The Securities and Exchange Commission’s Division of Corporation Finance issued two new Compliance and Disclosure Interpretations (C&DI), expanding its previously issued guidance related to the exemption from Item 10(e)(5) under Regulation S-K and Regulation G for non-GAAP financial information provided to a financial advisor in forecasts for business combination transactions. The previously issued guidance was discussed in the November 3, 2017 edition of the Corporate & Financial Weekly Digest.

As previously addressed, C&DI 101.01 states that financial measures provided to a financial advisor in connection with a business combination transaction would be excluded from the definition of non-GAAP financial measures and thus, not subject to Item 10(e) of Regulation S-K or Regulation G, if and to the extent that the following conditions are satisfied:

1. The financial measures are included in forecasts to a financial advisor for the purpose of rendering of an opinion that is materially related to the business combination transaction; and
2. The forecasts are being disclosed to comply with Item 1015 of Regulation M-A or requirements under state or foreign law with respect to the disclosure of a financial advisor’s analyses or substantive work.

New C&DI 101.02 clarifies that a company may rely on the guidance in 101.01 to the extent the same forecasts are provided to the company’s board of directors or a board committee. New C&DI 101.03 further provides that, if a company exchanges forecasts with bidders, and disclosure of such forecasts is required under the federal securities laws, the financial measures included in those forecasts would be similarly excluded from the definition of non-GAAP financial measures and not subject to Item 10(e) of Regulation S-K and Regulation G.

The full text of the C&DIs is available here.