On May 5, the SEC released proposed amendments that would allow Exchange Act reporting companies to file semiannual interim reports on a new Form 10-S in lieu of quarterly reports on Form 10-Q. Below is a summary of the key aspects of the proposal.
Overview
- The proposal would give all Exchange Act reporting companies subject to quarterly reporting the option to file one semiannual report and one annual report per fiscal year, rather than three quarterly reports and one annual report.
- A new Form 10-S would be created for semiannual reports. Form 10-S would require the same narrative disclosures and financial information as existing Form 10-Q, but would cover a six-month period rather than a fiscal quarter.
- The proposal is intended to reduce compliance costs and regulatory burden, provide flexibility, and encourage more companies to go and remain public.
Election Mechanics
- Companies would elect semiannual reporting by checking a box on the cover page of their annual report on Form 10-K. Leaving the box unchecked would default the company to quarterly reporting.
- The election would be made annually and could not be changed mid-fiscal year. Companies would be committed to the chosen reporting frequency for the remainder of that fiscal year.
- Companies that have not yet filed Exchange Act reports (e.g., IPO registrants) would make an initial election by checking the box on the cover page of their Securities Act or Exchange Act registration statement (Forms S-1, S-3, S-4, S-11, or Form 10).
- A company that inadvertently marks or fails to mark the checkbox may amend its Form 10-K to correct the error, provided the amendment is filed no later than the due date of the first Form 10-Q for the applicable fiscal year.
Form 10-S Content and Filing Deadlines
- Form 10-S would require the same disclosures as Form 10-Q, including MD&A, market risk disclosures, disclosure controls and procedures, legal proceedings, material changes in risk factors, and officer certifications.
- Financial statements for the semiannual period would be required to be prepared in accordance with U.S. GAAP, reviewed (but not audited) by an independent public accountant, and data tagged in Inline XBRL.
- The filing deadline for Form 10-S would be 40 or 45 days after the end of the first semiannual period, depending on the company's filer status; the same deadlines that currently apply to Form 10-Q.
- The second semiannual period would be subsumed within the annual report on Form 10-K, similar to the current treatment of the fourth fiscal quarter.
- Scaled disclosure would remain available to smaller reporting companies on Form 10-S, as it is on Form 10-Q.
Regulation S-X Amendments and Age of Financial Statements
- The proposal includes proposed amendments to Rule 3-01 and 8-08 of Regulation S-X to facilitate semiannual reporting and to ensure that financial statements in registration statements filed by semiannual filers are not considered "stale" under existing rules built around a quarterly framework.
- The amendments would consolidate and simplify the existing age of financial statement requirements, including by folding Rule 3-12 into Rule 3-01.
Other Key Points
- The proposal is voluntary; companies that do not elect semiannual reporting would continue filing quarterly reports on Form 10-Q under the existing framework.
- Companies electing semiannual reporting may still voluntarily provide earnings announcements or other disclosures during the first or third quarter.
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