Throughout the first half of 2022, we continue to see the SEC monitor and issue comment letters relating to the following areas:

  • Non-GAAP Measures – We have seen an increase in comment letters from the SEC staff around the use of non-GAAP measures with requests to either remove or modify these measures. Specific areas of focus include missing reconciliations from the most comparable GAAP metric, non-GAAP measures being presented at equal or greater prominence as the comparable GAAP measurement, and lastly, comments on disclosing management’s use of the non-GAAP measure and how it may be useful to investors.
  • MD&A – Throughout 2022, we have seen an increase in SEC staff comments on management’s discussion and analysis to include descriptions of economic developments, offsetting factors, or infrequent events resulting in changes between comparative periods as well as comments on including discussion of trends and uncertainties that may impact short-term or long-term performance. Lastly, there was an increase in comment letters focusing on management including more information on how management assesses company performance and judgments used in the application of significant accounting policies.
  • Segment Reporting – Throughout 2022, we have seen a slight decrease in the relative comment letters regarding segment reporting. However, letters that we are seeing relate to how filers identify operating segments and aggregate them to reporting segments, disclosing revenues from external customers for each group, including appropriate profitability measures for segments, and lastly, comment letters to filers who have multiple services or products but a smaller amount of reportable segments.
  • Risk Factors-Climate Change Matters – We have seen an increase in SEC staff comments on the new climate-related disclosures. The comment letters are focused on climate change risk as well as inconsistencies between SEC filings and the filers’ corporate social responsibility report, lack of disclosure on the risks, trends, and impact of climate change on the business, and lack of disclosure around pending or existing climate-related legislation and regulations that could have an impact on the business.
  • Revenue Recognition – Throughout 2022, we have seen a decrease in the relative comment letters regarding revenue recognition. However, the comment letters we are seeing focus on providing a description of distinct performance obligations and how they are satisfied, providing disclosures around estimates utilized in determining variable consideration, the timing of revenue recognition (over time or at a point in time and how it is satisfied), gross vs. net presentation and disaggregated revenue in a way that is inconsistent with other notes to the statements.

If you have concerns about any of these trends in comment letters and how they may drive changes in your financial reporting, please contact our SEC services team.


Article written by:
Zach Berardi, CPA
Manager, Assurance & Business Advisory Services

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