Calcbench tracks SEC comment letters as those letters become public, and we noticed that Dolby Laboratories ($DLB) had a comment letter published earlier this week. We decided to take a look.

In that letter (dated 28 Feb. 28 2024, but the SEC typically waits weeks before releasing comment letters publicly), SEC staff asked Dolby several questions about its 10-K report filed last November and the company’s accompanying earnings release. Specifically, the SEC asked Dolby to explain its non-GAAP net income number, which included an adjustment for amortization of acquisition-related intangible assets. 

The SEC wanted to know why Dolby recognized only part of its amortization expense, and told Dolby to provide “more robust disclosure explaining why management believes this adjustment, which excludes some, but not all, amortization expense, results in a non-GAAP measure that is useful to investors.”

Wait a minute — that’s the sort of challenge where Calcbench can help!

To be precise, Calcbench can help a firm understand how its non-GAAP disclosures compare against others. That can be useful knowledge when replying to SEC comment letters and trying to defend your position.

For example, we visited our Multi-Company Page and searched for amortization of intangible assets (using the list of standardized search terms on the left side of the page). We quickly found dozens of firms that reported such amortization in 2023; Figure 1, below, is a quick glimpse of the results.

One could then use our world-famous Trace feature to see exactly what those amortization disclosures were. Simply hold your cursor over the number you want to study, and a “Trace” icon will magically appear. Click that icon, and a separate window will open to that exact disclosure in the company’s financial statements. You could then study what the company said and perhaps find inspiration for how to reply to your own comment letter. 

Speaking of Non-GAAP Adjustments

In addition to the detailed research you can do comparing your company to peers, Calcbench also publishes an in-depth report on non-GAAP adjustments once a year. 

Our 2023 report examined the annual reports for 200 randomly selected companies in the S&P 500. Our crack team of interns tallied up every non-GAAP adjustment to net income they could find, grouped the adjustments by type, and identified which categories of adjustment were (1) most common; and (2) the largest by total dollars adjusted.

The headline last year was that among those 200 companies, we identified a total of 1,188 non-GAAP adjustments with a total value of almost $219 billion. Companies averaged 5.9 adjustments each, and each adjustment was on average for $184 million. 

We bring all this up because we are working on this year’s non-GAAP adjustment analysis right now. Expect that report, and lots of discussion on these blog pages about what it all means, in coming weeks!

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