On August 17, 2018, the Securities and Exchange Commission adopted amendments to eliminate or modify certain disclosure requirements the SEC describes as redundant, overlapping, outdated or superseded in light of other SEC rules, U.S. GAAP or changes in the information environment.1 The changes affect several disclosure requirements in Regulations S-K and S-X and various SEC forms. While the amendments are numerous and technical in nature, set forth below are certain highlighted changes that will affect disclosures made in periodic reports and registration statements. The amendments will become effective beginning late September. Companies should update their disclosure practices prior to filing their first periodic reports or registration statements after the effective date of these changes.
- Description of Business (Item 101 of Regulation S-K). Registrants will no longer be required to provide in the "Business" section of a prospectus or periodic report: (i) disclosure of segment information, including restatement of prior periods and discussion of interim segment performance that may not be indicative of current or future performance (which is covered by U.S. GAAP), (ii) research and development spending (which is covered by U.S. GAAP and, if a material trend, in MD&A), (iii) geographic breakdown of revenues and assets (which, if material, should be covered in MD&A) and (iv) risks associated with foreign operations (which, if material, should be covered in the risk factors).
- Available Information (Item 101(e) of Regulation S-K). A registrant's internet address, if any, is now mandatory disclosure. Previously the rule "encouraged" disclosure. In addition, issuers will no longer be required to identify and provide a physical address for the SEC's Public Reference Room although the requirement to disclose the SEC's internet address was retained.
- Market Price Information (Item 201(a)(1) of Regulation S-K). Issuers will no longer be required to disclose high and low trading prices for their common equity in the last two years in prospectuses and annual reports. Instead, issuers will be required to disclose their trading symbols so that investors can find that information in other sources.
- Dividends (Item 201(c) of Regulation S-K). Issuers will no longer be required to state the amount and frequency of dividends in the body of the filing as such information will now be required pursuant to Rule 3-04 of Regulation S-X. Likewise, the amendments consolidate disclosure requirements pertaining to restrictions that currently, or are likely to, materially limit the issuer's ability to pay dividends on its common equity into a single requirement in Rule 4-08(e)(3) of Regulation S-X.
- Seasonality Disclosure in Interim Reports (Instruction 5 to Item 303(b) of Regulation S-K). MD&A will no longer require a discussion of the seasonal aspects of an issuer's business, except to the extent that the effects of seasonality are material.
- Ratio of Earnings to Fixed Charges (Item 503(d) and Item 601(b)(12) of Regulation S-K). The requirements to include a ratio of earnings to fixed charges and the corresponding calculation exhibit disclosure requirements have been deleted.
- Statement re Computation of Per Share Earnings (Item 601(b)(11) of Regulation S-K). The statement re computation of per share earnings exhibit disclosure requirement has been deleted.
1The adopting release is available at https://www.sec.gov/rules/final/2018/33-10532.pdf.
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