The use of non-GAAP financial measures continues to be one of the disclosure areas that routinely generates comments from the SEC staff, according to Shelley Parratt, the Division of Corporation Finance’s deputy director for disclosure operations. She said the staff is seeing companies back out expenses that should not be backed out, and has sent comment letters objecting to the practice. Parratt joined a panel discussion on recent disclosure trends at the Practising Law Institute’s recent conference on securities regulation.

Parratt reminded filers that the disclosure of performance targets and benchmarks must be tied to a company’s specific circumstances. A general discussion about targets is not what the staff is looking for in the disclosure documents. She also reminded companies to be specific in their segment reporting. Where the staff does not see disclosure on how a company determined its reportable segments, it will ask for it, she said.

Parratt said the staff often issues comment letters on restatement disclosures. She advised that these disclosures must appear in all filings subsequent to the restatement until the company files its next annual financial statements. With respect to MD&A disclosure, she said the staff often has to remind companies to disclose the amount of cash they have in foreign subsidiaries that is not available for general corporate use.

Parratt said the staff sees many filings in which the risk factor disclosure has not been updated. Risk factors must be kept current, she said, which means right now a company should be discussing the specific challenges it faces due to the current economic conditions.

Martin Dunn of O’Melveny & Myers and Compensia’s Mark Borges discussed trends in proxy disclosure. Dunn noted that 2011 was the first time that companies prepared their CD&A for the people reading it and not for the SEC. Companies wanted a positive vote on their compensation programs, he said, so they had to tell their story.

Borges agreed that the proxy statement has transitioned to a communication document from a disclosure document, with say-on-pay as the catalyst. The key change that he observed in the 2011 proxy statements was the introduction of a proxy summary. A number of large companies put a summary at the front of proxy statement that highlighted key items in the document. Borges expects the use of proxy summaries to continue going forward.

Dunn said that last year many companies received a negative vote on their compensation packages, then filed supplemental proxy materials in which they provided effective disclosure on the issue. This was okay for the first year of say-on-pay, he said, but in 2012 companies should work that information into the original disclosure.

He also addressed the issue of proxy advisory firms, and noted that they do have some power in the shareholder voting process. He pointed out, however, that in 2011 they recommended votes against 300 to 400 companies’ compensation plans, but only about 40 received negative votes.

Dunn said that proxy advisory firms look at a company’s peer group to see if there are places where a company does not match the median of the group. He advised companies to try to figure out their peer group, determine what the median pay practices are, and be prepared to explain if and why they are different. On this and many other proxy disclosure issues, Dunn said it is always a good idea for a company to reach out to its shareholders directly.

Keir Gumbs, a partner at Covington & Burling, discussed companies’ increasing use of social media and its disclosure implications. He said that about 79% of companies now use some form of social media such as blogs, Twitter or Facebook. A company’s disclosure policy should apply to this area, he advised.

In particular, Gumbs reminded companies to be aware of Regulation FD, which states that a company cannot disclose certain information to certain persons without also making it widely known. In his opinion, if a company uses social media, it should be as a complement, not as the sole means of satisfying Regulation FD. The SEC is keeping an eye on what companies are saying through their social media. Gumbs cited a recent comment letter to a company whose CEO sent a tweet pre-announcing the company’s quarterly earnings.