SEC Updates Compliance And Disclosure Interpretations For Non-GAAP Financial Measures

Signals Greater Flexibility in the Use of Non-GAAP Measures

The Division of Corporation Finance of the SEC recently updated its Compliance and Disclosure Interpretations ("CDIs") relating to Regulation G and the use of non-GAAP financial measures, superseding its previous Frequently Asked Questions Regarding the Use of Non-GAAP Financial Measures issued in 2003 (the "2003 FAQs").¹ In particular, the Staff signaled greater flexibility regarding the use of non-GAAP financial measures that adjust for recurring items, while also providing various other helpful clarifications.

As directed by Section 402(b) of the Sarbanes-Oxley Act, Regulation G imposes restrictions on public disclosure by reporting companies of "non-GAAP financial measures."² Regulation G prohibits companies from disseminating false or misleading non-GAAP financial measures or presenting the non-GAAP financial measures in such a manner that they mislead investors or obscure the company's GAAP results.