Take-Two Interactive to Cease Non-GAAP Revenue Measures in Response to SEC Guidance
press release
which represents revenue recognized during the current period that was deferred in prior periods, net of revenue that is being deferred into future periods. This measure can be optionally added to the GAAP net revenue to derive the formerly reported non-GAAP net revenue figure the company was using before. It will also no longer report non-GAAP gross profit, income from operations and net income. Like the change in net revenue reporting, the company will disclose separate measures that will allow people to calculate the non-GAAP figure they previously used in addition to the GAAP metrics. These include:
* Change in deferred costs of goods sold, which represents costs of goods sold recognized during the current period that were deferred in prior periods, net of costs of goods sold that are being deferred into future periods. For those who choose to do so, the change in deferred costs of goods sold can be added to the Company’s new Non-GAAP costs of goods sold to calculate the financial measure that Take-Two formerly reported as Non-GAAP costs of goods sold.
* The net effect from deferral of net revenue and related costs of goods sold, which represents the after-tax net effect from the change in deferred revenue and the change in deferred costs of goods sold. For those who choose to do so, the net effect from deferral of net revenue and related costs of goods sold can be added to the Company’s new Non-GAAP net income to calculate the financial measure that Take-Two formerly reported as Non-GAAP net income.
MarketWatch Wall Street Journal speech in March
SEC Chair Mary Jo White, in a speech in June, echoed the concerns that Schnurr voiced, saying that the measures that are "meant to supplement the GAAP information, [have] become the key message to investors, crowding out and effectively supplanting the GAAP presentation."
In particular, she said the SEC is concerned with companies not giving equal or greater prominence for GAAP measures; exclusion of normal, recurring cash operating expenses; individually tailored non-GAAP revenues; lack of consistency; cherry-picking; and the use of cash per share data.
"We are watching this space very closely and are poised to act through the filing review process, enforcement and further rulemaking if necessary to achieve the optimal disclosures for investors and the markets," she said.