INSIGHT

Common SEC Reporting Mistakes Growing Companies Make

Will Tanem, Martina Gadgeff • July 28, 2026

Services: SEC Reporting

---

The path from private to public company is full of technical traps, and many of them don’t reveal themselves until a deadline is close, or an SEC comment letter lands in your inbox. Growing companies, particularly those filing for the first time or navigating their first few quarters as registrants, tend to repeat similar mistakes. Most are avoidable with the right preparation.  

6 SEC Reporting Mistakes That Catch Growing Companies Off Guard 

This article covers the reporting errors that show up most often, why they happen, and what your team can do to get ahead of them. 

1. Misclassifying Filer Status 

Filer classification is one of the first SEC reporting determinations a new registrant makes, and it drives almost every downstream deadline. Companies are classified as large, accelerated filers, accelerated filers, non-accelerated filers, or smaller reporting companies (SRCs), and may also qualify as emerging growth companies (EGCs) based on their public float and, in some cases, annual revenues.  

The classification determines when your 10-K and 10-Q filings are due, whether you’re subject to the auditor attestation requirement under Section 404(b) of the Sarbanes-Oxley Act that requires an independent registered public accounting firm to attest to management’s assessment of the effectiveness of internal control over financial reporting, and which financial statement accommodations apply to you.  

The more common misstep is not getting the initial classification wrong but failing to anticipate a change in status timely enough for adequate preparation. Under the SEC’s Rule 12b-2, a company must reassess its filer status annually based on its public float measured as of the last business day of its most recently completed second fiscal quarter. A Company may only realize that it has outgrown the accommodations available to SRCs, EGCs, and non-accelerated filers on that assessment date, and that is too late. 

Companies that do not monitor these thresholds ahead of the assessment date or do not plan ahead can be caught off guard losing scaled disclosure relief or triggering the SOX 404(b) auditor attestation requirement without enough runway to complete internal control readiness and remediation, which often require additional resourcing. Tracking public float and other qualification metrics well in advance allows management to prepare for a transition on its own timeline rather than scrambling to meet accelerated deadlines, expanded requirements and an internal control audit after the fact. 

2. Underestimating the Technical Requirements for MD&A 

Management’s Discussion and Analysis is not a narrative summary of the financial statements. The SEC’s requirements under Regulation S-K Item 303 call for a discussion of known trends, events, demands, commitments, and uncertainties that are reasonably likely to have a material effect on financial condition or results of operations. That distinction carries significant weight. 

• Known trends, events and uncertainties –  Failure to identify these and/or not disclosing them timely as early as known to management could attract scrutiny. Regulation S-K Item 303 imposes a forward-looking disclosure requirement. Registrants who wait until an uncertainty is virtually certain rather than disclosing when known to management and when it first became reasonably likely tend to invite scrutiny and could lead to more serious allegations that filings were misleading by omission.  
  
  Examples of these are margin or input-cost pressure, backlog softening, customer or supplier concentration, expiring or renegotiations of contracts, pending legislation or a proposed rule effect, which management monitors, and among other items. 
• Events messaging and information published by the entity are inconsistent – MD&A, earnings calls and transcripts, investor presentations and materials, roadshow decks, media and website content or any other information disseminated by the Company in the public domain are inconsistent. Inconsistencies are one of the most efficient triggers for a comment letter because they are easy to spot.  
  
  These could include forward-looking commentary given to analysts that is not reflected as a known trend or uncertainty in the filing, or that contradicts the risk factors; press releases announce record demand or strong pipeline but MD&A is silent on those or attributes them to different factors; management discusses the business by product line or geography on earnings calls but MD&A and segment footnotes are on a different basis, which may obscure how the business is actually run and reviewed.   
• Incomplete discussion of liquidity and capital resources – companies often describe balances but not how they expect to fund operations or known or reasonably likely cash needs.  The SEC requires disclosure of material cash requirements including commitments for capital expenditures, their general purpose and anticipated source of funding.  
  
  SEC comment letters flag disclosures that discuss known contractual commitments or liquidity risks in generic terms. The SEC expects specificity as to their nature, timing and quantified expected cash impact. Companies often list the expected cash outflow of purchase commitments, debt arrangements, leases or unconditional purchase obligations without disclosing when the payments come due, how they will be funded, what refinancing plans are there, whether the payments would compress a covenant cushion and by how much.  
  
  Other commonly missed disclosures include consequences of non-payment, delayed payment or default, whether there are any restrictions or circumstances that affect how readily available cash is and similar factors that affect whether payments are expected to materially affect liquidity. The SEC asks registrants to describe such drivers and constraints and to expand on disclosures regarding reliance on external financing. Specificity is what satisfies the requirement rather than a boilerplate commitments table or a simple quantification of commitments. 
• Failure to provide analysis and disaggregate key drivers of change – companies often write MD&A that rehashes what the income statement already shows. The SEC staff routinely issues comment letters challenging disclosures that fail to explain the underlying drivers of revenue changes, gross margin fluctuations, or changes in operating expenses from a business operations and/or market supply or demand perspective.  
  
  Think of the nature of the narrative explaining these similarly to how the board, the chief operation decision maker and management would have analyzed them. Quantifying the drivers of period-over-period changes and disclosing the business, operational and market reasons behind them, not just the amounts, is what SEC reviewers expect. 

3. Incomplete or Inconsistent Key Metrics Disclosure (KPIs) 

Many growing companies rely on key performance indicators and other operational metrics to explain their business, particularly in industries where GAAP financial statements do not fully capture growth or scale. Metrics such as ARR, bookings, customer counts, churn, or average revenue per user often play a central role in how management evaluates performance internally. The SEC has been clear that when these metrics are material to understanding the business, they should be disclosed in MD&A with sufficient context to allow investors to interpret them appropriately. 

The issue is not whether companies present KPIs. It is how those metrics are defined, calculated, and explained. The SEC has issued specific guidance on this topic and expects companies to provide a clear definition of each metric, explain how it is calculated, and describe why it is useful to investors and how management uses it. Without that context, even widely used metrics can be misleading. 

One of the most common mistakes is failing to clearly define the metric or the inputs used in its calculation. Companies often assume that terms like “bookings,” “pipeline,” or “active users” are widely understood, but in practice these metrics vary significantly across companies and industries. When definitions are unclear or incomplete, the SEC will ask for clarification, particularly if the metric is being used to explain revenue trends or growth. 

Another frequent issue is inconsistency in how metrics are calculated and presented across periods. Companies may refine or update their methodology as the business evolves, but fail to clearly disclose those changes or explain their impact. The SEC has emphasized that when the method of calculation changes, companies should describe the differences from prior periods, explain the reason for the change, and consider whether prior periods should be recast for comparability.  

The SEC also focuses on whether the metrics presented align with the rest of the filing. If KPIs discussed in MD&A are not consistent with trends described elsewhere, such as revenue drivers, segment disclosures, or earnings call commentary, it raises questions about whether the metrics are being used selectively. SEC reviewers routinely read across the entire filing and related public disclosures, and inconsistencies are a common source of comment letters. 

Finally, companies often fail to provide sufficient transparency around the assumptions and estimates embedded in their metrics. Where a metric relies on significant judgment, such as estimating customer lifetime value or retention rates, the SEC expects companies to consider whether additional disclosure is needed to avoid being misleading. Simply presenting the metric without explaining the underlying assumptions can result in follow-up questions. 

In practice, KPIs and operational metrics are expected to provide investors with insight into how management views the business. When they are not clearly defined, inconsistently applied, or insufficiently explained, they can do the opposite. As a result, incomplete or inconsistent KPI disclosure has become one of the more common drivers of SEC comments within MD&A. 

4. Disclosure Committee Gaps and Inadequate Controls Over Financial Reporting 

Section 302 of the Sarbanes-Oxley Act  requires the CEO and CFO to certify that the filing fairly presents the issuer’s financial condition, results of operations, and complies with SEC reporting requirements and that disclosure controls and procedures were evaluated as to their effectiveness. Management must also disclose any significant deficiencies or material weaknesses identified in the design or operation of those controls. For companies that haven not formalized a disclosure committee or documented their disclosure controls, those certifications create real exposure. 

A functional disclosure committee should include representatives from finance, legal, operations, and investor relations. It should operate under a written charter, meet on a defined schedule in the beginning and in preparation of each filing cycle, and maintain documentation that supports management’s evaluation of disclosure controls. Many growing companies stand up a committee in name only. When the SEC reviews your internal control disclosures or your auditors evaluate the design of your controls, an under documented process is difficult to defend.  

The common mistake among newly public companies is assuming that the primary compliance challenge is SOX 404 readiness, which in some cases provide a longer runway before auditor attestation is required. Companies often overlook the Section 302 certification or underestimate its immediacy. The certification requirement applies beginning with the company’s first Form 10-Q or 10-K periodic filing as a public company. Management must have effective disclosure controls and procedures in place from the onset for the purpose of certifying, even before completion of a formal SOX 404 compliance program that is still being developed. 

5. Missing the Segment Reporting Requirements Under ASC 280 

Segment reporting remains one of the most frequently challenged areas in SEC comment letters. Under ASC 280, reportable segments are based operating segments that meet certain revenue, profit and loss or asset tests and operating segments are defined based on the discrete financial information which the the chief operating decision maker (CODM) regularly reviews to allocate resources and assess performance. That is an internal management lens, not an external financial reporting lens. 

Companies that aggregate operating and/or reporting segments to avoid separate disclosure, or that fail to align their operating segments with how the CODM actually reviews the business, run into trouble. The SEC has placed particular focus on whether the segment information presented in the footnotes is consistent with how management discusses the business in the MD&A and earnings calls. 

6. Calculating Earnings per Share 

Growing companies and new SEC registrants frequently stumble on EPS in ways that draw SEC comment letters. One of the most pervasive mistakes is failing to apply the two-class method under ASC 260 when the capital structure includes participating securities such as convertible preferred stock, certain warrants or restricted stock units common in venture-backed companies. In these cases, undistributed earnings must be allocated between common and participating holders before computing basic EPS, rather than simply dividing net income by shares outstanding.  

Companies often mishandle the if-converted method for convertible instruments in diluted EPS, especially when contingently convertible instruments and/or derivatives are present. Errors include failing to make required numerator add-backs or, critically, including dilutive securities during net loss periods when all such securities are anti-dilutive by definition. 

The weighted-average share count around IPO capital structure changes is another frequent deficiency. Companies confuse which events require retroactive adjustment for all periods, such as stock splits and dividends versus prospective treatment from the conversion date, such as preferred stock or debt converting at IPO closing.  

Companies also often skip the required anti-dilution sequencing, which requires ranking instruments most to least dilutive and testing incrementally. Errors in share-based compensation are common as well, including incorrectly including unvested RSUs in basic EPS, mishandling vested but not released RSUs, or misapplying the treasury stock method by using period-end rather than average stock prices.  

As for disclosures, companies frequently omit required information, including the reconciliation of basic to diluted EPS, the impact of participating securities, disclosure of anti-dilutive shares excluded from diluted EPS, and per-class EPS for multi-class structures. 

7. Misapplying Non-GAAP Measure Requirements 

NonGAAP measures are widely used by public companies to communicate performance, but they remain one of the most common sources of SEC comment letters. The SEC’s guidance under Regulation G and Item 10(e) of Regulation SK focuses not just on required reconciliations and presentation, but on whether a nonGAAP measure could be considered misleading to investors.  

The SEC’s NonGAAP Financial Measures and Corporation Finance Interpretations make clear that even technically compliant measures may still be challenged if the presentation is considered misleading or obscures the comparability of the underlying GAAP results. 

Excluding normal, recurring operating expenses 

One of the most frequent areas of SEC scrutiny is the exclusion of normal, recurring, cash operating expenses. The SEC has stated that a nonGAAP measure may be misleading if it excludes expenses that are necessary to operate the business, even if those expenses are labeled as nonrecurring or unusual.  

Importantly, the SEC’s view of “recurring” is broader than many companies expect. An expense does not need to occur every period to be considered recurring. Expenses that occur repeatedly or even occasionally, including at irregular intervals, may still be viewed as recurring if they relate to the company’s operations or growth strategy. 

In practice, this is where many companies run into trouble. Adjustments for items such as restructuring costs, expansion-related spend, or “strategic initiative” costs are often presented as nonrecurring, even though similar costs appear period after period. The SEC frequently challenges whether those costs are truly unusual or simply part of the ongoing cost of operating and growing the business. 

“Cherry picking” adjustments and inconsistent presentation 

NonGAAP measures can also be misleading when adjustments are applied selectively. The SEC has highlighted that excluding charges without also excluding similar gains, or adjusting items in one period but not in others without clear disclosure, may violate Regulation G. 

These issues often arise when companies refine their definition of metrics such as “adjusted EBITDA” over time. Even where changes are made in good faith, failing to clearly explain the change or recast prior periods can lead to SEC comments. The core issue is consistency. Investors should be able to compare the measure across periods without distortion. 

Use of individually tailored accounting principles 

Another area of increasing SEC focus is the use of nonGAAP measures that effectively change the recognition or measurement principles required under GAAP. The SEC has stated that such “individually tailored accounting principles” may render a nonGAAP measure misleading. 

This extends beyond simple adjustments and into the way amounts are calculated. Examples include accelerating revenue that GAAP would recognize over time, presenting revenue on a net basis when GAAP requires gross presentation, or shifting from an accrual basis to a cash basis for certain expenses. 

These types of adjustments go beyond supplementing GAAP results and instead create an alternative accounting model. The SEC has been clear that this is not the purpose of nonGAAP measures and will often require companies to remove or revise these presentations.  

How BPM Can Help 

BPM’s technical accounting group works with companies at every stage of the reporting process, from initial readiness assessments before an IPO to ongoing SEC drafting support for seasoned registrants dealing with complex transactions or SEC comment letters. Our team has direct experience with the issues described above and can help your organization build the documentation, processes, and controls needed to sustain compliance. 

If your team is approaching a filing deadline or wants a structured review of your current reporting practices, contact us.