Corp Fin has posted two new CDIs regarding the use of non-GAAP financial measures in connection with business combinations, summarized below:

Section 101. Business Combination Transactions

Question 101.01 Financial measures included in forecasts provided to a financial advisor and used in connection with a business combination transaction are not considered non-GAAP financial measures if the following conditions are met:

  • “the financial measures are included in forecasts provided to the financial advisor for the purpose of rendering an opinion that is materially related to the business combination transaction; and
  • the forecasts are being disclosed in order to comply with Item 1015 of Regulation M-A or requirements under state or foreign law, including case law, regarding disclosure of the financial advisor’s analyses or substantive work.”

Why? Because under Item 10(e)(5) of Reg S-K and Rule 101(a)(3) of Reg G, financial measures that are required to be disclosed by GAAP, SEC rules, or an applicable system of regulation of a governmental authority or SRO are not considered non-GAAP measures.

Question 101.02 The exemption from Reg G and Item 10(e) of Reg S-K for non-GAAP financial measures disclosed in communications relating to a business combination transaction does not extend to the same non-GAAP financial measures disclosed in registration statements, proxy statements and tender offer statements. The exemption in Reg G and Item 10(e) applies to non-GAAP financial measures disclosed in communications subject to Rule 425 and Rules 14a-12 and 14d-2(b)(2) and is also intended to apply to communications subject to Rule 14d-9(a)(2); however, the exemption does not extend beyond these communications.