Non-GAAP Financial Measures: Update on the SEC’s Increased Scrutiny of Non-GAAP Disclosure

Sullivan & Cromwell LLP - October 4, 2016

The SEC continues to focus on the use of non-GAAP financial measures.  As widely reported, on May 17, 2016, the SEC’s Division of Corporation Finance issued new and revised Compliance and Disclosure Interpretations (“C&DIs”) regarding the use of non-GAAP financial measures in public disclosures and SEC filings amidst growing criticism that the use of these metrics may be misleading to investors.  In the months following the release of the C&DIs, the SEC staff has intensified its monitoring of reporting companies’ use of non-GAAP financial measures and has indicated its willingness to act through enforcement, if necessary.  In light of this increased scrutiny, we encourage reporting companies to review their use of non-GAAP financial measures in upcoming earnings releases, future SEC filings and other public disclosures.