The SEC staff has issued two new Compliance and Disclosure Interpretations, or CD&Is, on non-GAAP financial measures in the context of business combinations. In the first CD&I (Question 101.01), the SEC staff states financial measures provided to a financial advisor are not 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.

Regulation G and Item 10(e) of Regulation S-K provide an exemption for non-GAAP financial measures disclosed in communications relating to a business combination transaction. In the second CD&I (Question 101.02), the SEC staff expresses its view that the foregoing exemption does not extend to the same non-GAAP financial measures disclosed in registration statements, proxy statements and tender offer statements.