Topic 8: Non-GAAP Measures of Financial Performance, Liquidity, and Net Worth

8100 Use of Non-GAAP Financial Measures

(Last updated: 9/30/2008)

> 8110 Applicable Guidance

(Last updated: 12/31/2009)

8110.1 Authoritative guidance regarding the use of non-GAAP financial measures can be found in:

Regulation G
S-K 10(e)
Exchange Act Release No. 47226, Conditions for Use of Non-GAAP Financial Measures

8110.2 Staff guidance regarding the use of non-GAAP financial measures can be found in the Division of Corporation Finance’s Compliance and Disclosure Interpretations, Non-GAAP Financial Measures. The questions are grouped into the following categories:

Section 100 – General
Section 101 — Business Combination Transactions
Section 102 — Item 10(e) of Regulation S-K
Section 103 — EBIT and EBITDA
Section 104 — Segment Information
Section 105 — Item 2.02 of Form 8-K
Section 106 — Foreign Private Issuers
Section 107 — Voluntary Filers
Section 108 – Compensation Discussion and Analysis/Proxy Statement

(Last updated: 11/9/2016)

> 8120 Definition of a Non-GAAP Financial Measure

8120.1 A non-GAAP financial measure is a numerical measure of a registrant's historical or future financial performance, financial position, or cash flow that:

excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of comprehensive income, balance sheet or statement of cash flows of the issuer; or
includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable GAAP measure so calculated and presented.

8120.2 Some common examples of measures that meet the definition of non-GAAP measures include the following:

Funds from operations (FFO) (Non-GAAP C&DI Questions 102.01 and 102.02)
EBIT / EBITDA / adjusted EBITDA (Non-GAAP C&DI Questions 102.09, 103.01 and 103.02)
Adjusted revenues
Broadcast cash flow (BCF)
Free cash flow (FCF) (Non-GAAP C&DI Question 102.07)
Core earnings
Measures presented on a constant-currency basis (e.g., revenues, operating expenses, etc.) (Non-GAAP C&DI Question 104.06)
(Last updated: 3/31/2013)

8120.3 Measures of operating performance or statistical measures that fall outside the scope of the definition set forth above are not “non-GAAP financial measures”. Additionally, “non-GAAP financial measure” excludes financial information that does not have the effect of providing numerical measures that are different from the comparable GAAP measure. Examples of measures that are not non-GAAP financial measures include:

Operating and statistical measures (such as unit sales, number of employees, number of subscribers).
Measures of profit or loss and total assets for each segment that are consistent with disclosures made in accordance with ASC Topic 280. (Non-GAAP C&DI Questions 104.01 through 104.06)
Disclosure of expected or contracted indebtedness.
Disclosure of amounts of repayments that have been planned but not yet made.
Disclosure of estimated revenues or expenses of a new product line (so long as the amounts were estimated in the same manner as would be computed under GAAP). (Non-GAAP C&DI Question 104.05)
Financial measures that are required to be disclosed by a system of regulation of a governmental authority or self-regulatory organization that is applicable to the registrant (such as different levels of capital required by banks). (Non-GAAP C&DI Question 102.12) (Last updated: 10/30/2020)
Ratios or statistical measures that are calculated using exclusively one or both of:
1. financial measures calculated in accordance with GAAP (such as earnings per share); and
2. operating measures or other measures that are not non-GAAP measures (such as dollar revenues per square foot for hotels, same store sales, and revenues per slot machine for casinos, assuming that sales/revenues for each measure is based on GAAP numbers).

> 8130 General Applicability and Requirements of Regulation G and S-K 10(e)

(Last updated: 12/31/2011)

Reg	Applicability	Requirements	Prohibitions
Regulation G	Applies whenever a registrant required to file reports under Section 13(a) or 15(d) of the Exchange Act (other than a registered investment company), or a person acting on the registrant's behalf, discloses or releases publicly any material information that includes a non-GAAP financial measure. Typically, this information is furnished under Item 2.02 of Form 8-K.22	A presentation of the most directly comparable GAAP measure; and A reconciliation of the differences between the non-GAAP measure disclosed or released with the most directly comparable GAAP measure. With regard to forward-looking information, a quantitative reconciliation is only required to the extent available without unreasonable efforts. If all of the information necessary is not available without unreasonable efforts, the registrant must identify the information that is unavailable and disclose probable significance.	Reg G prohibits any registrant (or person acting on the registrant’s behalf) from making public a non-GAAP financial measure that, taken together with any information accompanying it, contains an untrue statement of material fact or omits to state a material fact necessary in order to make the presentation of the non-GAAP financial measure, in light of the circumstances under which it is presented, not misleading.
Regulation S-K 10(e)	Applies to a registrant's filings with the SEC Ex: 10-K, 10-Q, 20-F, S-1, F-1	Presentation, with equal or greater prominence, of the most directly comparable GAAP measure; A reconciliation of the differences between the non-GAAP measure and the most directly comparable GAAP measure; A statement disclosing the reasons why management believes the presentation of the non-GAAP measure provides useful information to investors regarding the registrant's financial condition and results of operations; and To the extent material, a statement disclosing the additional purposes, if any, for which management uses the non-GAAP measure.	Excluding charges or liabilities that required, or will require, cash settlement, or would have required cash settlement absent an ability to settle in another manner, from non-GAAP liquidity measures. This prohibition does not apply to EBIT and EBITDA used as liquidity measures. Adjusting a non-GAAP performance measure to eliminate or smooth items identified as non-recurring, infrequent, or unusual, when (1) the nature of the charge or gain is reasonably likely to recur within 2 years or (2) there was a similar charge or gain within the prior 2 years. Presenting non-GAAP financial measures on the face of the GAAP financial statements or in the notes. Presenting non-GAAP financial measures on the face of any pro forma information required to be disclosed by Article 11. Using titles or descriptions of non-GAAP measures that are the same or confusingly similar to GAAP titles.

> 8140 General Application of Regulation G and S-K 10 (e) to Foreign Private Issuers

Issuer	Regulation G	S-K 10(e)
Foreign Private Issuers	FPIs are exempt from Regulation G if three conditions are met: The securities of the FPI are listed or quoted on a securities exchange or inter-dealer quotation system outside the U.S.; The non-GAAP financial measure is not derived from or based on a measure calculated and presented in accordance with U.S. GAAP; and The disclosure is made by or on behalf of the FPI outside the U.S., or is included in a written communication that is released by or on behalf of the FPI outside the U.S. Regulation G will not apply to disclosures made by or on behalf of the FPI notwithstanding the existence of one or more of the following circumstances: Disclosure is included in a written communication released in the U.S. as well as outside the U.S., as long as the communication is released contemporaneously with or after its release outside the U.S. and is not otherwise targeted at persons located in the U.S.; Foreign or U.S. journalists or other third parties have access to the information; Disclosures appear on one or more of a registrant’s websites, so long as the websites, taken together, are not available exclusively to, or are targeted at, persons in the U.S.; or After disclosure of the information outside the U.S., the information is included in a submission on Form 6-K.	FPIs are subject to S-K 10(e) requirements with respect to use of non-GAAP measures in filings on Form 20-F or 1933 Act registration statements. However, a non-GAAP measure that would otherwise be prohibited under S-K 10 (e)(1)(ii) will be permitted in a filing if the measure is: Required or expressly permitted by the standard-setter that establishes the GAAP principles used in the registrant's primary financial statements; and Included in the foreign private issuer's annual report or financial statements used in its home-country jurisdiction or market. The exemption from the prohibitions under S-K 10(e)(1)(ii) does not cover situations where the measure is merely not prohibited by the foreign standard setter; it only applies where the standard-setter affirmatively acts to require or permit the measure. Note that these measures are still subject to the remaining requirements of S-K 10(e). (Non-GAAP C&DI Question 106.01).

NOTE: With respect to foreign private issuers whose primary financial statements are prepared in accordance with IFRS or a home-country GAAP, references to “GAAP” in the definition of a non-GAAP financial measure refer to the principles under which those primary financial statements are prepared. However, if a foreign private issuer calculates a non-GAAP measure derived from or based on a measure calculated in accordance with U.S. GAAP, then for purposes of the application of the non-GAAP rules, GAAP for that measure would be defined as U.S. GAAP.

The reference to “generally accepted accounting principles in the United States” in the FPI exemption from Regulation G refers to U.S. GAAP regardless of the accounting principles used in the primary financial statements. (Last updated: 12/31/2011)

8200 [Reserved]

(Last updated: 10/30/2020)

8300 Tangible Book Value Per Share

(Last updated: 2025 and Prior)

> 8310 Presentation of Net Tangible Book Value per Share

(Last updated: 12/4/2025)

In IPOs of common stock for companies other than SPACs, where there is substantial disparity between the public offering price and the price previously paid by officers, directors, promoters and affiliates (dilution), presentation of net tangible book value per share is required as part of the dilution table. [S-K 506] In IPOs of SPACs, the SPAC must present, among other things, net tangible book value per share, as adjusted, to give effect to material probable or consummated transaction (other than the completion of a de-SPAC transaction). [S-K 1602(a)(4) and 1602(c)] A registration statement for a de-SPAC transaction must also include the presentation of net tangible book value per share, as adjusted, as required by S-K 1604(c).

> 8320 Definition

There are no rules or authoritative guidelines that define tangible book value. Tangible book value per share is used generally as a conservative measure of net worth, approximating liquidation value. The staff believes generally that tangible assets should exclude any intangible asset (such as deferred costs or goodwill) that cannot be sold separately from all other assets of the business, and should exclude any other intangible asset for which recovery of book value is subject to significant uncertainty or illiquidity.

> 8330 Staff Practice

In some cases, the staff allows dual calculations of tangible book value. For example, some intangible assets (such as patents) may be sold separately, but the ability to recover their carrying value may be indeterminable. Also, some material deferred costs are accounted for as adjustments to the yield on specific assets or liabilities (debt costs or policy acquisition costs). The staff has allowed tangible book value per share calculations made with and without those assets, with appropriate explanation.

> 8340 Net Tangible Book Value per Share, As Adjusted [S-K 1602(a)(4), 1602(c), 1604(c)]

(Last updated: 12/4/2025)

8340.1 Background and Objective – The commission adopted rules for SPACs in SEC Release No. 33-11265 that require disclosure of dilution that includes the computation of net tangible book value per share, as adjusted. This disclosure is required to be presented in tabular format and is required in a SPAC’s initial registration statement as well as the de-SPAC transaction registration statement. An objective of the disclosure is to depict the amount of net assets that a SPAC will contribute to a post-combination entity.

8340.2 Redemption Intervals – At the IPO stage for a SPAC, net tangible book value per share, as adjusted is disclosed in tabular format at quartile intervals based on percentages of the maximum redemption threshold (i.e., 25%, 50%, 75%, and 100%). At the de-SPAC stage, the measure is disclosed at intervals representing selected potential redemption levels that may occur across a reasonably likely range of outcomes. Registrants should not select redemption levels that are not possible (e.g., a level that would result in the SPAC having cash lower that the minimum cash condition stipulated in the de-SPAC agreements).

8340.3 Calculation of Net Tangible Book Value per Share, As Adjusted and Dilution – The calculation may be summarized as having the following components (as further described by the numerical references). Given the similarity in the calculations between IPO stage and de-SPAC stage disclosures, the components are summarized in one table with distinctions made in the components’ descriptions.

Component	Amount
Historical net tangible book value (1)	XX
Adjustments to give effect to the following:	XX
Proceeds of the SPAC’s initial public offering (2)	XX
Assumed redemptions (3)	XX
Material probable or consummated transactions (4)	XX
Other material effects of the de-SPAC transaction (5)	XX
Net tangible book value, as adjusted	XX
Shares outstanding, as adjusted (6)	XX
Net tangible book value per share, as adjusted	XX
Offering price in the SPAC’s initial registered offering	XX
Dilution (offering price less net tangible book value per share,as adjusted)	XX
(1) Historical net tangible book value, consistent with S-K 506, is not defined. Refer to Section 8320. The amounts must be derived from the most recent balance sheet filed. (2) For disclosure in the SPAC’s initial registration statement for an offering of equity securities, the measure would give effect to the offering. This adjustment is not applicable for de-SPAC transactions. (3) Assumed redemptions of the SPAC’s shares. Refer to Section 8340.2. (4) For disclosures in de-SPAC registration statements on Form S-4/F-4, the net assets that the SPAC would contribute to the post-combination entity would include the effects of other material probable or consummated transactions undertaken by the SPAC other than consummation of the de-SPAC transaction itself and that are not included in the historical amounts in (1). Such transactions may include financing arrangements, such as funding backstop, forward purchases, or PIPE financings. The pro forma effects of transactions in presentation of pro forma financial information pursuant to S-X Article 11 would generally represent adjustments to net tangible book value per share. (5) Other material effects of the de-SPAC transaction (but not the de-SPAC transaction itself) representing the effects if the de-SPAC transaction arising from other contractual agreements or sources. Such other effects may include the issuance of shares contingent on consummation of the de-SPAC transaction as compensation to a SPAC sponsor or the expected incurrence of transaction expenses to consummate the de-SPAC transaction. Net tangible book value per share, as adjusted, does not take into account the de-SPAC transaction itself, because doing so would contradict the objective of the disclosure: to depict the amount of net assets that a SPAC will contribute to a post-combination entity. (6) Disclose the nature and amounts of each source of dilution (i.e., each share issuance reported in the financial statements and each adjustment to shares outstanding).

8340.4 Outside of the table depicting the calculation of net tangible book value per share, disclose each material potential source of future dilution that non-redeeming shareholders may experience that is not reflected in the table. Registrants should limit this disclosure to known material potential sources of dilution, and do not need to provide disclosure regarding hypothetical sources of dilution. Such material potential sources resulting from redemptions results in the amount of the non-redeeming shareholders’ interest per share being at least the initial public offering price per share of common stock. This amount is calculated as the number of post-redemption shares outstanding multiplied by the IPO price. Section II.D.3.iv.f., Interest Per Share Disclosure, of SEC Release No. 33-11265 contains a detailed example of this calculation.

8340.5 Disclosure of Assumptions – A registrant must disclose any description of the model, methods, assumptions, and parameters necessary to understand the tabular disclosure.

Footnotes

Per Instruction 2 to Item 2.02 of Form 8-K, the requirements of S-K 10(e)(1)(i) apply to disclosures (furnished or filed) under Item 2.02 of Form 8-K.