SEC Issues New Guidance for GAAP Reconciliations of Non-GAAP Projections

On October 17, 2017, the SEC updated its Compliance & Disclosure Interpretation on non-GAAP financial measures in the context of business combination transactions. Revised Questions 101.01 and 101.02 clarify that (1) GAAP reconciliation is not required when non-GAAP projections were disclosed in proxy statements because they were provided to a financial advisor for the purpose of rendering a financial opinion for an M&A transaction; and (2) registration, proxy and tender offer statements must include GAAP reconciliation for non-GAAP projections when the projections are not provided to a financial advisor for purposes of a fairness opinion. The new C&DI clarifies the SEC’s position on GAAP reconciliation for non-GAAP projections following a number of deal-related lawsuits filed in federal court in which plaintiffs alleged that merger-related proxy disclosures were deficient due to the absence of GAAP reconciliations for non-GAAP projections included in the associated proxy statements.