The SEC posted Square's comment letters on its revenue recognition and revenue non-GAAP metrics
The regulator posted the letters on Dec. 26, long after the company acknowledged some big changes.
At noon today, subscribers to The Dig can read my full analysis of the Square comment letters, along with an update on Blackberry’s use of the same metric.
The SEC’s scattershot comment letter campaign against measures that “substitute individually tailored recognition and measurement methods for those of GAAP,” is, to say it gently, still a work in progress.
In particular, it doesn't seem that Corporation Finance, the group in the SEC that reviews company filings and send out comment letters, has a full awareness or consistent approach to addressing the deferred revenue purchase accounting adjustments that create “ghost revenue.”
The SEC publicly posted the Square comment letter file on December 26, 2019, 30 days after the file was closed on November 26, according to the last letter posted by the SEC. That’s ten days later than the 20 days allowed per the SEC’s rules on making comment letters public.
The SEC did not close the matter, and its file, until 20 days after Square issued its 8-K announcing the change.
The Square comment letter correspondence file — there were a total of 3 letters from the SEC to Square, including the closing letter beginning August 16, 2018 based on a review of the company’s 10-Q for the quarter ended March 31, 2018 — was not yet publicly available on the SEC site and Square declined to provide a copy when the company announced the change on November 6.
In an FAQ about the change on November 6, Square said that it started using the metric in November 2015, “to provide investors and analysts with useful metrics to measure the performance and growth of our ongoing recurring business and allow comparability to other businesses in the payment processing sector.”
It will now “discontinue the use of the adjusted revenue measure based on the SEC’s evolving position with respect to non-GAAP performance measures,” the FAQ said.
Want to read my full analysis of the Square comment letters, and an update on Blackberry’s use of the same metric? It’s coming out at noon today but you need to be a paid subscriber.