SEC Proposes Streamlining Disclosure Requirements
On 13 July 2016, the US Securities and Exchange Commission ("SEC") released a 318-page proposal setting out a number of technical amendments to disclosure requirements for SEC filers that it believes have become outdated or are identical or similar to overlapping requirements contained in other SEC rules, US generally accepted accounting principles ("US GAAP") or international financial reporting standards ("IFRS").
With respect to financial statement disclosures, the proposed relaxations relate to requirements in respect of foreign currency disclosure, consolidation, changes in issued debt, income tax rate reconciliation, related party transactions, material contingencies and earnings per share, among others.
With respect to qualitative disclosures, the proposal contemplates eliminating repetition of information that is disclosed both in the financial statements and management's discussion and analysis section, such as: segment financial information and performance, geographic areas of operation, foreign operations, seasonality and research and development.
The release is also soliciting comments on whether some disclosure requirements that overlap with US GAAP but require incremental information should be eliminated or referred to the Financial Accounting Standards Board for potential incorporation into US GAAP. These overlapping areas include financial statement disclosure; major product, service and customer disclosure; and legal proceedings disclosure.
The SEC proposes deletions of requirements that have become obsolete as a result of the passage of time or changes in the business environment, such as: deleting references to the SEC's Public Reference Room, replacing detailed disclosure requirements for most issuers on the trading of their stock with trading market and ticker, and deleting requirements relating to disclosure of readily available foreign exchange data
For IPOs by foreign private issuers, the changes would permit using annual financial statements that are older than 12 months but not older than 15 months without the need for a waiver.
While most of these changes are minor, changing the location of disclosure may affect its prominence for investors, or require auditor involvement if the new disclosure is contained in the financial statements. The public comment period expired on 3 October 2016. The SEC will consider the comments received in formulating a final rule.
Our related client publication is available at:
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
