SEC Makes Significant 10-K/20-F Reporting ChangesBy
Having made changes to reporting requirements under Regulation S-X earlier in 2020, the U.S. Securities & Exchange Commission (SEC) made more significant changes to Items 301, 302, and 303 of Regulation S-K in November.
These changes go into effect 210 days after publication in the Federal Register, which means these rules won’t be mandatory for the 2020 annual reports on Forms 10-K or 20-F for companies with calendar fiscal year-end. The final rule was issued in “Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information,” Release No. 33-10890.
Cydney Posner, a special counsel in Cooley LLP’s public companies group, said in a blog post, “[S]ome of the proposed changes are fairly dramatic—such as eliminating selected financial data and the Table of Contractual Obligations…. Whether the changes result in more nuanced, analytical disclosure remains to be seen.”
The objective of the changes, however, isn’t necessarily to make financial reporting more nuanced but to enhance the focus of financial disclosures on material information for the benefit of investors, while simplifying compliance efforts for registrants. “Today’s rules will improve the quality and accessibility of the disclosure that companies provide their investors, including, importantly giving investors greater insight into the information management uses to monitor and manage the business,” then-SEC Chairman Jay Clayton said when the amendments were announced.
Commissioners Allison Herren Lee and Caroline A. Crenshaw voted against the amendments in part because of the elimination of the table of contractual obligations, which, according to their statement of dissent, “provides investors with critical insight into supply chain and risk management.” Supporters of the elimination argued the table is duplicative of information available elsewhere.
Among other things, the amendments simplify the requirements for Supplementary Financial Information, make changes to the requirements relating to liquidity and capital resources, eliminate the requirement for a separate off-balance-sheet arrangements discussion, eliminate the requirement for the tabular disclosure of contractual obligations, and provide registrants with more flexibility with respect to the presentation of results of operations for interim periods.