On 4 April 2018, the staff of the Division of Corporation Finance of the U.S. Securities and Exchange Commission (SEC) updated its compliance and disclosure interpretations (C&DIs) regarding disclosure of non-GAAP financial measures in the context of business combination transactions. The new C&DI expands on prior guidance that 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 two 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;
- 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;
- The new C&DI states that a registrant can rely on this guidance if the same forecasts provided to its financial advisor are provided to its board of director or board committee; and
- In another new C&DI, the staff provided its view that when a registrant provides material forecasts to bidders in a business combination transaction and the disclosure of such forecasts is required to comply with the anti-fraud and other liability provisions of the federal securities laws, the financial measures included in such forecasts would be excluded from the definition of non-GAAP financial measures and therefore not subject to Item 10(e) of Regulation S- K and Regulation G.
The SEC's C&DI's are available at:
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