Brattle Principal Adoria Lim contributed to Practice Points, a publication of the ABA’s Securities Litigation Committee, on the use of non-GAAP measures.

Ms. Lim examines the use of non-GAAP measures in earnings releases and SEC filings. She outlines adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA), a non-GAAP measure, which is used by companies that want to estimate their recurring cash earnings.

Because GAAP doesn’t provide a measure for recurring cash earnings, companies are left to calculate adjusted EBITDA on a case-by-case basis, which some say can cause confusion between the company and its investors. Ms. Lim suggests that companies should clearly disclose the nature and calculations of non-GAAP measures to avoid such confusion.

The full post, “Non-GAAP Measures: The SEC Awakens,” can be read on the ABA’s website.

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