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Print articleThe SEC Simplifies and Updates Disclosure Requirements
October, 2018 - Matthew Fry
On November 5, 2018, the amendments recently adopted by the Securities and Exchange Commission (the “SEC”) to update and simplify certain disclosure requirements will become effective. These disclosure simplification amendments were adopted pursuant to the FAST Act’s mandate to modernize and simplify the disclosure requirements of Regulation S-K and alter certain disclosure requirements that have become redundant, duplicative, overlapping, outdated or superseded as a result of other disclosure requirements. Although they are not intended to significantly alter the total mix of information disclosed to investors, the amendments will affect disclosure for a broad array of issuers. Depending upon the filing date, the amendments may impact reporting for the quarter ended September 30, 2018.
The full text of the final rule may be accessedhere, and the demonstration version reflecting the changes may be accessedhere.
The following table summarizes certain of the more significant amendments to Regulation S-K:
| Topic | Amendment |
| Description of Business (Item 101 of Regulation S-K) | |
| Segment InformationItem 101(b) of Regulation S-K | Segment financial information, restatement of prior periods when reportable segments change, and discussion of interim segment performance that may not be indicative of current or future operations are no longer required, as such information is already required pursuant to U.S. generally accepted accounting principles (“GAAP”). |
| Research and DevelopmentItems 101(c)(1)(xi) and 101(h)(4)(x) of Regulation S-K | The requirement to disclose amounts spent on research and development activities in a discussion on business is deleted because similar disclosure is already required pursuant to GAAP. |
| Geographic AreaItem 101(d) of Regulation S-K | The requirement to disclose financial information by geographic area is deleted because similar disclosure is already required under GAAP. |
| MD&A (Item 303 of Regulation S-K) | |
| Geographic AreaItem 303(a) of Regulation S-K | Discussion of trends and uncertainties is amended to require disclosure by geographic area. |
| SeasonalityInstruction 5 to Item 303(b) of Regulation S-K | A discussion of the seasonal aspects to the business that materially affected the business is no longer required in interim reports due to overlap with GAAP and other items of Regulation S-K. |
| Market Information Concerning Common Equity (Item 201 of Regulation S-K) | |
| Market PricingItem 201(a)(1) of Regulation S-K | Issuers must disclose the trading symbol for their common equity and their principal trading market. Issuers with an established trading market for their common equity are no longer required to provide certain public market price disclosures due to the readily available nature of such information. |
| Warrants, Rights, and Convertible InstrumentsItem 201(a)(2)(i) of Regulation S-K | Disclosure of the amount of common equity subject to outstanding options warrants or convertible securities is no longer required because similar disclosure is already required under GAAP. |
| DividendsItem 201(c)(1) of Regulation S-K | Disclosure of the frequency and amount of cash dividends declared is no longer required due to duplicative requirements under Regulation S-X.Disclosure of restrictions that materially limit the ability to pay dividends is no longer required under Regulation S-K and is now required under Regulation S-X. |
| Certain Other Items | |
| Ratio of Earnings to Fixed ChargesItem 503(d) of Regulation S-K | The requirement for certain issuers, including those with registered debt securities and preference equity securities, to disclose historical and pro forma ratios of earnings to fixed charges and preference dividends to earnings is deleted because such information is generally available to investors through other means and similar disclosure concerning an offering’s effect on certain fixed charges is already required under Item 504 of Regulation S-K. |
| Where You Can Find More Information and WebsiteItem 101(e)(2) and (e)(3) of Regulation S-K and Certain Forms | The requirement to identify the Public Reference Room and its address and phone number is deleted, but issuers are required to disclose their website address, if available. |
| Exhibits (Item 601 of Regulation S-K) | |
| Item 601(b) of Regulation S-K | The following exhibits are no longer required:
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The final rules also make numerous changes to financial reporting requirements in Regulation S-X to delete or amend certain disclosure requirements, in large part due to redundancy in combination with GAAP, and will require the presentation of changes in shareholders’ equity in interim financial statements. The SEC also referred a number of disclosure requirements to the Financial Accounting Standards Board for potential incorporation into GAAP.
According toguidancefrom the SEC staff, the amendments will become effective for all filings made on or after November 5, 2018. Issuers should determine in advance when they plan to file their quarterly reports on Form 10-Q for the quarter ended September 30, 2018. Issuers filing on or after November 5, 2018, should update their quarterly reports on Form 10-Q for the disclosure simplification amendments and, per the staff’s guidance, may consider deferring presentation of changes in shareholders’ equity in their interim financial statements until their next Form 10-Q.
For additional information, including other changes to reporting requirements mandated by the final rule, please contact any member of Haynes and Boone’sCapital Markets and Securities Practice Group.
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