The SEC staff has released updated Compliance Disclosure and Interpretations regarding Regulation G/non-GAAP financial measures. Non-GAAP measures have been under attack in recent SEC speeches and media articles and now there are updated parameters surrounding their usage.

From a practical standpoint, the biggest changes in the CD&Is appear in new question 102.10 –this will impact many companies’ earnings releases due to the parameters it places around ordering, headlines, etc. This CD&I points out that the rules require that when a registrant presents a non-GAAP measure it must present the most directly comparable GAAP measure with equal or greater prominence. Included among the examples of disclosures that would cause a non-GAAP measure to be more prominent are some practices that are currently quite common, including (1) a non-GAAP measure that precedes the most directly comparable GAAP measure (including in an earnings release headline or caption); (2) omitting comparable GAAP measures from an earnings release headline or caption that includes non-GAAP measures and (3) describing a non-GAAP measure as, for example, "record performance" or "exceptional" without at least an equally prominent descriptive characterization of the comparable GAAP measure.

Although the CD&Is are technically informal views, not rules, companies can expect the SEC staff to comment on their filings that contain non-GAAP measures if they don’t adhere to the updated guidance.