SEC Staff Issues Updates to C&DIs on Non-GAAP Financial Measures
May 19, 2016 — The SEC published updates this week to certain of its Compliance and Disclosure Interpretations (C&DIs) related to non-GAAP financial measures.1
The updated C&DIs discuss the following:
- When a non-GAAP measure may be misleading or prohibited,2 such as measures that:
- Exclude normal, recurring cash operating expenses necessary to run a business.
- Adjust an item in the current reporting period but do not adjust for a similar item in the prior period, without appropriate disclosure.
- Exclude nonrecurring charges but do not exclude nonrecurring gains.
- Include individually tailored accounting principles, including non-GAAP performance measures that accelerate revenue recognition.
- Include the presentation of certain per-share non-GAAP measures.
- The continued acceptability of funds from operations (FFO) as defined by the National Association of Real Estate Investment Trusts (NAREIT) and adjustments to FFO.3
- Disclosures that would cause a non-GAAP measure to be more prominent.4
- The determination and presentation of the tax impact of adjustments made to a GAAP measure in the calculation of a non-GAAP measure.5
The updated C&DIs are available on the SEC’s Web site.
For additional information about the changes and a discussion of other recent developments related to non-GAAP measures, see Deloitte’s upcoming Heads Up newsletter.