By George Wilson
As we approach third quarter-end 2020, many of us will be drafting and reviewing earnings releases. A majority, perhaps most, of these earnings releases will include non-GAAP measures. The SEC includes earnings releases in their review process and, as you likely already know, frequently comments on the use of non-GAAP measures included in these crucial communication documents.
More often than not the issues raised in these comments are areas that are dealt with in Regulation G, S-K Item 10(e), or the related Compliance and Disclosure Interpretations. To help avoid non-GAAP problems in earnings releases and other documents, this series of posts focuses on earnings releases that resulted in SEC comments about the use of non-GAAP measures.
To make this a bit more of a challenge, you can first read the excerpt of the release behind the comment and try to spot the issue. If you prefer, you can read straight through to the comment and explanation that follow.
This excerpt is from an 8-K filed by Dasan Zhone Solutions, Inc. on May 7, 2020. Can you spot the non-GAAP issue?