{"id":1815,"date":"2020-09-29T10:10:40","date_gmt":"2020-09-29T14:10:40","guid":{"rendered":"https:\/\/seci.wpenginepowered.com\/?p=1815"},"modified":"2020-09-29T10:10:40","modified_gmt":"2020-09-29T14:10:40","slug":"an-sec-comment-challenge-find-the-non-gaap-measure-issue-post-two","status":"publish","type":"post","link":"https:\/\/seciblog.pli.edu\/index.php\/an-sec-comment-challenge-find-the-non-gaap-measure-issue-post-two\/","title":{"rendered":"An SEC Comment Challenge: Find the Non-GAAP Measure Issue \u2013 Post Two"},"content":{"rendered":"

In this series of posts we are focusing on non-GAAP measure problems and related SEC comments in earnings releases.\u00a0 As the first post in this series<\/a> did, this post gives you an opportunity to see if you can spot the issue, and then provides the background and SEC guidance about the issue.<\/p>\n

As a brief reminder, the SEC\u2019s guidance about the use of non-GAAP measures is primarily in three places:<\/p>\n

Regulation G<\/a> for non-GAAP measures used anywhere,<\/p>\n

S-K Item 10(e)<\/a>, for non-GAAP measures in filed documents, and<\/p>\n

The related Compliance and Disclosure Interpretations<\/a>.<\/p>\n

\u00a0Just like the first post in this series<\/a>, you can read the excerpt of the release behind the comment and try to spot the issue.\u00a0 If you prefer, you can read straight through to the comment and explanation that follow.<\/p>\n

This excerpt is from an 8-K filed by The Interpublic Group of Companies on April 22, 2020.\u00a0 Can you spot the non-GAAP issue?<\/p>\n

\"Interpublic<\/a><\/p>\n

The issue here goes back to the concept that companies should not try to create the impression that non-GAAP measures provide a better view of the company than GAAP.\u00a0 Here is the related SEC comment:<\/p>\n

Form 8-K filed April 22, 2020 <\/strong><\/p>\n

Exhibit 99.1
\nReconciliation of Adjusted Results, page 7 <\/strong><\/p>\n

    \n
  1. Please tell us your consideration of the guidance in Question 102.10 of the Non-GAAP Compliance and Disclosure Interpretations related to your presentation of full non-GAAP income statements when reconciling non-GAAP measures in your earnings releases.<\/li>\n<\/ol>\n

    The C&DI mentioned states:<\/p>\n

    Question 102.10<\/strong><\/p>\n

    Question:\u00a0<\/strong>Item 10(e)(1)(i)(A) of Regulation S-K requires that when a registrant presents a non-GAAP measure it must present the most directly comparable GAAP measure with equal or greater prominence. This requirement applies to non-GAAP measures presented in documents filed with the Commission and also earnings releases furnished under Item 2.02 of Form 8-K. Are there examples of disclosures that would cause a non-GAAP measure to be more prominent?<\/p>\n

    \u00a0<\/strong>Answer:\u00a0<\/strong>Yes. Although whether a non-GAAP measure is more prominent than the comparable GAAP measure generally depends on the facts and circumstances in which the disclosure is made, the staff would consider the following examples of disclosure of non-GAAP measures as more prominent:<\/p>\n