Bass Berry’s Jay Knight recently blogged about a comment letter exchange in which the Staff objected to a company’s presentation of a non-GAAP measure adjusted for expenses incurred in transitioning to public company status. Here’s an excerpt:
We found particularly interesting this recent comment letter exchange (see here and here) where the SEC Staff took issue when a company, which had recently gone public, included an adjustment in its Adjusted EBITDA non-GAAP financial measure for “public company expenses” related to “additional headcount to build infrastructure and support the operations of a public company (i.e., public company directors & officers liability insurance, investor relation and public listing fees, additional legal and accounting fees, and additional independent board members).”
In the Staff’s view, these expenses were normal, recurring expenses associated with public company status and efforts to back them out of Adjusted EBITDA involved inappropriate “tailored accounting.” The company agreed to remove the adjustment in future filings.
– John Jenkins