SEC Finalizes Reg G on Non-GAAP Financial Measures

The Securities and Exchange Commission voted on January 15, 2003 to adopt Regulation G. The new regulation will apply whenever a company publicly discloses or releases material information that includes a "non-GAAP financial measure."

A non-GAAP financial measure is defined as a numerical measure of a company's financial performance that includes or excludes amounts normally reflected in comparable measures calculated and presented in accordance with generally accepted accounting principles (GAAP) in the statement of income, balance sheet or cash flows.

Most notably, the SEC's definition would encompass metrics commonly known as "pro forma earnings." Regulation G prohibits use of non-GAAP measures that contain untrue statements or omissions of material facts. It also requires reconciliations with comparable GAAP measures, with limited exceptions for foreign issuers.

At the same time, the SEC also voted to adopt:

  • Regulations that will require companies to promptly disclose information about material changes in their financial condition or operation and to furnish to the Commission any releases or announcements about these changes, if and when the information is released to the public. This requirement does not apply to information released through oral statements, telephone calls, webcasts or broadcasts made within 48 hours of a related Form 8-K, provided the information is broadly available to the public and posted on the company's Web site.

  • Rules restricting insider trading during pension fund blackout periods. These rules apply to trading by directors and executive officers as well as companies. They require a company to notify its directors and executive officers, as well as the Commission, of an impending blackout period on a timely basis.

The SEC is pushing to implement the many rules required by the Sarbanes-Oxley Act before the legislative deadline of January 26, 2003. Outgoing SEC Chairman Harvey Pitt said this week and next week could be "the busiest two weeks of rule-making in this agency's history."

You may like these other stories...

The US Securities and Exchange Commission (SEC) has chosen a former partner and vice chairman with Deloitte LLP as its new chief accountant.James Schnurr, who specialized in financial and SEC reporting for public companies...
Summer is a time for kicking back and playing a few round of golf with friends, for example. But if you're on the green, you'd better be careful: The SEC may be looking over your shoulder.In July, the SEC announced...
An examination initiative launched by the US Securities and Exchange Commission (SEC) earlier this week will enable the agency to evaluate whether municipal advisors are complying with new SEC rules that went into effect...

Already a member? log in here.

Upcoming CPE Webinars

Oct 21Kristen Rampe will share how to speak and write more effectively by understanding your own and your audience’s communication style.
Oct 22This webinar will include discussions of important issues in AU-C 800, Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks.
Oct 23Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.
Oct 30Many Excel users have a love-hate relationship with workbook links.