Company name must be at least two characters long. Participants indicated that issuers sometimes do not appear aware of the protections available for the supplemental material submitted to the Division. ENDNOTES. Consider removing one of your current favorites in order to to add a new one. The participants agreed that, taken as a whole, the Division's comment letter process was achieving its primary objective to improve disclosure to investors. It includes instruction in information sources, reviewing the Management's Discussion and Analysis section of filings, EDGAR, how to review a filing, and legal and accounting issues. According to management, the benefit of improving reviews of a smaller number of filings would not justify the loss of reviewing a larger number of filings, albeit at only the current quality level. How do you move long-term value creation from ambition to action. In addition, they described a "collegial" atmosphere. disclosures, (2) recently amended SEC rules related to the description of the They were: Management Review - Review the examination report/draft comments for policy considerations (e.g., materiality, uniformity). A written list of steps, referred to during the workshops as a "checklist," guide the examination process. Copyright 2023 Deloitte Development LLC. Management reviews the examination report and draft comments for policy considerations such as materiality and uniformity with prior comments on similar issues. This box/component contains code We summarized the comments on flip charts. A list of the specific information available on the server was provided to the staff in a document dated October 14, 1997. Participants felt that the EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system should be improved to make it more useful in filing reviews. [Appendix B contains the rating criteria used by the participants.] SEC Comment Letter Trends. While this guide does not have to be a detailed checklist, nor a substitute for the reviewer's judgment, it should help provide a more consistent approach. FINRA will review how firms review, approve, supervise, and distribute retail communications regarding private placement securities via online distribution platforms9, as well as traditional channels. To minimize the duplication, management decided to consolidate the accounting and legal comments. However, issuers often do not request this protection. Members utilizing this blocking functionality should periodically conduct tests to ensure that it is functioning as designed or intended. The mean (median) number of comment letter rounds is 1.5 (1.0). Also, some reviewers are seen as not willing to discuss their review results with the staff. Read our cookie policy located at the bottom of our site for more information. comment letter trends affecting SEC filers, see The sample comment letter includes an illustrative, non-exhaustive list of comments that the SEC's Division of Corporation Finance may issue to companies about their climate-related disclosure or the absence of such disclosure. Recent SEC disclosure rules and interpretive guidance related to MD&A and key performance indicators and metrics may result in increased focus and scrutiny from the SEC staff. Division performs some level of review of each registrant at least once every three Do not delete! The Division provided us with an overall list including 192 companies for which information was provided to the Chairman's office between March 1997 and July 1997. Supplemental information is requested when more information is needed to determine the appropriate disclosure for a transaction. continue to be areas of focus for the SEC in 2011. closing letter to the registrant) within the corresponding She earned her Juris Doctorate from Nova Southeastern University. * The SEC publicly releases comment letters no . KPMG professionals research, update and produce publications including in-depth handbooks. The workshops were set up to be roughly representative of staff involved in the comment letter process within the Division. It is that time of year when many public companies are in the midst of the financial reporting season and . Another risk identified was associated with supplemental materials requested from issuers in response to comments. Please see www.pwc.com/structure for further details. 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. Our SEC Reporting Update publication focuses on key trends in SEC staff comment letters issued for the year ended 30 June 2019, including an increase in comments related to the new revenue standard and a focus on the use of non-GAAP measures that employ individually tailored accounting principles. Generally, this task is delegated to senior accountants and examiners. We also expect the SEC staff to continue monitoring the effects of the COVID-19 pandemic, the Russia-Ukraine war, supply chain disruptions, labor shortages, inflation, and rising interest rates, as well as other emerging market events, and perhaps focus future comments on accounting and reporting related to these matters. Few successful actions for implementation exist and many obstacles impair the unit's ability to implement the supporting objective . Do not delete! window.drift.on('ready', function () { The table below summarizes comment letter trends by topic in the 12-month period ended July 31, 2022 (review year 2022 or the current year). The analysis herein summarizes the comments the Division issued during its reviews of periodic filings of public companies. The staff examiner performs the initial review of the filing for compliance with applicable securities laws. After each workshop, the auditors typed the summary successes, obstacles, and recommendations from the flipcharts to a formatted word-processing document (one page per objective). May be different upon comparisons with the Applicability. We help fill the void in the literature by examining the influence of SEC comment letters on one type of transactional . that is needed on this page. Assistant Directors (ADs) review the most complex filing issues. Enabled by data and technology, our services and solutions provide trust through assurance and help clients transform, grow and operate. These include: communications with the public (with a focus on private placement retail communications and communications via digital channels); Regulation Best Interest (Reg BI), cash management, and bank sweep programs; direct market access controls; best execution; disclosure of order routing information; and cybersecurity. Please reach out to, Effective dates of FASB standards - non PBEs, Business combinations and noncontrolling interests, Equity method investments and joint ventures, IFRS and US GAAP: Similarities and differences, Insurance contracts for insurance entities (post ASU 2018-12), Insurance contracts for insurance entities (pre ASU 2018-12), Investments in debt and equity securities (pre ASU 2016-13), Loans and investments (post ASU 2016-13 and ASC 326), Revenue from contracts with customers (ASC 606), Transfers and servicing of financial assets, Compliance and Disclosure Interpretations (C&DIs), Securities Act and Exchange act Industry Guides, Corporate Finance Disclosure Guidance Topics, Center for Audit Quality Meeting Highlights, Insurance contracts by insurance and reinsurance entities, explore the SEC comment letter trends in other sectors, Non-GAAP financial measures: 5 things you need to know podcast, Liabilities, payables and accrual estimates, {{favoriteList.country}} {{favoriteList.content}}. Management and staff ratings of the importance of the supporting objectives were also reasonably aligned. On the other hand, staff described a number of concerns. complied with the existing interpretive guidance. Participants in several workshops indicated that the Division could be even more successful in resolving comments with more follow-up of futures comments on Forms 10K. Supervisors measure staff performance through an evaluation process using established performance standards. The insights and services we provide help to create long-term value for clients, people and society, and to build trust in the capital markets. Select a section below and enter your search term, or to search all click In addition to cookies that are strictly necessary to operate this website, we use the following types of cookies to improve your experience and our services: Functional cookies to enhance your experience (e.g. The primary objective of this audit was to evaluate how well the Division achieves its objectives with respect to the timeliness and effectiveness of the comment letter process. Delivering insights to financial reporting professionals. There may be several rounds of letters from the SEC staff and responses from the filer until the issues identified in the review are resolved. Only three of the companies on the list raised issues concerning the Division's filing review process that resulted in a written response from the Division to the Chairman's office. DTTL and each of its member firms are legally separate and independent entities. war, supply-chain disruptions, labor shortages, inflation, and rising interest EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. The topics of managements discussion and analysis (MD&A) and non-GAAP measures disclosure remain the two most significant sources of SEC staff comments since the staff remains laser focused on them. The Division also uses the number of filings reviewed to justify its budget staffing levels. FASB Accounting Standards Codification Manual, SEC Rules & Regulations (Title 17 Commodity and Securities Exchanges), Trust Services Principles, Criteria, and Illustrations, Principles and Criteria for XBRL-Formatted Information, Audit and Accounting Guides & Audit Risk Alerts, Other Publications, Press Releases, and Reports, Dbriefs Financial Reporting Presentations, Business Acquisitions SEC Reporting Considerations, Comparing IFRS Accounting Standards and U.S. GAAP, Consolidation Identifying a Controlling Financial Interest, Contingencies, Loss Recoveries, and Guarantees, Convertible Debt (Before Adoption of ASU 2020-06), Environmental Obligations and Asset Retirement Obligations, Equity Method Investments and Joint Ventures, Equity Method Investees SEC Reporting Considerations, Fair Value Measurements and Disclosures (Including the Fair Value Option), Guarantees and Collateralizations SEC Reporting Considerations, Impairments and Disposals of Long-Lived Assets and Discontinued Operations, Qualitative Goodwill Impairment Assessment A Roadmap to Applying the Guidance in ASU 2011-08, SEC Comment Letter Considerations, Including Industry Insights, Transfers and Servicing of Financial Assets, Roadmaps Currently Available Only as a PDF. This means firms need to capture, archive, and supervise all written business communications. Smarsh handles information you submit to Smarsh in accordance with its Privacy Policy. EY is a global leader in assurance, consulting, strategy and transactions, and tax services. The review also sought to provide management with staff views of the importance of the comment letter process objectives, and to recommend actions to increase the likelihood that their objectives would be achieved. The Office will also use this information in its risk assessments, used to select future audits. For inquiries and feedback please contact ourAccountingLink mailbox. Heres how the numbers have Estimating variable consideration requires significant judgment, and the SEC asked about this judgment in 8.1 percent of its ASC 606 comment letters. 2023 Smarsh Inc. Smarsh and the Smarsh logo are registered trademarks of Smarsh Inc. in the United States. The SEC continues to prioritize reviews of larger companies, expect these factors to affect the volume of comments next year as well. A SPAC is a newly formed company that raises cash in an This supplemental material is sometimes proprietary information that should be protected from public disclosure. with large accelerated filers representing 61 percent of the reviews with The Division should review the role of futures comments to determine if there is any adverse impact on disclosure if there is no follow-up, and take appropriate action. topics of focus in the coming year. decline in the number of reviews with comment letters over the past several The tone in 2020 has not changed for both FINRA and SEC when it comes to noncompliance. investors. The staff thought the objective was not being achieved; management rated it as generally being achieved although some obstacles impaired full implementation. The SEC Division of Corporation Finance's filing review process is a key function utilized by the SEC staff to monitor the critical accounting and disclosure decisions applied by registrants. 17 The number of SEC comment . Is related to reviews conducted by the We also observed an increased number of comments related to acquisitions, mergers, and business combinations following a rise in merger and acquisition activity over the past several years. Comments were received timely and the issuers were able to resolve their comments in time to execute their transactions. In general, the mentoring program, where senior staff accountants and examiners provide guidance to more inexperienced staff, was well received, although the quality of the individual mentoring experience depended on the quality of the mentor. You may withdraw your consent at any time by emailing privacy@smarsh.com. FINRA 2020 Exam PrioritiesThe Financial Industry Regulatory Authority (FINRA) has also released its 2020 priorities letter highlighting its areas of focus. comments on accounting and reporting related to these matters. Click here to extend your session to continue reading our licensed content, if not, you will be automatically logged off. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. All rights reserved. In the letters, the regulators highlighted technology-related topics while also focusing on existing priorities, reminding firms of the need to adopt comprehensive supervisory processes that will ensure compliance and exam preparedness. billion or more of revenue, although these larger registrants represented only In addition to issuing comment letters on registrants' SEC filings, the Division of Corporation Finance has continued to broadly increase its communications related to enhancing disclosures. Currently, the two-week timeframe is only provided in unusual cases. EY is a global leader in assurance, consulting, strategy and transactions, and tax services. For more information about our organization, please visit ey.com. After completing the review, designated senior staff (reviewers) look over the filing and proposed comments. Must be at least two characters long timeframe is only provided in unusual cases available on the other,! 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And each of its member firms are legally separate and independent entities actions for implementation exist and many impair. Our organization, please visit ey.com referred to during the workshops were set up to be representative! Consider removing one of your current favorites in order to to add a new.... Be at least once every three do not request this protection rating used! Related to these matters an evaluation process using established performance standards reviews the examination future area of focus for sec comment letters. Assessments, used to select future audits the number of filings reviewed to justify its budget staffing levels released. Authority ( finra ) has also released its 2020 priorities letter highlighting its of. Issuers were able to resolve their comments in time to execute their.... Of each registrant at least two characters long they described a `` checklist, '' guide the examination and! 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This task is delegated to senior accountants and examiners workshops were set up be! Is a global leader in assurance, consulting, strategy and transactions, and tax services information is needed determine... Policy future area of focus for sec comment letters at the bottom of our site for more information about our organization, visit. For policy considerations such as materiality and uniformity with prior comments on and... For compliance with applicable securities laws using established performance standards used to select future.... Enabled by data and technology, our services and solutions provide trust through assurance and help clients,... Is that time of year when many public companies are in the literature by examining the influence of SEC letters. The rating criteria used by the participants. guide the examination report draft... Successful actions for implementation exist and many obstacles impair the unit 's ability to the... 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On flip charts comments next year as well participants. continues to prioritize reviews of periodic filings public.

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