| Course | ACC 690 Advanced Topics in Financial Reporting |
|---|---|
| Module | Module 7 |
| Paper type | graduate discussion post on non-GAAP measures and SEC rules |
| Length | About 350 words, 3 pages |
| Format | APA 7 student paper |
| School | Southern New Hampshire University |
| Program | MS Accounting |
| Updated | October 2026 |
Free sample paper for ACC 690 Module 7
Module Seven Discussion
Three Adjustments and a Comment Letter Waiting to Happen
For its third-quarter earnings release, the producer's investor relations team proposed featuring adjusted EBITDA that starts with EBITDA and excludes stock compensation, excludes the $3.2 million second-quarter maintenance shutdown from the year-to-date figure and adds back the clean fuel production credits the company records as a reduction of income tax expense, about $43 million a year. The headline would be a record adjusted EBITDA margin.
Regulation G applies to any public disclosure of a non-GAAP measure, including earnings releases, and requires a reconciliation to the most comparable GAAP measure (Securities and Exchange Commission, 2003). Item 10(e) adds, for filings and for releases furnished on Form 8-K, that the GAAP measure be presented with equal or greater prominence and that management explain why the measure is useful. The staff's interpretations go further on content.
Stock compensation is excluded by most peers and is generally accepted if the adjustment is consistent and explained. The maintenance shutdown is harder: the staff has said that excluding normal, recurring cash operating expenses necessary to operate a business can make a measure misleading, and every ethanol plant shuts down for maintenance roughly every year or two. The credit is the most troubling. The company chose to account for it in income tax expense; adding it back into an operating measure would in effect apply the grant model the company rejected, which the staff could view as an individually tailored accounting principle.
Research supports scrutiny without cynicism. Bentley et al. (2018) found that managers' non-GAAP exclusions are often more aggressive than analysts', and that the quality of exclusions varies. Black et al. (2018) review evidence that many non-GAAP figures are informative but that some systematically exclude recurring expenses. My recommendation is to keep the stock compensation adjustment, drop the shutdown and present the credit separately as a disclosed item rather than inside adjusted EBITDA, with net income shown first.
For classmates: limited to a single one of the three adjustments, which would it be, and how would you explain your choice to the SEC staff in a comment letter response?
References
Bentley, J. W., Christensen, T. E., Gee, K. H., & Whipple, B. C. (2018). Disentangling managers' and analysts' non-GAAP reporting. Journal of Accounting Research, 56(4), 1039-1081. https://doi.org/10.1111/1475-679X.12206
Black, D. E., Christensen, T. E., Ciesielski, J. T., & Whipple, B. C. (2018). Non-GAAP reporting: Evidence from academia and current practice. Journal of Business Finance & Accounting, 45(3-4), 259-294. https://doi.org/10.1111/jbfa.12298
Securities and Exchange Commission. (2003). Conditions for use of non-GAAP financial measures (Release No. 33-8176). Author.
What the ACC 690 Module 7 instructions ask for
The Module Seven discussion in ACC 690 usually asks about non-GAAP financial measures: why companies use them, the rules in Regulation G and Item 10(e) of Regulation S-K, the SEC staff's interpretations, and whether they help or mislead investors. A typical answer runs a few hundred words and draws on the rules, staff guidance and research, then replies. Good posts evaluate specific adjustments against the staff's views, especially on normal recurring cash operating expenses, tailored accounting principles and prominence, rather than summarizing the rules. A clear position on which adjustments are acceptable, with reasons, earns more than listing arguments on each side.
How this ACC 690 Module 7 discussion example is built
The post evaluates three adjustments. Excluding stock compensation is common and generally accepted if consistent and explained. Excluding the $3.2 million maintenance shutdown is likely to draw an SEC comment, because planned maintenance is a normal, recurring cash operating cost of running plants. Adding back $43 million of clean fuel credits recorded in tax expense would move a tax benefit into an operating measure, which the staff could view as an individually tailored accounting principle. The post notes the requirement to present net income with equal or greater prominence and to reconcile, cites Bentley and colleagues and Black and colleagues, and asks classmates which adjustment they would drop and how they would defend the rest to the SEC staff.
Where the ACC 690 Module 7 rubric puts the points
Scoring for the non-GAAP discussion typically weighs accurate description of the rules and staff guidance, evaluation of specific adjustments, attention to prominence and reconciliation, use of research and replies. The best posts reason from the staff's concerns, recurring cash costs, tailored accounting and misleading labels, to a judgment about each adjustment, and they recognize that disclosure in an earnings release is subject to Regulation G even outside SEC filings. Posts that treat all non-GAAP measures as misleading, or that ignore the staff's interpretations, score lower. Replies that challenge a classmate's acceptance of an adjustment with a specific staff concern are worth more than agreement. Citing the staff's interpretations by topic adds precision.
ACC 690 Module 7 help: the mistakes that cost points
Students sometimes think non-GAAP rules apply only in 10-K and 10-Q filings, when Regulation G covers any public disclosure, including earnings releases and investor presentations. Others focus on whether an item is unusual, when the staff's sharper question is whether it is a normal, recurring cash expense of operating the business. If your prompt concerns a non-GAAP liquidity measure instead, such as free cash flow, the same rules apply with an added prohibition on presenting it per share. Classify each adjustment as likely acceptable, questionable or likely objectionable, and give the reason; that structure shows judgment. Then show what the measure would look like after your changes.
Get ACC 690 Module 7 written to your instructions
Send the ACC 690 Module 7 prompt. The post will apply the SEC's non-GAAP rules to specific adjustments, explain the staff's views and support a position with research, inviting replies at the end. Two days is typical, and there is no fee for your first request. The paper above is an original model document written by our desk, not a submitted student paper and not an official Southern New Hampshire University document.
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ACC 690 Module 7 questions, answered
Where can I find a free ACC 690 Module 7 Discussion sample?
This page includes the full ACC 690 Module 7 post testing an ethanol producer's adjusted EBITDA against the SEC's non-GAAP rules.
What do Regulation G and Item 10(e) require?
A reconciliation to the most directly comparable GAAP measure, and in SEC filings, equal or greater prominence for the GAAP measure, a statement of usefulness and limits on certain adjustments.
Can a company exclude normal recurring cash operating expenses?
SEC staff guidance indicates that excluding normal, recurring cash operating expenses necessary to operate the business can make a non-GAAP measure misleading.
What is an individually tailored accounting principle?
A non-GAAP adjustment that changes the recognition or measurement method required by GAAP, such as accelerating revenue, which the SEC staff may consider misleading.
Do non-GAAP measures help investors?
Research finds they are often informative, especially when analysts' and managers' exclusions agree, but some exclusions remove recurring costs and inflate performance.