“Adjusting for Litigation Expenses in a Non-GAAP Financial Measure” from Bass Berry & Sims provides an instructive example of a recent comment letter exchange between SEC staff and an issuer concerning litigation expense adjustments in non-GAAP measures with reference to Item 10(e) of Regulation S-K and associated C&DI 102.03. In addition to identifying a list of non-exclusive pre-established criteria the company uses to inform its determination of whether certain expenses should appropriately be excluded from its non-GAAP measures, the company also noted in its follow-up comment letter response the fact that its Disclosure Committee regularly reviews its non-GAAP disclosure policy, including its reliance on the pre-established criteria, and reviews and approves any proposed exclusions prior to release.
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This post first appeared in the weekly Society Alert!