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Financial Statements – 2020-2021 Edition of Financial Statement Disclosures Manual Published NEW!

Exposure Draft - Proposed Accounting Standards Update 2020-100 —Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets 

Release No. 33-10668: Modernization of Regulation S-K Items 101, 103, and 105 

FASB Proposed ASU 2019-600 - Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative 

Debt – FASB Discusses Debt Disclosures 

Interim Reporting - SEC Staff Publishes Updated Compliance and Disclosure Interpretation 

Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant's Securities - Release No. 33-10526

More Companies Qualify for Scaled-Disclosure with SEC Vote

SEC Guidance on Cybersecurity Disclosures Discussed 

Commission Statement and Guidance on Public Company Cybersecurity Disclosures - Release No. 33-10459

SEC Staff Updates Compliance and Disclosure Interpretation

Commission Guidance on Pay Ratio Disclosure - SEC Release No. 33-10415

Securities Act Rules - SEC Staff Updates Compliance and Disclosure Interpretation

SEC Staff Interpretations - SEC Staff Updates Compliance and Disclosure Interpretation

Disclosure of Order Handling Information

SEC3Request for Comment on Subpart 400 of Regulation S-K Disclosure Requirements Relating to Management, Certain Security Holders and Corporate Governance Matters

Disclosure Update and Simplification

Request for Comment on the Effectiveness of Financial Disclosures About Entities Other than the Registrant 

Possible Revisions to Audit Committee Disclosures

Business and Financial Disclosure Required by Regulation S-K 

Pay Ratio Disclosure

Simplification of Disclosure Requirements for Emerging Growth Companies and Forward Incorporation by Reference on Form S-1 for Smaller Reporting Companies

Articles 

Financial Statements – 2020-2021 Edition of Financial Statement Disclosures Manual Published

We have published a new edition of the 2020-2021 GAAP Financial Statement Disclosures Manual (the Manual), which provides comprehensive guidance on the subject of financial statement disclosures. Specifically, the Manual contains over 750 examples of practical sample footnote disclosures to assist in the preparation of financial statements for an audit, a review, or a compilation engagement; facilitates compliance with U.S. generally accepted accounting principles (U.S. GAAP).

This new edition of the Manual incorporates the financial statement disclosure requirements through FASB Accounting Standards Update No. 2020-03, Codification Improvements to Financial Instruments.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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Exposure Draft - Proposed Accounting Standards Update 2020-100 —Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets

Summary - The FASB has issued a proposed ASU, Not-for-Profit Entities (Topic 958)— Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets. The proposal includes amendments intended to improve transparency around how not-for-profit organizations present and disclose contributed nonfinancial assets, also known as gifts-in-kind. The comment deadline is April 10, 2020.

Examples of contributed nonfinancial assets include fixed assets such as land, buildings, and equipment; the use of fixed assets or utilities; materials and supplies, such as food, clothing, or pharmaceuticals; intangible assets; and/or recognized contributed services.

The proposed ASU, if adopted as proposed, would require a not-for-profit organization to present contributed nonfinancial assets as a separate line item in the statement of activities, apart from contributions of cash or other financial assets.

The proposed amendments also would require a not-for-profit to disclose:

  • Contributed nonfinancial assets received disaggregated by category that depicts the type of contributed nonfinancial assets, and
  • For each category of contributed nonfinancial assets received (as identified above):
  • Qualitative information about whether the contributed nonfinancial assets were or are intended to be either monetized or utilized during the reporting period and future periods. If utilized, a description of the programs or other activities in which those assets were or are intended to be used.

A description of any donor restrictions associated with the contributed nonfinancial assets.
The valuation techniques and inputs used to arrive at a fair value measure, including the principal market (or most advantageous market) if significant, in accordance with the requirements in Topic 820, Fair Value Measurement.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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Release No. 33-10668: Modernization of Regulation S-K Items 101, 103, and 105

Summary - The SEC proposed amendments to modernize the description of business (Item 101), legal proceedings (Item 103), and risk factor disclosures (Item 105) that registrants are required to make pursuant to Regulation S-K. The SEC is proposing amendments to these items to “improve these disclosures for investors and to simplify compliance for registrants. More specifically, the proposed amendments are intended to improve the readability of disclosure documents, as well as discourage repetition and disclosure of information that is not material.”

Proposed Amendments to Item 101
The proposed amendment of Item 101(c) would:
• Clarify and expand its principles-based approach, by including disclosure topics drawn from a subset of the topics currently contained in Item 101(c);
• Include, as a disclosure topic, human capital resources, including any human capital measures or objectives that management focuses on in managing the business, to the extent such disclosures would be material to an understanding of the registrant’s business, such as, depending on the nature of the registrant’s business and workforce, measures or objectives that address the attraction, development, and retention of personnel; and
• Refocus the regulatory compliance requirement by including material government regulations, not just environmental provisions, as a topic.
Proposed Amendments to Item 103
The proposed amendment of Item 103 would:
• Expressly state that the required information about material legal proceedings may be provided by including hyperlinks or cross-references to legal proceedings disclosure located elsewhere in the document in an effort to encourage registrants to avoid duplicative disclosure; and
• Revise the $100,000 threshold for disclosure of environmental proceedings to which the government is a party to $300,000 to adjust for inflation.

Proposed Amendments to Item 105
The proposed amendment of Item 105 would:
• Require summary risk factor disclosure if the risk factor section exceeds 15 pages;
• Refine the principles-based approach of that rule by changing the disclosure standard from the “most significant” factors to the “material” factors required to be disclosed; and
• Require risk factors to be organized under relevant headings, with any risk factors that may generally apply to an investment in securities disclosed at the end of the risk factor section under a separate caption.

The proposal will have a 60-day public comment period following its publication in the Federal Register.

For more information, click here.
© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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FASB Proposed ASU 2019-600 - Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative

Summary - The FASB has issued a proposed ASU, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. Comments were due by June 28, 2019.

SEC Referral to FASB
The FASB is proposing these amendments in response to a referral the SEC made to the FASB for potential incorporation into the FASB Accounting Standards Codification™ (Codification). The referral includes certain SEC disclosure requirements that overlap with, but require incremental information to, generally accepted accounting principles (GAAP).

Presentation and Disclosure Requirements
These proposals, if adopted as planned, would amend a number of Codification Topics. The primary proposed amendments would modify disclosure or presentation requirements in the particular Topics. Others clarify or make technical corrections to current requirements.

The proposed amendments would apply to all entities within the scope of the affected Topics, unless otherwise indicated.

The proposed ASU provides a summary table of the proposed amendments in the “Amendment to the FASB Accounting Standards Codification” section. The amendments affect the following Codification provisions, among others:
  • Amendments to the Master Glossary;
  • Topic 205, Presentation of Financial Statements;
  • Topic 250, Accounting Changes and Error Corrections;
  • Topic 260, Earnings Per Share;
  • Topic 270, Interim Reporting;
  • Topic 505, Equity;
  • Topic 805, Business Combinations;
  • Topic 815, Derivatives and Hedging;
  • Topic 830, Foreign Currency Matters; and
  • Topic 850, Related Party Transactions.
Effective Dates
The FASB will determine the effective dates of the proposed amendments after consideration of comments. The FASB expects the amendments to be applied prospectively to financial instruments issued after the effective date.

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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Debt – FASB Discusses Debt Disclosures

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on March 20, 2019, and continued redeliberations of the proposed Accounting Standards Update (ASU), Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent).

The FASB affirmed its previous decision that an unused long-term financing arrangement in place at the balance sheet date should be disregarded in determining the classification of debt. The FASB also decided not to amend the disclosure requirements on the combined aggregate amount of maturities in Topic 470 as part of this project.

The FASB directed its staff to draft a revised proposed ASU for vote by written ballot, with a comment period of 45 days.

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
 
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Interim Reporting - SEC Staff Publishes Updated Compliance and Disclosure Interpretation

Summary - The staff in the Division of Corporation Finance (Corp Fin) of the SEC has issued an update to its Compliance and Disclosure Interpretation (C&DI), Exchange Act Forms. Corp Fin has added a new question 105.09 that provides guidance on the timing of compliance with the new requirement to present the changes in shareholders’ equity in the interim financial statements (either in a separate statement or footnote) in quarterly reports on Form 10-Q. This guidance is provided given that the SEC’s final rule that includes this requirement has been published but is not yet effective. The amendments are effective for all filings made 30 days after publication in the Federal Register, which has not yet occurred.

Corp Fin provided that in light of the anticipated timing of effectiveness of the amendments and expected proximity of effectiveness to the filing date for most filers’ quarterly reports, the SEC staff would not object if the filer’s first presentation of the changes in shareholders’ equity is included in its Form 10-Q for the quarter that begins after the effective date of the amendments. For example, assuming an effective date of October 25, a December 31 fiscal year-end filer could omit this disclosure from its September 30, 2018 Form 10-Q. Likewise, a June 30 fiscal year-end filer could omit this disclosure from its September 30, 2018 and December 31, 2018 Forms 10-Q; however, the staff would object if it did not provide the disclosures in its March 31, 2019 Form 10-Q.

For more information, click here.

© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
 
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Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant's Securities - Release No. 33-10526

Summary - The SEC proposed rule amendments to simplify and streamline the financial disclosure requirements applicable to registered debt offerings for guarantors and issuers of guaranteed securities, as well as for affiliates whose securities collateralize a registrant’s securities.

The proposed amendments to Rules 3-10 and 3-16 of Regulation S-X would focus disclosures on information that is material to investors given the specific facts and circumstances, make the disclosures easier to understand, and reduce the costs and burdens for registrants. By reducing compliance burdens, the proposed amendments should further encourage issuers to register debt offerings, and thus provide investors with additional protections that are not present in unregistered offerings.

Under the proposed amendments, Rule 3-10 would continue to permit the omission of separate financial statements of subsidiary issuers and guarantors when certain conditions are met and the parent company provides supplemental financial and non-financial disclosure about the subsidiary issuers and/or guarantors and the guarantees. Similar to the existing rule, the proposed rule would provide the conditions that must be met in order to omit separate subsidiary issuer or guarantor financial statements. Proposed Rule 13-01, contained in new Article 13 of Regulation S-X, would specify the disclosure requirements for the accompanying proposed disclosures.

The proposed amendments to the disclosure requirements in Rule 3-16 would be amended and relocated to proposed Rule 13-02, in new Article 13 of Regulation S-X. Among other things, the proposed amendments would:

  • Replace the existing requirement to provide separate financial statements for each affiliate whose securities are pledged as collateral with financial and non-financial disclosures about the affiliate(s) and the collateral arrangement as a supplement to the consolidated financial statements of the registrant that issues the collateralized security;
  • Permit the proposed financial and non-financial disclosures to be located in filings in the same manner as described above for the disclosures related to guarantors and guaranteed securities; and
  • Replace the requirement to provide disclosure only when the pledged securities meet or exceed a numerical threshold relative to the securities registered or being registered with a requirement to provide the proposed financial and non-financial disclosures in all cases, unless they are immaterial to holders of the collateralized security.

Comments on the proposal are due 60 days from publication in the Federal Register.

For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
 
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More Companies Qualify for Scaled-Disclosure with SEC Vote

A recent article published by the Journal of Accountancy detailed how the SEC voted in June 2018 to change the definition of "smaller reporting company" in an effort to expand the number of companies that qualify for scaled disclosure accommodations. Click here for more information on this new definition and what companies are affected by the vote. 

SEC Guidance on Cybersecurity Disclosures Discussed 

Summary - CCH Incorporated has published a new edition of the GAAP Update Service. This new edition discusses the SEC's interpretive guidance to assist public companies prepare disclosures about their cybersecurity risks and incidents. The views of the Commission included in this interpretive release reinforce and expand on guidance from the SEC staff published in 2011. 
For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Commission Statement and Guidance on Public Company Cybersecurity Disclosures - Release No. 33-10459

Summary - The SEC unanimously approved a statement and interpretive guidance to assist public companies in preparing disclosures about cybersecurity risks and incidents. SEC Chairman Jay Clayton indicated that "In today's environment, cybersecurity is critical to the operations of companies and our markets. Companies increasingly rely on and are exposed to digital technology as they conduct their business operations and engage with their customers, business partners, and other constituencies. This reliance on and exposure to our digitally-connected world presents ongoing risks and threats of cybersecurity incidents for all companies, including public companies regulated by the Commission. Public companies must stay focused on these issues and take all required action to inform investors about material cybersecurity risks and incidents in a timely fashion."
 
The interpretive guidance provides the SEC's views about public companies' disclosure obligations under existing law with respect to matters involving cybersecurity risk and incidents. It also addresses the importance of cybersecurity policies and procedures and the application of disclosure controls and procedures, insider trading prohibitions, and Regulation FD and selective disclosure prohibitions in the cybersecurity context. The SEC indicates that the SEC staff, through its Division of Corporation Finance filing review process, continues to monitor cybersecurity disclosures carefully.
 
The interpretive guidance is effective upon publication in the Federal Register.
For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

SEC Staff Updates Compliance and Disclosure Interpretation

Summary - The staff in the Division of Corporation Finance (Corp Fin) of the SEC has updated its Compliance and Disclosure Interpretation (C&DI), Securities Act Rules. This C&DI provides Corp Fin's interpretations of the rules adopted under the Securities Act of 1933.
 
Corp Fin has added new question 271.25 that provides guidance on the exemption for offers and sales of securities pursuant to certain compensatory benefit plans and contracts relating to compensation. Specifically, Corp Fin provides guidance to companies having concerns when satisfying their Rule 701(e) delivery obligations electronically about the potential disclosure of sensitive company information. Standard electronic safeguards, such as user-specific login requirements and related measures, are permissible. Corp Fin cautions that the "use of a particular electronic disclosure medium either alone or in combination with other safeguards, such as the use of dedicated physical disclosure rooms that house the medium used to convey the information required to be disclosed, should not be so burdensome that intended recipients cannot effectively access the required disclosures."
For more information, click here.
 
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Commission Guidance on Pay Ratio Disclosure - SEC Release No. 33-10415

Summary - The SEC has approved interpretive guidance to assist companies in their efforts to comply with the pay ratio disclosure requirement mandated by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Under the SEC's rule implementing the pay ratio requirement, companies are required to begin making pay ratio disclosures in early 2018. The SEC's guidance:

  • States the SEC's views on the use of reasonable estimates, assumptions and methodologies, and statistical sampling permitted by the rule;
  • Clarifies that a company may use appropriate existing internal records, such as tax or payroll records, in determinations about the inclusion of non-U.S. employees and in identifying the median employee; and
  • Provides guidance as to when a company may use widely recognized tests to determine whether its workers are employees for purposes of the rule.

For more information, click here.

© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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Securities Act Rules - SEC Staff Updates Compliance and Disclosure Interpretation

Summary - The staff in the Division of Corporation Finance (Corp Fin) of the SEC has updated its Compliance and Disclosure Interpretation (C&DI), Securities Act Rules. This C&DI provides Corp Fin interpretations of the rules adopted under the Securities Act of 1933.

The SEC staff has added new questions 182.21-182.23 to the C&DI. The new guidance provides information on offerings under Regulation A on Form 8-A. 

For more information, click here.

© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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SEC Staff Interpretations - SEC Staff Updates Compliance and Disclosure Interpretation

Summary - The staff in the Division of Corporation Finance (Corp Fin) of the SEC has updated the following Compliance and Disclosure Interpretations (C&DIs):

  • Regulation S-K; and
  • Securities Act Rules

These C&DIs provide Corp Fin interpretations of rules adopted under Regulation S-K and the Securities Act of 1933. Corp Fin has updated the Regulation S-K C&DI to revise Question 128C.01, withdraw Question 128C.05, and add new Question 128C.06. These updates provide guidance on the pay ratio disclosure rule.

Corp Fin has updated its Securities Act Rules C&DI to update guidance throughout the following sections:

  • 141 (intrastate offers and sales);
  • 254-258 (Regulation D);
  • 260 (exemption for limited offers and sales); and
  • 541 (intrastate offers and sales).

For more information, click here.

© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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Disclosure of Order Handling Information

Summary  - The SEC has issued for public comment a proposed rule, Disclosure of Order Handling Information. This proposal would amend Rules 600 and 606 of Regulation National Market System ("Regulation NMS") under the Securities Exchange Act of 1934 ("Exchange Act") to require additional disclosures by broker-dealers to customers about the routing of their orders. Specifically, with respect to institutional orders, the SEC is proposing to amend Rule 606 of Regulation NMS to require a broker-dealer, upon request of its customer, to provide specific disclosures related to the routing and execution of the customer's institutional orders for the prior six months. The SEC also is proposing to amend Rule 606 of Regulation NMS to require a broker-dealer to make publicly available aggregated information with respect to its handling of customers' institutional orders for each calendar quarter. With respect to retail orders, the SEC is proposing to make targeted enhancements to current order routing disclosures under Rule 606 by requiring limit order information to be broken down into marketable and non-marketable categories, requiring the disclosure of the net aggregate amount of any payment for order flow received, payment from any profit-sharing relationship received, transaction fees paid, and transaction rebates received by a broker-dealer from certain venues, requiring broker-dealers to describe any terms of payment for order flow arrangements and profit-sharing relationships with certain venues that may influence their order routing decisions, and eliminating the requirement to divide retail order routing information by listing market. In connection with these new requirements, the Commission is proposing to amend Rule 600 of Regulation NMS to include a number of newly defined terms which are used in the proposed amendments to Rule 606. The SEC is also proposing to amend Rules 605 and 606 of Regulation NMS to require that the public order execution and order routing reports be kept publicly available for a period of three years and to make conforming changes to Rule 607.
 
Comments on the proposal are due 60 days from publication in the Federal Register. 
 
For more information, click here .
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

SEC3Request for Comment on Subpart 400 of Regulation S-K Disclosure Requirements Relating to Management, Certain Security Holders and Corporate Governance Matters

Summary  - The SEC announced that it is seeking public comment on disclosure requirements in Subpart 400 of Regulation S-K, including those relating to management, certain security holders, and corporate governance matters.
 
The request for comment is part of the Disclosure Effectiveness Initiative, which is a broad-based staff review of the disclosure requirements and the presentation and delivery of the disclosures. The request for comment also will inform the Commission's study on Regulation S-K, which is required by the Fixing America's Surface Transportation (FAST) Act.
The public comment period will remain open for 60 days following publication of the comment request in the Federal Register.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Disclosure Update and Simplification

Summary - The SEC voted unanimously (3-0) to issue proposed amendments for public comment to address redundant, duplicative, overlapping, outdated, or superseded disclosure requirements. Chair White indicated that these proposed amendments are a modest, but important step in the overall ongoing efforts of the SEC and its staff to review existing SEC disclosure requirements. The SEC has included specific proposed technical amendments to delete redundant or duplicative disclosures requirements. In addition, the SEC seeks public comment on certain disclosures that may be overlapping with other already required disclosures or are outdated. The SEC staff indicated that it believes that the disclosure changes proposed would not significantly change the information currently being provided to investors. However, the SEC staff is interested in hearing from interested groups, including feedback on those cases where current disclosures would move to other places within an SEC filing and whether such movement changes the prominence of that disclosure. The SEC staff indicated that the changes in the proposal would primarily impact public companies, including Foreign Private Issuers, but that it would also impact other SEC regulated entities, including broker-dealers and investment companies.
 
Comments on the proposal are due 60 days from publication in the Federal Register.
For more information, click  here.
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Request for Comment on the Effectiveness of Financial Disclosures About Entities Other than the Registrant 

Summary - The SEC has published a request for comment on the effectiveness of financial disclosure requirements in Regulation S-X. Regulation S-X contains disclosure requirements on the form and content of financial statements to be included in filings with the SEC. The request for comment focuses on the specific requirements for the form and content of financial disclosures that companies must file with the SEC about acquired businesses, affiliated entities, and guarantors and issuers of guaranteed securities. Comments are requested within 60 days from publication of the request for comment in the Federal Register.

In this request for comment, the SEC seeks public comment on the following specific rules under Regulation S-X, along with certain related requirements:
  • Rule 3-05, Financial Statements of Businesses Acquired or to be Acquired;
  • Rule 3-09, Separate Financial Statements of Subsidiaries Not Consolidated and 50 Percent or Less Owned Persons;
  • Rule 3-10, Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered; and
  • Rule 3-16, Financial Statements of Affiliates Whose Securities Collateralize an Issue Registered or Being Registered.
As the request for comment provides, the SEC "seeks to better understand how well these requirements, some of which have remained largely the same for many years, are informing investors and we are soliciting comment on how investors use the disclosures to make investment and voting decisions. We are also interested in learning about any challenges that registrants face in preparing and providing the required disclosures." The SEC also indicates that it is "interested in potential changes to these requirements that could enhance the information provided to investors and promote efficiency, competition, and capital formation."
The request for comment is part of the Disclosure Effectiveness Initiative, which is a broad-based SEC staff review of the disclosure requirements and the presentation and delivery of the disclosures. As part of the initiative, the staff in the SEC's Division of Corporation Finance is reviewing the disclosure requirements in Regulation S-K and Regulation S-X, which provides requirements for financial statements, and is considering ways to improve the disclosure regime for the benefit of both companies and investors. The goal is to comprehensively review the requirements and make recommendations on how to update them to facilitate timely, material disclosure by companies and shareholders' access to that information. Initially, the review will focus on the business and financial disclosures required by periodic and current reports, Forms 10-K, 10-Q, and 8-K. Subsequent phases of the project will include compensation and governance information included in proxy statements.
For more information, click here.
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Possible Revisions to Audit Committee Disclosures

Summary - The SEC has issued for public comment a concept release on current audit committee disclosure requirements that focuses on the committee's oversight of independent auditors. According to the SEC, it is interested in receiving information about the audit committee and auditor relationship and whether improvements can be made to enhance the information provided to investors about the audit committee's responsibilities and activities.
The concept release notes that some "have expressed a view that the Commission's disclosure rules for this area may not result in disclosures about audit committees and their activities that are sufficient to help investors understand and evaluate audit committee performance, which may in turn inform those investors' investment or voting decisions." The majority of audit committee disclosure requirements can be found in Item 407 of Regulation S-K and were adopted in 1999. The SEC indicates since that time "there have been significant changes in the role and responsibilities of audit committees arising out of, among other things, the Sarbanes-Oxley Act of 2002, enhanced listing requirements for audit committees, enhanced requirements for auditor communications with the audit committee arising out of the rules of the PCAOB, and changes in practice, both domestically and internationally."
Comments on the concept release are due 60 days from publication in the Federal Register.
For more information, click here.
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Business and Financial Disclosure Required by Regulation S-K 

Summary - The SEC has voted to publish a concept release discussing and seeking public comment on modernizing certain business and financial disclosure requirements in Regulation S-K. The Commission is interested in receiving input on whether the disclosure requirements continue to elicit the information that investors need for investment and voting decisions and how registrants can most effectively present the information. The Commission is also seeking comment on the costs and benefits of the disclosure requirements for companies and investors.
The request for comment is part of the Disclosure Effectiveness Initiative, which is a broad-based staff review of the requirements, and the presentation and delivery of disclosures that companies make to investors.
In addition to discussing and seeking input on the disclosure requirements for business and financial information in Regulation S-K, the concept release explores how the Commission could improve the readability and navigability of company disclosures. The Commission invites comment on various formats used to present information, such as tables and structured data, as well as different tools used to deliver disclosure, including cross-referencing, incorporation by reference, hyperlinks and company websites.
The public comment period will remain open for 90 days following publication of the concept release in the Federal Register.
For more information, click here.
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Pay Ratio Disclosure

Summary -  The SEC adopted a rule requiring public companies to disclose the ratio of the annual total compensation of the chief executive officer to the median of the annual total compensation of the company's employees as required by section 953(b) of the Dodd-Frank Act. The SEC indicated that it received over 287,000 comment letters on its pay ratio rules and has incorporated some of the concerns into the final rule.
SEC Chair Mary Jo White indicated that the rules provide additional company-specific information about important executive compensation practices, which shareholders now have a specific say on. The final rule does include provisions aimed at reducing the cost of compliance, including:
  • Flexibility in the methodology used to calculate the median employee, which can be based on the registrant's total employee population or a statistical sample;
  • The median employee must only be determined once every three years, unless significant changes would reasonably be expected to significantly change the median employee calculation;
  • The median employee can be determined on any date within the last three months of the registrant's fiscal year;
  • Non-US employees can be excluded from the calculation if it would violate foreign data privacy laws to obtain certain information; and
  • Companies can exclude up to 5% of its overseas workers from its pay ratio calculation.
The final rule does require companies to calculate the median employee using all employees, including full-time, part-time, and seasonal employees.
The pay ratio disclosure rule does not apply to certain registrants, including emerging growth companies, smaller reporting companies, and foreign private issuers.
For more information, click here.
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Simplification of Disclosure Requirements for Emerging Growth Companies and Forward Incorporation by Reference on Form S-1 for Smaller Reporting Companies

Summary -  The SEC has issued an Interim Final Rule, Simplification of Disclosure Requirements for Emerging Growth Companies and Forward Incorporation by Reference on Form S-1 for Smaller Reporting Companies.
The SEC is adopting interim final amendments to its rules and forms to implement Sections 71003 and 84001 of the Fixing America's Surface Transportation ("FAST") Act, which require that the SEC revise Forms S-1 and F-1 to permit emerging growth companies to omit financial information for certain historical periods and revise Form S-1 to permit forward incorporation by reference for smaller reporting companies.
Section 71003 of the FAST Act amends Section 102 of the Jumpstart Our Business Startups ("JOBS") Act to allow an emerging growth company that is filing a registration statement (or submitting a draft registration statement for confidential review) under Section 6 of the Securities Act on Form S-1 or Form F-1 to omit financial information for historical periods otherwise required by Regulation S-X. The company must reasonably believe the omitted information will not be required to be included in the filing at the time of the contemplated offering and the issuer must amend the registration statement prior to distributing a preliminary prospectus to include all financial information required by Regulation S-X at the time of the amendment.
Section 84001 of the FAST Act requires the SEC to revise Form S-1 to permit a smaller reporting company to incorporate by reference into its registration statement any documents filed by the issuer subsequent to the effective date of the registration statement. The SEC added a new paragraph to Item 12 of Form S-1 to implement Section 84001.
This interim rule is effective upon publication in the Federal Register. Comments on the interim final rules can be submitted on or before 30 days after publication in the Federal Register.
For more information, click here.
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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