measures (e.g., non-GAAP net sales, interest expense) and may give the impression that the non-GAAP income statement represents a comprehensive basis of accounting. Please confirm to us that you will revise your presentation to provide relevant information to investors without providing full non-GAAP income statements in future filings. For additional guidance, please refer to Compliance and Disclosures Interpretation 102.10 which is available on our website at . Liquidity versus performance measures Non-GAAP financial measures may be presented as performance measures, liquidity measures or both. When a non-GAAP measure is used as both a performance and liquidity measure, multiple reconciliations may be necessary. For example, EBITDA generally should be reconciled to net income if it is presented as a performance measure and to cash flow from operations if it is presented as a liquidity measure. The SEC staff may question a registrant’s disclosure that indicates a non-GAAP measure is a liquidity measure (e.g., used to assess ability to service debt, generate cash flows, or fund acquisitions and capital expenditures), but the non-GAAP measure is reconciled only to a performance measure such as net income. The SEC staff may request that registrants revise their disclosure to clarify how the non- GAAP measure is used (i.e., as a performance or liquidity measure) and include the appropriate reconciliation to the most directly comparable GAAP measure.
SEC reporting issues 26 When a registrant discloses a non-GAAP liquidity measure, it is precluded under Item 10(e)(ii)(A) from excluding charges or liabilities that require cash settlement. If a non-GAAP measure is presented as a liquidity measure, the SEC staff may challenge the appropriateness of certain adjustments (e.g., excluding certain charges or liabilities that require, or will require, cash settlement) that might otherwise be acceptable when calculating non-GAAP performance measures. Example SEC staff comment: Non-GAAP liquidity measures We note your presentation of a non-GAAP measure you identify as “Adjusted EBITDA.” We note you disclose several uses of this measure, including to “assess your ability to service your debt.” It appears to us you are presenting this measure as both a performance measure and a liquidity measure. If you present this measure as a liquidity measure, please revise it to not exclude items that will impact cash and reconcile it to cash flows from operating activities. EY resources 2012 SEC annual reports — Form 10-K (SCORE No. CC0360), November 2012
SEC Comments and Trends 27 Summary of issues noted The SEC staff may ask about pro forma financial information disclosed in filings, including registration statements, proxy statements and Forms 8-K. The SEC staff may request that registrants explain how they have met the requirements of Article 11 of Regulation S-X. The SEC staff also may ask registrants to provide more transparent disclosure about how they calculate pro forma adjustments.
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