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Use of non-GAAP grows in proxy statements

Audit Analytics | June 22, 2016

Recent statements and papers from regulators and advisory firms suggest lack of compliance with non-GAAP accounting rules could be perceived as a significant regulatory risk.

The Securities and Exchange Commission released an additional interpretation of Regulation G, which comprises the rules that govern the use of non-GAAP metrics in financial reporting. The release does not constitute new regulation, but instead clarifies the SEC’s position, in particular around the use of “misleading” financial metrics.

Recent SEC speeches have given a strong indication that, while the use of non-GAAP metrics is neither prohibited nor discouraged, the SEC will be reviewing non-GAAP disclosures in more detail. But companies that may be in violation of Regulation could have some...

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