In August, the SEC released a final rule updating disclosure requirements. The overall objective of the changes was to reduce excessive, superseded and redundant disclosure. Buried in the amendment’s 300 pages, Disclosure Update and Simplification, was a new disclosure requirement:
- An analysis of changes in stockholders’ equity will now be required for the current and comparative quarter and year-to-date interim periods. Registrants will be required to provide an analysis of changes in each caption of stockholders’ equity and noncontrolling interests, which will need to be accompanied by dividends per share and in the aggregate for each class of shares.
The disclosure must be presented in the form of a reconciliation, either as a separate statement or in the footnotes. The amended rule will require companies to provide information on the dividends issued and the relationship the dividends have to stockholders’ equity in one place, which may help investors understand some of the strategic decisions made by management, such as dividend payout versus share buyback.
These changes are effective 30 days after publication in the Federal Register, so the amendments will be effective as of November 5, 2018. The Federal Register notification was delayed, so the SEC published an update that provides an extended transition period for the new disclosure. The SEC will not object to a registrant waiting to comply until its Form 10-Q for the quarter that begins after the effective date, i.e., a calendar year-end filer may omit the reconciliation from its September 30, 2018, 10-Q. Likewise, a registrant with a June 30 fiscal year-end may omit the reconciliation from its September 30, 2018, and December 31, 2018, 10-Qs. However, the SEC would object—in both examples—if the reconciliation were excluded from the March 31, 2019, 10-Q because the rule is effective before January 1, 2019.
BKD has prepared an article summarizing the most significant SEC eliminations, as well as recent disclosure relief efforts by the Financial Accounting Standards Board, New Disclosure Relief & Projects Underway. Registrants can apply the SEC rules’ amendments that eliminate disclosure requirements in any filing on or after the effective date.
BKD has prepared a library of BKD Thoughtware® on public company reporting. Visit our website to learn more. If you have questions about these changes, contact your BKD advisor.