TheCorporateCounsel.net

This Barnes & Thornburg blog cites recent comments from Corp Fin Director Jim Moloney about how he’d rather see more staff resources devoted to listening to earnings calls than to reviewing routine S-3 filings. I bet that part of the reason for Director Moloney’s position is that earnings calls are often a target rich environment for staff comments.

That’s because companies too often make the mistake of addressing something in their earnings call without considering whether the topic is appropriately addressed in the corresponding Exchange Act filings. When that happens, the blog points out that you should expect to receive a comment like this from the staff reviewer:

We note your disclosure indicating that you manage your business on the basis of one reportable segment and unit. Based upon comments made by management during your February 10, 2025, earnings call, it appears that discrete financial information below the consolidated level is both available to and reviewed by management. Please tell us how you considered ASC 280-10-50 in determining your operating and reportable segments. To the extent that you have aggregated multiple operating segments into a single reportable segment, please also tell us your basis for doing so.

That hiccup resulted in the company on the receiving end of this comment having to prepare a detailed response (which the blog reprints). That’s something that undoubtedly required significant time and resources which I’m sure the company and its management team would have preferred to devote to, well, almost anything else.

The blog points out that in order to reduce the probability of these situations arising, companies should be sure to have the accounting team to assess the earnings calls’ prepared remarks for such potential issues.

If your CEO can be an unguided missile at times (perish the thought!), I’d also suggest that, if you don’t already, you should consider holding off filing your 10-K or 10-Q until after the earnings call. That way, if the CEO or others on the call wander a bit in their remarks, you’ll have the chance to add any necessary disclosure to your 10-Q or 10-K before you file it.

The blog offers up one more thing to chew on – it notes the trend of companies shortening their earnings calls by issuing prepared remarks in advance, and just using the call as a Q&A forum. The blog also provides some recent examples of public companies that have opted for this approach.

– John Jenkins