SEC Adopts Amendments to Simplify and Update Disclosure Requirements
August 29, 2018
On August 17, 2018, the Securities and Exchange Commission (SEC) announced amendments to certain disclosure requirements that it views as “duplicative, overlapping, or outdated in light of other Commission disclosure requirements, US generally accepted accounting principles (GAAP), or changes in the information environment.” These amendments were adopted as part of the SEC’s efforts to implement the Fixing America’s Surface Transportation Act. The formal adopting release is available here, and a “demonstration version” reflecting the text of the specific amendments is available here. The amendments are effective 30 days after publication in the federal register.
A summary of the more significant disclosure changes adopted by the SEC is provided here. These changes primarily impact Regulation S-K disclosure requirements in periodic reports and registration statements, and also include several Regulation S-X disclosure requirements related to financial statements and certain requirements specifically related to REITs.
In addition to these changes, the SEC also removed multiple SEC disclosure requirements that it views as redundant or duplicative of other existing SEC, GAAP, or IFRS disclosure requirements. The eliminated items primarily encompass SEC Regulation S-X disclosure requirements that duplicate existing GAAP disclosures required in the financial statement footnotes. As such, the removal of these additional requirements will not result in any practical change to current disclosures. Summaries of the additional amendments to remove redundant or duplicative disclosure requirements can be found on pages 29-35, 60-61, and 77 of the adopting release.
The SEC has deferred rulemaking on numerous other existing SEC disclosure requirements and has instead referred these items to the Financial Accounting Standards Board (FASB) to consider whether they should be incorporated into GAAP due to their significant overlap with existing GAAP requirements. The SEC has asked the FASB to complete this process and determine whether to add the referred disclosure items to the FASB’s technical standard-setting agenda within 18 months. The disclosure requirements referred to the FASB relate to, among other things:
- Foreign currency disclosures [Rule 3-20(d) of Regulation S-X];
- Repurchase and reverse repurchase agreements [Rule 4-08(m)(1) of Regulation S-X];
- Equity compensation plan disclosures [Rule 201(d) of Regulation S-K];
- Discounts on shares [Rule 4-07 of Regulation S-X];
- Income tax disclosures [Rule 4-08(h) of Regulation S-X]; and
- Major customers [Item 101(c)(1)(vii) and Item 101(h)(4)(vi) of Regulation S-K].
Additional disclosure items referred to the FASB for potential incorporation into GAAP are summarized on pages 93-97 of the adopting release.
As part of its amendments, the SEC also deleted certain disclosure requirements that have become obsolete due to the passage of time (e.g., outdated cross-references or transition dates) and cleaned-up various non-existent or incorrect references and typographical errors.
This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Shelly Heyduk, an O'Melveny partner licensed to practice law in California, Robert Plesnarski, an O'Melveny partner licensed to practice law in the District of Columbia and Pennsylvania, and Sarah J. Levesque, an O'Melveny counsel licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.
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