Non-GAAP prominence checklist (Item 10(e) and C&DI 102.10)

Where the rule applies

Item 10(e)(1)(i)(A) of Regulation S-K requires the most directly comparable GAAP measure to be presented with equal or greater prominence whenever a non-GAAP measure appears in a filing. The staff applies the same requirement to earnings releases furnished under Item 2.02 of Form 8-K (C&DI 102.10(a)). Regulation G covers other public disclosures and requires a reconciliation.

1. Prominence – the release and the filing (C&DI 102.10(a))

Check that you are not:

• Leading with the non-GAAP measure, or omitting the GAAP measure – including in a headline or caption
• Presenting a ratio with a non-GAAP numerator or denominator without the same ratio on a GAAP basis, with equal or greater prominence
• Using bold, larger font or other styling that emphasises the non-GAAP measure
• Describing the non-GAAP result as "record" or "exceptional" without an equally prominent description of the GAAP result
• Showing charts, tables or graphs of non-GAAP measures without equally prominent GAAP versions
• Discussing and analysing the non-GAAP measure without similar discussion of the GAAP measure in an equally prominent location
• Presenting an income statement made of non-GAAP measures

2. The reconciliation (C&DI 102.10(b), (c))

• Starts with the GAAP measure, not the non-GAAP measure
• Is not a "non-GAAP income statement" – one with all or most of the GAAP line items and subtotals on a non-GAAP basis
• Forward-looking measures without a quantitative reconciliation: reliance on the "unreasonable efforts" exception is disclosed, the unavailable information is identified and its probable significance is stated, with equal prominence

3. Other Item 10(e) and C&DI checks

• Quantitative reconciliation to the most directly comparable GAAP measure (Item 10(e)(1)(i)(B))
• Statement of why management believes the measure is useful to investors, and other purposes it is used for (10(e)(1)(i)(C), (D))
• Liquidity measures do not exclude charges that required cash settlement, other than EBIT and EBITDA (10(e)(1)(ii)(A))
• No normal, recurring cash operating expenses excluded from a performance measure (C&DI 100.01)
• No individually tailored accounting principles (C&DI 100.04)
• Income tax effects shown as a separate adjustment and explained – not "net of tax" (C&DI 102.11)
• Titles not confusingly similar to GAAP titles; no non-GAAP measures on the face of the financial statements (10(e)(1)(ii))