4.16 Normalized Market Prices

Because of significant volatility in commodity prices, a registrant may believe that investors would benefit from disclosure of a non-GAAP financial measure that adjusts its results of operations by eliminating the effect of significant changes in commodity prices (e.g., disclosure of a “price normalized cash margin”). At the 2015 AICPA Conference, the SEC staff stated that it objects to the presentation of such a non-GAAP measure because of the challenges associated with ascertaining a “normal” market price given ever-changing market conditions and volatility in commodity prices. Similarly, registrants may believe that investors would benefit from disclosure of non-GAAP measures that “normalize” or adjust for other forms of volatility, such as changes in interest rates, income tax rates, rates of return, or other industry-specific measures. Generally, such adjustments would also be viewed as tailored accounting principles (see Section 4.3.3 for a discussion of such principles).