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March 26, 2019

Firms defend quarterly reporting despite Trump’s urging of the SEC to investigate benefits of semi-annual reports

By Joe Pickard

A number of firms have defended the benefits of quarterly reporting, following a tweet by President Trump in August which called the US’ Securities and Exchange Commission (SEC) to investigate the benefits of moving from quarterly reporting to semi-annual reporting.

Following the initial tweet by Trump, which claimed semi-annual reports would ‘allow greater flexibility & save money’, the SEC launched an invitation for comment from various stakeholders to provide opinions on the way the Commission can “enhance, or at a minimum maintain, the investor protection attributes of periodic disclosures while reducing administrative and other burdens on reporting companies associated with quarterly reporting.”

EY US urged the SEC to exercise caution, due to the potentially ‘far-reaching implications’ of changing a fundamental reporting process, by expanding its outreach efforts beyond evaluating written comments to include opinions of other stakeholders such as investors.

The Big Four Firm said that its general belief is that the ‘quarterly reporting process functions effectively but could benefit from targeted improvements that would reduce the compliance burden on companies while maintaining investor protection’.

The firm showed its support for retaining quarterly reporting for all domestic registrants, apart from possibly a few exceptions, due to a belief it increases transparency and due to its contribution in making the US public capital markets ‘so successful’.

Deloitte US described the SEC disclosure regime as the ‘bedrock’ on which the US capital markets are built and therefore believe it is important for ‘at least quarterly’ reporting to take place.

From a mid-tier viewpoint, BDO US said it believes there are ‘substantial benefits to investors, registrants, and auditors from the existing periodic reporting system’.

The firm said that benefits include quality and consistency of financial reporting, greater audit quality, and internal control benefits.

Despite support for retaining quarterly reporting, a number of firms expressed the view that disclosures in quarterly reports can be extensive.

BDO noted that they can include a significant amount of detail that may not be materially different from information reported in the most recent annual report which may make discerning the key highlights for the quarter more difficult.

Similarly, RSM US suggested that to ease some of the burden of reporting, the SEC could consider removing certain disclosure requirements that are duplicative with annual disclosures or are not material to investors.

The IAB has contacted a number of firms and will update this article when comments are received.

 

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