SEC Staff Issues New C&Dis Regarding Non-GAAP Measures In Business Combination Context

On October 17, 2017, the Staff of the Securities and Exchange Commission (SEC) issued new Non-GAAP Financial Measures Compliance and Disclosure Interpretations (C&DI) that clarify when financial forecasts used in connection with a business combination transaction are considered non-GAAP measures subject to Item 10(e) of Regulation S-K and Regulation G.

In business combination transactions, companies often include non-GAAP projections and forecasts in SEC filings to satisfy their duty of disclosure under state law, to comply with specific SEC disclosure requirements or to avoid material omission claims. At the same time, Item 10(e)(5) of Regulation S-K and Rule 101(a)(3) of Regulation G exclude from their purview any non-GAAP financial measures that are required to be disclosed by GAAP, SEC rules, or regulations of a government or self-regulatory organization applicable to the registrant. This exclusion allows a registrant to disclose non-GAAP measures without having