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Companies advised to stay alert to non-GAAP issues

Tammy Whitehouse | December 4, 2017

The regulatory furor over non-GAAP reporting may be diminishing, but the need for continued corporate vigilance on proper use of non-GAAP measures is not.

The Securities and Exchange Commission has been on a mission since early 2016 to clean up errant corporate uses of performance measures that fall outside the realm of U.S. Generally Accepted Accounting Standards. Companies are required to comply with GAAP in their financial reporting. While they are not prohibited from communicating with investors outside of financial statements in non-GAAP terms, they are required to comply with SEC rules governing non-GAAP measures to assure the communication is not misleading to investors.

A Deloitte analysis of SEC comment letters on 2016 financial statements shows the SEC committed plenty of focus to non-GAAP measures, with 43 percent of all reviews earning at least one remark on the company’s non-GAAP reporting. It was the most common area of comment, in fact, outranking even...

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