Non-GAAP Measures in the Wake of COVID-19 - Regulation and SEC Guidance

Sep 20, 2026

Guidance on how to define and use non-GAAP financial measures under SEC rules, centered on Regulation S-K Item 10(e) and Regulation G. Covers affirmative and negative disclosure requirements, including equal or greater prominence for the most comparable GAAP measure, quantitative reconciliation expectations, management explanation of usefulness, and key prohibitions related to liquidity measures, recurring adjustments, and placement within statements and pro forma presentations. Also addresses foreign private issuer exemptions, relevant forms, and compliance disclosure interpretations.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages78

Reading Time3 h 17 min

AccessFree to download

Objectives

Non-GAAP Financial Measures: Regulation

What is a Non-GAAP Financial Measure?

Regulation S-K (Item 10(e))

Regulation G

Foreign Private Issuer (FPI) Exemptions

C&DIs

Non-GAAP Measures in the Wake of COVID-19 Ryan Castillo Partner +1 212 506 2645 [rcastillo@mayerbrown.com](rcastillo@mayerbrown.com) Laura D. Richman Counsel +1 312 701 7304 [lrichman@mayerbrown.com](lrichman@mayerbrown.com) February 16, 2021 Objectives – Discuss non-GAAP financial measures regulation and guidance – Examine recent SEC guidance on key performance indicators and metrics used in MD&A and other company disclosures – Examine recent SEC guidance on non-GAAP financial measures in COVID-19 disclosures – Examine recent SEC comment letters on non-GAAP financial measures and KPIs – Look at SEC enforcement actions related to noncompliance – Examine audit committee and management roles in compliance and effective disclosure controls 2 Non-GAAP Financial Measures: Regulation What is a Non-GAAP Financial Measure? • A numerical measure of historical or future performance, financial position, or cash flows that either: – Excludes (or adjusts) amounts included in the most comparable GAAP measure; or – Includes (or adjusts) amounts excluded from the most comparable GAAP measure • Operating and other financial measures and ratios or statistical measures are not non-GAAP financial measures if exclusively calculated from: – Financial measures calculated in accordance with GAAP; and/or – Operating or other measures that are not non-GAAP financial measures Item 10(e) of Regulation S-K • Applies only to non-GAAP financial measures in SEC-filed documents • Affirmative requirements: – Most directly comparable GAAP measure must receive equal or greater prominence – Must provide a quantitative reconciliation to GAAP 􀀐 If prospective, required unless unreasonable effort • If non-GAAP financial measure is derived from or based on a measure calculated in accordance with U. S. GAAP, the reconciliation must be to U. S. GAAP • If reconciliation to prospective amounts would require unreasonable effort, disclose that fact and identify the information that is unavailable and its probable significance Item 10(e) of Regulation S-K (cont’d) • Disclose how management uses the measure and why management believes the measure provides useful information to investors • Negative requirements – Cannot exclude a cash charge from a liquidity measure 􀀐 except EBIT and EBITDA – Cannot exclude items identified as nonrecurring, infrequent, or unusual if likely to recur 􀀐 two-year window (forward and backward) – Cannot include on the face of or in footnotes to financial statements – Cannot include on the face of pro formas required by Article 11 of Regulation S-X – Cannot have a title that is the same as or similar to GAAP measures Regulation G • Regulation G generally applies to all public disclosures that contain non-GAAP financial measures, including press releases, investor presentations, and conference calls, whether such disclosure is made in print, orally, telephonically, by webcast, or by broadcast • In connection with the disclosure of a non-GAAP financial measure, Regulation G requires the presentation of: – The most directly comparable financial measure calculated and presented in accordance with GAAP; and – A reconciliation of the non-GAAP financial measure to the most directly comparable GAAP measure • For public disclosure made orally, telephonically, or by webcast, broadcast, or similar means, an issuer may post the reconciliation simultaneously to its website and announce the location to investors of the presentation that includes the non-GAAP financial measure Foreign Private Issuer (“FPI”) Exemptions • Regulation G does not apply to an FPI if all of the following conditions are met: 1. The securities are listed or quoted on a securities exchange or inter-dealer quotation system outside the United States 2. The non-GAAP financial measure is not derived from or based on a measure calculated and presented in accordance with U.S. GAAP and 3. The disc

FAQs

What qualifies as a non-GAAP financial measure under SEC rules?

It is a numerical measure of historical or future performance, financial position, or cash flows that either excludes or adjusts amounts included in the most comparable GAAP measure, or includes or adjusts amounts excluded from that GAAP measure.

What are the core affirmative requirements of Regulation S-K Item 10(e)?

The most directly comparable GAAP measure must receive equal or greater prominence, and a quantitative reconciliation to GAAP is required (including prospective reconciliation unless it would be impractical).

What key negative requirements limit how non-GAAP measures can be presented?

They cannot exclude certain cash charges from liquidity measures (except EBIT/EBITDA), cannot exclude items labeled nonrecurring/infrequent/unusual if they likely recur within a two-year window, and cannot be presented on the face of financial statements or in prohibited pro forma contexts.

Sep 20, 2026

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