SEC Comment Letters on Firms' Use of Non-GAAP Measures: The Determinants and Firms' Responses

Koren M Jo, Shuo Yang

Research output: Journal article publicationJournal articleAcademic researchpeer-review


This paper explores Securities and Exchange Commission comment letters that address firms' use of non-Generally Accepted Accounting Principles (GAAP) measures in 10-Ks, 10-Qs, and earnings releases. We investigate the determinants of firms' receiving non-GAAP comments and the revisions to non-GAAP reporting undertaken by these recipients. Firms that experience poor GAAP performance and emphasize non-GAAP measures are more likely to receive non-GAAP comments. Recipients of non-GAAP comments are more likely than other reviewed firms to abandon non-GAAP measures in future filings. When recipients of non-GAAP comments continue to report non-GAAP measures, they provide more justifications for the use and reduce the prominence of these measures. However, higher non-GAAP earnings and GAAP earnings differentials do not appear to attract non-GAAP comments. In addition, the amount of non-GAAP exclusions does not decrease after the receipt of non-GAAP comments. Overall, our findings suggest that non-GAAP comments are effective in deemphasizing non-GAAP measures.
Original languageEnglish
Article number34 (2)
Pages (from-to)167–184
JournalAccounting Horizons
Issue number2
Publication statusPublished - 2020


  • Comment Letter
  • Non-GAAP
  • Earnings Release


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