When this column is published, many Compliance Week readers will be in the middle of working on their 2011 financial reports. With that in mind, instead of delving into a policy issue or discussing some new standard that might affect you down the road, I have 10 quick tips to consider as you draft your 2011 reports. Just about all of them are things that can be implemented now. All that’s necessary is to put a little extra time and thought into preparing these documents, instead of just doing it the way it’s always been done.
Use non-GAAP measures to provide insight. Contrary to popular belief, the Securities and Exchange Commission doesn’t believe all non-GAAP measures are bad and misleading. Indeed, the SEC staff encourages (as they should) the use of measures that add to a reader’s understanding of the company. The requirements to reconcile measures to GAAP figures and to explain the purpose of pro forma measures are meant to allow users to gain that increased understanding. If the measure really is useful, those requirements aren’t difficult to comply with. So don’t be afraid to disclose non-GAAP measures. You do investors a disservice by giving into fear (or risk-averse legal advice) and holding back useful information.
