On August 17, 2018, the US Securities and Exchange Commission (SEC) adopted a new release, Disclosure Update and Simplification. The included amendments are intended to simplify and update the SEC’s disclosure requirements and eliminate duplicative disclosures between the SEC rules and US generally accepted accounting principles.
The SEC also added new disclosure requirements related to interim financial statements. The amendments are part of the SEC’s effort to improve disclosure effectiveness and implement mandates included in the Fixing America’s Surface Transportation Act.
New Requirement for Interim Financial Statements
The amendments include a new requirement, which states that companies must present a reconciliation of changes in stockholders’ equity as a separate statement or footnote in interim financial statements. The SEC made this change by incorporating the requirements of Rule 3-04 of Regulation S-X in the SEC’s interim financial reporting rules.
The SEC introduced this modification to offset the impact of eliminating the requirements to disclose the frequency and amount of cash dividends for the two most recent fiscal years and any subsequent interim period.
Effective Date and Transition
The amendments will become effective 30 days after the final rule is published in the federal register.
On September 25, 2018, the SEC added Question 105.09 to its Compliance and Disclosure Interpretations (C&DI) applicable to Exchange Act Forms. The new section addresses questions about when filers are expected to comply with the new stockholders’ equity presentation requirement. The C&DI states that the staff wouldn’t object if a filer’s first presentation of the changes in stockholders’ equity is included in its Form 10-Q for the quarter that begins after the effective date of the amendments.
For example, assuming the effective date of the amendments is prior to the filing date of the third quarter 10-Q, a calendar year-end company could choose to provide the new disclosures beginning with either its Form 10-Q for September 30, 2018, or March 31, 2019.
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