September 23, 2015

Disclosure Effectiveness Efforts Underway

Preliminary results of a joint survey between Financial Executives Research Foundation (FERF) and EY reportedly reveal that the majority of companies are taking actions voluntarily to improve their disclosure effectiveness pending the outcome of Corp Fin’s Disclosure Effectiveness initiative. Based on the survey, 83% of companies are focused on changes to their annual and interim filings rather than proxy statements or earnings releases at this point.

Disclosure Effectiveness Voluntary Changes – Focal Points

– 79.50% Reducing redundancies/more cross-references
– 76.90% Eliminating outdated information
– 76.90% Eliminating immaterial information
– 30.80% Less narrative disclosures in favor of graphs, charts and infographics
– 17.90% Greater use of technology
– 15.40% Holistic change approach
– 5.10%  Other areas

The survey, which was launched in July, is planned to result in a report to be issued in late fall of this year. Stay tuned!

Access the comments submitted to Corp Fin to date on its Disclosure Effectiveness initiative here.

Form 10-K Word Counts Drop in 2014

FEI reports that word counts in the MD&As within the Form 10-Ks of the Fortune 50 – and footnotes – measurably decreased in 2014 compared to 2013. This is concurrent with the increased emphasis on improving disclosure effectiveness. Specifically, LogixData calculated 16,111 average words in 2014 – compared to 17,657 in 2013, which was up from 17,107 in 2012. However, it’s unclear at this point whether these reduced word counts equate to improved disclosure effectiveness.

Not surprisingly (at least from this lawyer’s point of view), participants in EY’s discussions on this topic last year cited litigation and compliance risks, competing disclosure objectives in accounting and SEC reporting standards, and the different needs of different investors as impediments to more effective disclosure.

More on “The Mentor Blog”

We continue to post new items daily on our blog – “The Mentor Blog” – for members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

– Tips for Building Your Board Pre-IPO
– Social Media & the Board
– DOJ Guidance: Internal Investigations & Other Charging Considerations
– DOJ Issues Cybersecurity Guidance
– Study: SOX 404 Penalizes Compliant Companies

– by Randi Val Morrison