The Securities and Exchange Commission (SEC)'s Disclosure Update and Simplification Rule has been published in the Federal Register, with an effective date for the amendment of November 5, 2018.
The amendments in the Rule are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. These amendments are part of an initiative by the Division of Corporation Finance to review disclosure requirements applicable to issuers to consider ways to improve the requirements for the benefit of investors and issuers.
The update includes amendments to certain disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, U.S. Generally Accepted Accounting Principles (U.S. GAAP), or changes in the information environment.
Incremental Disclosure Requirements
The update also includes referring certain Commission disclosure requirements that overlap with, but require information incremental to U.S. GAAP, to the Financial Accounting Standards Board (FASB) for potential incorporation into U.S. GAAP. An example of this is to amend Rule 3-04 of Regulation S-X to extend the annual disclosure requirement of changes in stockholders' equity, and the amount of dividends per share for each class of shares, to interim periods in the form of a reconciliation of the beginning balance to the ending balance for each period for which an income statement is required to be filed, with all significant reconciling items described by appropriate captions with contributions from and distribution to owners shown separately.
The amendments are effective for all filings made on or after November 5, 2018. As discussed in a recent SEC Staff Interpretation (C&DI 105.9), in light of the timing of effectiveness of the amendments and proximity of effectiveness to the filing date for most filers' quarterly reports, the 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, 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.
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Published on October 23, 2018