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Are you responsible for preparing SEC filings for a publicly traded company?

posted December 30, 2015

Form 10Q Disclosure Requirements – November 7, 2015

Most people in this position are desperately seeking ways to reduce the burden associated with preparing these filings. As auditors of public entities, the most common issue we see is providing too much disclosure! The assumption is that the reader of the 10Q has the prior annual audited financial statements and the previously filed 10K side by side when reading the 10Q. Only significant changes need to be addressed in the footnotes. These would include:

  • New accounting policies required based on new transaction types or commercial activity such as issuing share-based compensation for the first time
  • Significant transactions or activity effecting line items in the financial statements
  • Discontinued operations or dispositions of significant assets or lines of businesses
  • Other changes significantly impacting the financial operations of the entity

For example, accounting polices disclosed in the 10K do not need to be repeated in the 10Q, just eliminate them. If the only change to property, plant and equipment is depreciation expense for the quarter, there is no need to reproduce the property, plant and equipment footnote from the 10K in the 10Q. If the only change to debt is recurring debt payments, don’t reproduce the debt footnote. If the only change to capital or operating leases is making recurring lease payments, do not regurgitate the lease disclosure in the 10K.
Taking this approach will drastically reduce the financial statement disclosures in the 10Q for most small public entities. An indirect benefit is that the fees you pay your independent registered accounting firm will be reduced as they do not need to keep reviewing information that is not required!
The full set of financial statements is always required, i.e. balance sheets, statements of operations and cash flow. The equity statement is not required unless there are substantial changes not readily explained elsewhere.
Some disclosures are always required, so make sure the following are always addressed:
• Use of estimates
• Going concern disclosures
• Earnings per share calculation policies
• Impact of new accounting pronouncements
• Material contingencies and other uncertainties (repeated until the contingencies removed)
About THAYERONEAL Audit and Advisory Team
Our audit and assurance team is comprised of experienced professionals, led by Mickey O’Neal – Partner. We specialized in SEC audits, audits and reviews of private businesses, financial reporting, and mergers and acquisitions.

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