US Securities and Exchange Commission (SEC) Chairman Mary Jo White directed the commission’s staff to develop recommendations for updating the rules for what a company must disclose in its public filings, according to an SEC news release.
The SEC staff issued a report to the US Congress on Friday recommending that the commission’s disclosure requirements be re-evaluated to ensure that investors are provided with meaningful, non-duplicative information.
Congress mandated the report in the Jumpstart Our Business Startups Act of 2012. The report offers an overview of SEC Regulation S-K, which governs public-company disclosures.
Disclosure effectiveness also has been a focus for accounting standard-setters inside and outside the US. An effort to improve the effectiveness of disclosures in notes to financial statements was rated the most important early-stage project on the US Financial Accounting Standards Board’s (FASB’s) agenda in a survey administered by the board’s primary advisory group earlier this year.
The International Accounting Standards Board also intends to create a framework for improved disclosures, and board Chairman Hans Hoogervorst warned in a recent speech that annual reports are in danger of becoming simply compliance documents rather than instruments of communication because of unnecessarily complex disclosures.
A call to action by UK Financial Reporting Council Chairman Roger Marshall in October urged companies to focus on relevant information and avoid boilerplate language in financial reports.
In the United States, the SEC’s Office of the Chief Accountant will co-ordinate with FASB to identify ways to improve effectiveness of disclosures and eliminate duplication.
Keith Higgins, director of the SEC’s Division of Corporation Finance, said in a statement that updating the SEC’s rules is just one step in improving company disclosures.
“For their part, companies should examine how they can improve the quality and effectiveness of their disclosures and how our rules can be improved to facilitate clear and effective communications to investors,” Higgins said. “Better disclosure benefits everyone in the marketplace.”
—Ken Tysiac (ktysiac@aicpa.org) is a CGMA Magazine senior editor.