The SEC Division of Corporation Finance's filing review process is a key function utilized by the SEC staff to monitor the critical accounting and disclosure decisions applied by registrants. Our analysis of SEC comment letters identifies the frequency of topical areas addressed by the SEC staff and how their focus areas changed over time. In addition to providing our insights on the nature of the SEC staff comments, we provide sample text from the SEC staff’s comments and links to where you can learn more about the accounting and disclosure requirements addressed in each topical area.
Click on the trends to learn more.
(7/1/2018 – 6/30/2019)*
|Relative change in number of letters compared to the Prior Period*|
|1||Oil, gas and mining reserves||Flat|
|3||Fair value measurement||Flat
|6||Management's discussion and analysis||Flat|
|8||Oil and gas industry-specific disclosures||Flat|
|10||Goodwill and other intangibles||Flat
*This analysis was performed based on topical areas assigned by research firm Audit Analytics for comment letters publicly issued in the 12 months ended June 30, 2019 ("Current Period") and the 12 months ended June 30, 2018 ("Prior Period") in relation to Form 10-K and Form 10-Q filings. Total comment letters evaluated during the Current Period and Prior Period were approximately 150 and 270, respectively.
The relative number of comment letters has increased.
The relative number of comment letters has decreased.
The relative number of comment letters has not changed significantly.
The SEC staff's comments around oil, gas and mining reserves continue to focus on proved undeveloped (PUD) reserves and the use of third-party reserve reports. Specifically, the SEC staff frequently ask for additional information on:
The SEC staff has also asked for reserve reports included as an exhibit in the Form 10-K to be refiled to include all of the information required by Item 1202(a)(8) of Reg S-K.
Non-GAAP financial measures result in frequent comments regarding compliance with Item 10(e) of Regulation S-K and the related compliance and disclosure interpretations, sometimes resulting in requests to remove or substantially modify non-GAAP metrics. Focus areas have included:
Fair value measurements often require the application of significant judgment. The SEC staff has focused on the quality of disclosure around those significant judgments and estimates, frequently commenting on:
Certain of the fair value disclosure requirements, and consequently the nature of the SEC staff's comments may be impacted by ASU 2018-13, Changes to the Disclosure Requirements for Fair Value Measurements, which can be early adopted.
Business combinations are a consistent area of focus for the SEC staff, with frequent comments related to:
The SEC staff's comments around fixed assets primarily related to the accounting for impairments, including the assessment of whether an impairment analysis was necessary. The SEC staff has focused on the quality of the disclosure of the judgments and estimates involved, frequently commenting on:
The SEC staff's comments on management's discussion and analysis have emphasized the requirements in Item 303 of Regulation S-K and the related disclosure objectives, including a focus on:
SEC staff frequently question how registrants have identified operating segments and aggregated them into reportable segments, often due to events reported by companies in press releases or Form 8-K disclosures. SEC staff may expect to see changes in segments when the company has disclosed significant acquisitions or dispositions, changes in organizational structure, or changes in key personnel. To resolve segment questions, the SEC staff may request a copy of the reporting package utilized by the chief operating decision maker, or other documents, to evaluate its consistency with management’s reporting conclusions.
The lack of entity-wide information required to be disclosed under ASC 280 has also been highlighted by the SEC staff. Required disclosures include:
ASC 932-235-50 provides guidance on calculating and disclosing the standardized measure for discounted future net cash flows, and the changes in such standardized measure. Specifically, the SEC staff has commented on:
Accounting for income taxes requires the application of significant judgment and the use of estimates. The SEC staff has focused on the quality of the disclosures around these judgments and estimates, frequently commenting on:
The SEC staff has focused on the quality of the disclosure around significant judgments and estimates associated with goodwill and intangible assets, including impairment assessments, frequently commenting on:
Michael (Casey) A. Herman
Energy, Utilities & Mining Co-leader; US Power & Utilities Leader, PwC US