July 17, 2017

Clayton Speech: Corp Fin Will Consider Your S-X Waiver Requests

SEC Chair Jay Clayton’s recent speech at the “Economic Club of New York” has received a lot of attention – it was his first as Chair – but this remark seems to have been overlooked:

My last point on capital formation is a reminder. There are circumstances in which the Commission’s reporting rules may require publicly traded companies to make disclosures that are burdensome to generate, but may not be material to the total mix of information available to investors. Under Rule 3-13 of Regulation S-X, issuers can request modifications to their financial reporting requirements in these situations. I want to encourage companies to consider whether such modifications may be helpful in connection with their capital raising activities and assure you that SEC staff is placing a high priority on responding with timely guidance.

I don’t want to read too much into this – but it’s the third time in the past month or so that Rule 3-13 waiver requests have been mentioned in Corp Fin guidance or in comments by senior SEC Staffers.

In addition to Jay’s remarks, this Deloitte memo notes that Corp Fin’s Chief Accountant – Mark Kronforst – discussed waiver requests at a recent conference, and “urged companies to discuss their facts and circumstances” with the Staff. The Staff’s willingness to consider these waiver requests was also recently noted in Corp Fin’s announcement that all IPO filers would be permitted to submit confidential draft registration statements.

There’s no suggestion in any of these comments that it’s somehow “open season” on Reg S-X’s requirements. Still, I think it’s fair to say that the SEC Chair is sending a message that Corp Fin is more open to dialogue about Rule 3-13 waivers than some might assume.

Revenue Recognition: FASB’s “Gift” to Retailers

Over at “MarketWatch,” Francine McKenna recently pointed out that implementation of FASB’s new revenue recognition standard could turn out to be a big gift to the bottom lines of some major retailers.  That’s because the new standard would change the way retailers recognize revenue from the unredeemed portion of company-issued gift cards.

This is known as “breakage revenue” – and companies have been recognizing it under various scenarios based on their own redemption experience. Under the new rule, companies will be required to spread breakage revenue over a gift card’s expected redemption period.  That’s good news for many retailers:

Most companies will be able to accelerate breakage revenue rather than holding on to it until the likelihood anyone cashes in the balance becomes remote or until the card expires. The accounting change will affect everyone who issues gift cards, from classic bricks-and-mortar grocery and fashion retailers to restaurants to Amazon and other online stores.

Tomorrow’s Webcast: “FCPA Considerations in M&A”

Tune in tomorrow for the webcast – “FCPA Considerations in M&A” – to hear Richards Kibbes’ Audrey Ingram, K&L Gates’ Vince Martinez and Schulte Roth’s Gary Stein discuss how to take the FCPA and other anti-corruption laws into account during M&A activities.

John Jenkins