Non-GAAP financial information includes either more or less information than is included in the most comparable GAAP financial metric. A company issuing such information typically wants to highlight certain results and downplay other results. When a publicly held company wants to release a non-GAAP financial measurement, its ability to do so is governed by Regulation G of the Securities and Exchange Commission (SEC). The regulation requires that the issuance of a non-GAAP financial measurement be accompanied by the following information:
- The most comparable financial metric, both calculated and presented as per GAAP; and
- A reconciliation of the non-GAAP information to this most comparable financial metric.
Regulation G also prohibits the disclosure of any non-GAAP information that is either untrue or which omits material information.
If material non-GAAP information is released to the public in a speech, webcast, conference call, or other means of oral conveyance, the preceding requirements must still be met by reporting the reconciliation information on the company's website, and stating to the audience where this information can be found on the company's website. It is usually easier to include the reconciliation information in a Form 8-K filing with the SEC, which is an acceptable alternative.
Avoidance of Non-GAAP Measures
It is best never to issue non-GAAP information, both because of the preceding reconciliation reporting, and also because this information can confuse the investment community. Consequently, institute a policy prohibiting the release of such information, unless it is specifically approved by the disclosure committee.