Description: Current thoughts on development and trends in securities regulation, corporate governance and executive compensation published by Gibson Dunn.
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On March 14, 2023, the SEC charged DXC Technology Co. (“DXC") with making material misstatements with respect to its non-GAAP financial performance measures, stating that, DXC “negligently misclassif[ied] tens of millions of dollars of expenses as [transaction, separation and integration-related (“TSI")] costs and improperly exclude[ed] them in its reporting of non-GAAP measures." The SEC's order also found that DXC, and specifically its controllership function and disclosure committee, failed to maintain
The SEC stated that these shortcomings caused employees within the business units and financial planning & analysis to “make subjective determinations about whether expenses were related to an actual or contemplated transaction, regardless of whether the costs were actually consistent with the description of the adjustment included in the company's public disclosures." For example, although DXC's public description of TSI costs remained unchanged for two full years, “the company had no process by which its
The SEC also cited several factors that prevented DXC's controllership from engaging in a meaningful review of proposed TSI costs, including the large number of line items contained in the TSI cost spreadsheet, the short time period within which to complete its review, and the lack of access to project and cost descriptions. Notably, when controllership employees questioned particular expenses or raised other concerns, they often received incomplete or inaccurate information, and no supporting documentation