SEC Proposes Optional Semiannual Reporting Framework for Public Companies

Today, the Securities and Exchange Commission (the “SEC”) proposed a rule and form amendments that would allow public companies to file semiannual reports to meet their interim reporting obligations under Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) , as well as related amendments to certain financial statement requirements.

Generally, U.S. public companies are required to file quarterly reports on Form 10-Q, with certain exceptions for foreign private issuers and investment companies.  If adopted, the amendments would allow public companies to elect to file semiannual reports on new Form 10-S instead of quarterly reports on Form 10-Q.  Companies that elect semiannual reporting would file one semiannual report and one annual report for each fiscal year in lieu of three quarterly reports and one annual report.  Companies that do not choose to become semiannual filers would continue to file quarterly reports on Form 10-Q.  In his statement, Chair Atkins noted that, “[i]n determining a company’s reporting cadence, a company might consider factors such as the costs and management time of preparing quarterly reports versus semiannual reports, expectations of its investors, potential effects on its cost of capital, the stage of its business development, the nature of its business model, other avenues of disclosure including earnings calls and current reports on Form 8-K, and prospects of increased research coverage, all without undermining fundamental investor protections.”

New Form 10-S, as proposed, would require the same narrative disclosures and financial information as Form 10-Q but would cover a six-month period instead of a fiscal quarter.  The financial statements for a semiannual period would be required to be prepared in accordance with United States generally accepted accounting principles and reviewed by an auditor (but not required to be audited).  For semiannual filers, Form 10-S would be due 40 or 45 days, depending on the company’s filer status, after the end of the first semiannual period of the fiscal year.

Related proposed amendments to Regulation S-X would revise the rules governing financial statement requirements in periodic reports, registration statements, and proxy statements to accommodate the new framework.  Among other things, the amendments would update the requirements governing the age of financial statements so that registration statements filed by semiannual filers would not be deemed to contain “stale” financials.  The amendments would also consolidate and simplify the rules governing the age of financial statements into a single rule.  The proposal would also amend Exchange Act Rules 13a-10 and 15d-10, which govern the requirements for transition reports when a company changes its fiscal year, to account for the optional semiannual reporting framework. In addition, the proposal would make conforming technical amendments to various rules and forms that currently reference quarterly reporting.

The public comment period will remain open for 60 days after the date of publication of the proposing release in the Federal Register.  Read the SEC’s press release, fact sheet and proposing release.

Read our Legal Update.