The SEC Revised Compliance and Disclosure Interpretations (C&DIs): Time to Rethink Your Firm's Curre
Financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP) provide investors, analysts, and other users with a defined basis for conducting financial analysis and comparison among different entities. In addition to GAAP based financial statements, public companies also convey financial information using measures other than those that are specified, defined or determined by GAAP, commonly referred to as non-GAAP financial measures.
Non-GAAP financial measures can be useful to management and investors because they can provide additional insight into a company’s financial performance, financial condition and/or cash flow. Non-GAAP financial measures also allow public companies to communicate meaningful, entity or industry-specific information. Problems can arise, however, when non-GAAP financial measures are defined inadequately or presented inconsistently to be potentially misleading, or when they obscure financial results prepared in accordance with GAAP. Furthermore, non-GAAP financial measures typically are company-specific and, if so, are generally not comparable from one company to the next.
This explains the Securities and Exchange Commission's (SEC's) recent issuance of its revised Compliance and Disclosure Interpretations (C&DIs) relating to the disclosure of non-GAAP financial measures. The updated guidance demonstrates SEC's increased scrutiny over companies' usage of Non-GAAP measures. The guidance also provides examples of potentially misleading non-GAAP measures that could violate applicable SEC rules.
With the SEC's heightened enforcement of Non-GAAP disclosure rules, while the use of non-GAAP financial measures continues to be categorically permitted, it is crucial for public companies to rigorously review their current use of Non-GAAP measures and perform self-correcting and exercise full caution before using these measures in SEC filings and other public disclosures to avoid potential legal pitfalls.
In this two-hour LIVE Webcast, a panel of distinguished professionals and thought leaders assembled by The Knowledge Group will provide the audience with an in-depth discussion of The Revised Compliance and Disclosure Interpretations (C&DIs). Speakers will also help the audience understand the critical elements of the guidance and its effects on public disclosures of financial information starting from Q2 2016. Some of the major topics that will be covered in this webcast are:
Last Clear Chance – the SEC has been increasingly focused on Non-GAAP Measures
Explanation and Analysis of the New Guidance
Problematic or Misleading Non-GAAP Financial Measures
Prominence of GAAP vs. Non-GAAP Measures
Do’s and Don’ts on Use of Certain Non-GAAP Measures
Required Non-GAAP to GAAP Reconciliation
Don’t Forget About Tax Effects
What to Do Now – Compliance and “Self-Correcting” Tips
SEC Enforcement – Responding to Staff Comment Letters