried very hard to rewrite the SEC’s rules by requiring GAAP measures to always be mentioned prior to the corresponding non-GAAP measure. However, the plain-English meaning of the words “equal prominence” cuts against them.

As noted in the MarketWatch article below – in which I have a quote – I do believe that the SEC has been forced to act in some way because too many companies have gotten lazy or cute (or worse). For example, if non-GAAP appears – or is discussed first – how can that be equal prominence? But when you think about it, can you ever really have “equal” prominence? How does it work? Two columns instead of consecutive?

By the way, the PCAOB Standing Advisory Group’s recent meeting covered the auditor’s role regarding non-GAAP financial measures – see this briefing paper

Earnings Releases: Are IROs Getting Sloppy?

With the SEC ramping up its attention to non-GAAP measures – leading to last week’s issuance of CDIs in that area – this MarketWatch article entitled “Here’s how investors are duped each earnings season” highlights areas beyond non-GAAP where it seems like some companies are not taking the earnings release process seriously – or perhaps they just need some new blood handling those duties. I’m quoted near the end…

Transcript: “M&A Research – Nuts & Bolts”

We have posted the transcript for our recent webcast: “M&A Research: Nuts & Bolts.”

Broc Romanek