Chapter 3 — Disclosures About Non-GAAP Measures

3.1 Overview and General Requirements of Regulation G and Item 10(e)

Regulation G applies to all public releases or disclosure of non-GAAP measures, even if such information is not part of a registrant’s SEC filing (e.g., conference calls, investor presentations, and webcasts) and regardless of whether the information is furnished to or filed with the SEC.

Regulation G states that:

Non-GAAP financial measures must not be misleading.
The most directly comparable GAAP measure must be presented.
A quantitative reconciliation of the non-GAAP financial measure to the most comparable GAAP measure must be presented for (1) a historical non-GAAP measure and (2) forward-looking information (to the extent available without unreasonable effort).

Item 10(e) applies to all SEC filings, such as registration statements, proxy statements,1 and Forms 10-K and 10-Q. Item 10(e) expands on Regulation G to require the following in addition to the three items above:

That the prominence of the most directly comparable GAAP measure presented be equal to or greater than that of the non-GAAP measure.
A statement indicating the reasons why the registrant believes that the non-GAAP measure provides useful information to investors about the registrant’s financial condition and results of operations.
To the extent material, a statement disclosing the additional purposes, if any, for which the registrant uses the non-GAAP measure.

The disclosure requirements for press releases furnished on Form 8-K are the same as those in Item 10(e).

The non-GAAP disclosure requirements are discussed in greater detail below. Factors for registrants to consider when assessing potentially misleading non-GAAP measures are outlined in Section 4.3.

The following table summarizes the disclosure requirements that apply to domestic2 registrants under the Rules:

Disclosure Requirements	All Disclosure of Non-GAAP Financial Measures (Regulation G3,4)	SEC Filings (Item 10(e) of Regulation S-K5,6)	Press Releases Furnished to the SEC (Item 2.02 of Form 8-K7)
Presentation of the most directly comparable GAAP financial measure	X
Presentation, with equal or greater prominence, of the most directly comparable GAAP financial measure		X	X
Quantitative reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure	X	X	X
Statement disclosing the reasons why management believes the non-GAAP financial measure provides useful information to investors		X	X
To the extent material, a statement disclosing the additional purposes, if any, for which management uses the non-GAAP financial measure		X	X

3.1.1 Multiple Presentations of the Same Non-GAAP Measure

The SEC’s rules regarding conditions for use of non-GAAP measures do not address situations in which a registrant presents the same non-GAAP measure in multiple sections of a filing (e.g., description of business, selected financial data, and MD&A) or multiple times within the same section of a filing. Although a registrant may repeat the disclosure each time the measure is used, repetitive disclosures may not be beneficial to users. One alternative is to provide the Item 10(e) disclosures for all non-GAAP measures in one section of the filing and a cross-reference to that section each time a non-GAAP measure is presented.

3.1.2 Presentation of Non-GAAP Measures in a “Glossy” Annual Report

In 2022, the SEC amended Regulation S-T, Rule 101, to require reporting companies that provide “glossy” annual reports8 to their shareholders to submit such reports electronically on EDGAR in PDF format.9 An electronic submission of a glossy annual report is considered “furnished” to the SEC and would not be treated as “filed” unless it is incorporated by reference in a filed document (e.g., a registration statement). Generally, non-GAAP measures included in a furnished glossy annual report would be subject only to Regulation G. However, if the glossy annual report is incorporated by reference in a filed report, the requirements and prohibitions of Regulation S-K, Item 10(e), would apply as well. Registrants are encouraged to consult with their legal advisers if they have questions about whether their glossy annual reports may be considered filed. See Appendix D for a comprehensive summary of the disclosure requirements and prohibitions under Regulation G and Item 10(e).

Footnotes

See C&DI Question 108.01, which discusses an exception for disclosures of target levels that are non-GAAP measures in Compensation Discussion & Analysis or other parts of the proxy statement.

For guidance on FPIs, see Regulation G; Regulation S-K, Item 10(e); Section 106 of the C&DIs; and Section 8140 of the FRM.

Regulation G applies whenever a registrant, or person acting on its behalf, publicly discloses or releases material information that includes a non-GAAP financial measure. Such information may be furnished to or filed with the SEC or publicly disclosed or released in another manner.

In certain situations, Regulation G and Item 10(e) do not apply. For example, they do not apply to non-GAAP measures related to projections or forecasts provided to a financial adviser as part of a proposed business combination, or measures required to be disclosed by a governmental authority. See Section 2.3 for a discussion of measures that do not meet the definition of a non-GAAP measure under the Rules.

Item 10(e) applies to all SEC filings that include non-GAAP financial measures.

See footnote 4.

Form 8-K, Item 2.02, requires registrants to furnish to the SEC all releases or announcements disclosing material nonpublic financial information about completed annual or quarterly fiscal periods, regardless of whether the release or announcement includes disclosure of a non-GAAP financial measure. Item 2.02 also specifies that the requirements in Item 10(e)(1)(i) apply to such disclosures. If a registrant elects to file the release or announcement with the SEC, all the requirements in Item 10(e) apply.

While “glossy” refers to the paper on which annual reports historically have been printed, these reports may be presented in various forms. It is now common for companies to use their annual report filed on Form 10-K to satisfy their requirement to provide an annual report under the Exchange Act. In some circumstances, a registrant may choose to present a “10-K wrap,” in which it provides several pages of company commentary (e.g., letter to shareholders, business overview) along with the Form 10-K.

The amended rule also eliminates the option for a company to provide paper copies of its glossy annual report or to post it only on its Web site. The requirements apply to both stand-alone glossy annual reports and annual reports that use the 10-K wrap approach described in footnote 8 above. The amendments became effective January 11, 2023.

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This SEC Reporting Interpretations manual provides comprehensive guidance; however, the manual does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.