August 14, 2023
Transcript: “Non-GAAP Developments: Enhancing Your Policies and Procedures”
We’ve posted the transcript for our recent “Non-GAAP Developments: Enhancing Your Policies and Procedures” webcast featuring Honigman’s Mike Ben, Covington’s Matthew Franker, Deloitte’s Pat Gilmore and Faegre Drinker’s Amy Seidel. The webcast covered:
– Common non-GAAP mistakes and comment letter trends
– Tips for responding to a non-GAAP comment
– SEC guidance and non-GAAP CDIs
– The recent non-GAAP enforcement actions
– Improving non-GAAP policies, procedures & controls
Non-GAAP compliance has been one of the top three comment letter topics — if not the top comment letter topic — for several years. The panelists all stressed that now is the time to take a fresh look at your non-GAAP practices, procedures and controls if you haven’t done so recently, especially in light of the December 2022 non-GAAP CDIs and 2023 enforcement action. One of the themes of the webcast was that identifying all your non-GAAP numbers is not always as straightforward as it seems. Here’s a reminder from Matt Franker about what he called “inadvertent non-GAAP measures”:
Mike alluded to another important factor, which is what I sometimes refer to as “inadvertent non-GAAP measures.” These tend to pop up when a company is working on its earnings release and in the script for the quarterly earnings call. These can also pop up in investor presentations and in other situations. Often, these arise where there is an unusual event or charge and whomever is in charge of drafting those materials will sometimes say, “Our adjusted earnings were this, but without this factor, it was this other number.” As soon as you exclude that other number, you are creating another non-GAAP measure. Whether that is a new non-GAAP measure or a further adjustment from an existing non-GAAP measure, it is essentially a new non-GAAP measure that raises all the same issues in terms of prominence of disclosure, providing a reconciliation and defining why management is using it in the first place. Keeping an eye open for those types of things is important.
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– Meredith Ervine