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On August 17, 2018, the U.S. Securities and Exchange Commission (the “SEC”) adopted amendments1 to certain disclosure requirements that have become redundant, overlapping, outdated or superseded in light of other SEC disclosure requirements, current accounting principles and standards under U.S. GAAP, and changes in the way information is accessed. The amendments are intended to facilitate disclosure and simplify compliance without significantly altering the total mix of information provided to investors. These amendments are part of an initiative by the SEC’s Division of Corporation Finance to review disclosure requirements applicable to issuers in order to consider ways to improve the requirements for the benefit of both investors and issuers.
While the amendments are numerous, we highlight the following changes to Regulation S-K and certain of the SEC’s forms, which will affect an issuer’s annual and quarterly reporting, proxy statements and registration statements:
- Ratio of Earnings to Fixed Charges (Item 503(d) and Item 601(b)(12)). The SEC has removed the requirement to disclose the ratio of earning to fixed charges, including the pro forma ratio.
- SEC’s Public Reference Room and SEC Website (Item 101(e)). The SEC deleted the requirements to identify its Public Reference Room and disclose its physical address and phone number. The SEC retained the requirement to disclose the SEC’s Internet address with a statement that electronic SEC filings are available there.
- Issuer Website (Item 101(e)). The SEC will now require all issuers to disclose their Internet addresses, if they have one.
- Foreign Private Issuers (Form 20-F). The SEC deleted the requirement for foreign private issuers to provide exchange rate data when financial statements are prepared in a currency other than the U.S. dollar.
- Market Information for Issuer’s Common Equity (Item 201(a)(1)). The identification of trading markets for equity securities must now be accompanied by the trading symbols for such securities. The disclosure of high and low sale prices for each quarter in the two most recent fiscal years and subsequent interim periods, including the dividend history, is no longer required. Disclosure regarding restrictions on the ability to pay dividends on common equity has now been consolidated into Regulation S-X. Therefore, if included in the financial statements such restrictions no longer need to be disclosed in the body of the Form 10-K or other applicable filing.
- Description of Business (Item 101). The SEC has eliminated financial information about segments (similar disclosure will continue to be available in the notes to the financial statements), the R&D activities spending disclosure, financial information by geographic area (but, where material, it must be covered in the MD&A pursuant to Item 303(a)), and risks associated with foreign operations (but, where material, it should be covered in the risk factors).
The amendments will be effective 30 days from publication in the Federal Register.
1. Disclosure Update and Simplification, Release Nos. 33-10532; 34-83875; File No. S7-15-16