Preface

We are pleased to present the 2023 edition of Non-GAAP Financial Measures and Metrics. This Roadmap combines the SEC’s guidance on non-GAAP measures with Deloitte’s interpretations and examples in a comprehensive, reader-friendly format. The 2023 edition of this publication reflects recent developments related to non-GAAP measures, key performance indicators, and metrics. Such developments include the SEC’s issuance of new and updated interpretive guidance on non-GAAP measures. For a summary of substantive changes made to this Roadmap since publication of the 2022 edition, see Appendix J.

For the 12 months ended July 31, 2022, non-GAAP measures remained among the top areas of SEC comment. Because of the high volume of disclosure comments and questions related to non-GAAP measures, the SEC staff updated its Compliance and Disclosure Interpretations (C&DIs) on this topic in December 2022 to address how it evaluates certain non-GAAP measures, as well as its criteria for considering such measures misleading, and included updated examples of when a non-GAAP measure may be more prominent than the corresponding GAAP measure. The SEC staff is expected to continue monitoring registrants’ use of non-GAAP measures and metrics, and registrants should remain mindful of key focus areas, including whether (1) there is undue prominence of non-GAAP measures; (2) disclosures related to the purpose and use of such measures are sufficient; (3) non-GAAP measures have been clearly labeled as such; (4) certain adjustments are potentially misleading as a result of adjustments for normal, recurring cash operating expenses or could represent tailored accounting; and (5) metrics, if used, have been clearly defined, their purpose has been explained to investors, and their function has been described by management. The SEC staff has also publicly spoken about the importance of registrants’ implementation of appropriate controls related to the disclosure of non-GAAP measures.

Given the ongoing uncertainty associated with the unprecedented nature of COVID-19, the impacts of the Russia-Ukraine war, and related economic conditions, companies may be faced with a number of financial reporting and disclosure challenges that result in the recognition of infrequent or unusual gains, charges, or losses. Registrants that are considering reflecting these items in their non-GAAP measures should be mindful of the various requirements and interpretations related to the use of such measures. In CF Disclosure Guidance Topic 9, the SEC advised registrants that “it would be appropriate to highlight why management finds [a non-GAAP] measure or metric useful and how it helps investors assess the impact of COVID-19 on the company’s financial position and results of operations.” Further, in its May 3, 2022, sample letter to companies regarding disclosures about the financial impact of the Russia-Ukraine war, the SEC reminded registrants that the non-GAAP rules may not permit them to adjust for lost revenue as a result of the war or certain expenses related to it.

We hope that you find this Roadmap helpful, and we welcome your suggestions for future improvements. If you need assistance with applying the non-GAAP guidance or have other questions about this topic, we encourage you to consult our technical specialists and other professional advisers.