It is well documented that companies now use social media for all kinds of communications, including “traditional” SEC disclosures. As the scope of the social media disclosures continues to expand, some companies are starting to post non-GAAP financial measures. It is important to remember that any such postings must comply with the SEC’s GAAP reconciliation rules. The question then becomes how?

General GAAP Reconciliation Requirements…

The SEC’s Regulation G requires that any time a company publically discloses non-GAAP financial measures, it must provide a reconciliation of those measures to the most directly comparable GAAP number. The SEC has made special allowances for oral, telephonic, webcast or similar disclosures by allowing companies to meet the reconciliation delivery requirement by referring listeners to a reconciliation posted on the company’s website. There is no analogous rule allowing social media postings to reference or link to the website.

Recent SEC Staff Hyperlink Guidance…

Back in the spring, the SEC staff issued five new CDIs specific to public offering communications. Basically, they provide that when a company is required by Rules 134, 165 or 433(c) (which relate to securities offerings and business combinations) to affix a legend or statement to a public communication that it chooses to make via social media, it may satisfy that requirement by hyperlinking to the legend or statement, but only if certain conditions are met. (See this Doug’s Note regarding the new CDIs.)

Does this hyperlink guidance extend by analogy to social media postings of non-GAAP measures?

Maybe. As long as social media is a “recognized channel of distribution,” (see the staff’s 2008 interpretive guidance regarding Regulation FD-complaint website disclosures) and the postings satisfy antifraud rules, then it would seem logical that the staff would permit companies to hyperlink from social media to the company’s website for reconciliation of non-GAAP measures to GAAP numbers. This would also be a logical extension of the staff’s 2013 Netflix 21(a) Report allowing Regulation FD-compliant social media disclosures under certain circumstances. (See this Doug’s Note regarding the Netflix report.)

So far the staff has not issued guidance on this issue, and so far postings of non-GAAP measures have not become widespread. Nevertheless, the practice is beginning to gain steam and, like many social media trends, may quickly take off.

If your company uses social media for SEC disclosures, or is considering doing so, then this is a development worth watching.