This article from Nasdaq’s Chief Economist & Director of Economic Research attempted to answer how much mandatory quarterly reporting costs public companies. They looked at the total cost of SEC reporting, including audit & consulting fees plus systems and technology expenses:

Experts estimate that total annual SEC compliance costs, including audit costs, range from below $0.5 million for small companies to $5+ million for large companies – averaging roughly $2.3 million per company. For all U.S. companies, that adds to roughly $9 billion a year.

Then, by comparing disclosure requirements and page lengths of various forms (10-Ks are only twice as long as 10-Qs!) and considering FPI disclosures and 8-K requirements, they estimated that moving to semi-annual reporting would reduce SEC reporting costs by half and “add roughly $45 billion to U.S. market valuations.”

Corp Fin Director Jim Moloney also addressed the possible shift away from mandatory quarterly reporting at SRI, noting that it may be voluntary, with companies being able to choose between one or three 10-Qs. He said life sciences companies with one product candidate, for example, may not feel the need to put so much information into the market since investors are focused on limited data points — like remaining cash, trial data and regulatory approvals. And for companies that file one 10-Q, Form 8-K might be used for flash numbers to allow stock buybacks, etc.

One big, open question seems to be how much information and engagement the street expects for non-10-Q quarters. If companies also forego earnings calls for those quarters, that would significantly reduce the burden on financial reporting teams and on public company CEOs & CFOs.

– Meredith Ervine