Among the many helpful takeaways from this new White & Case memo: "Reminders for US Public Companies for the 2018 Annual Reporting and Proxy Season" are those pertaining to financial disclosure implications triggered by the new tax law, and risk factor update considerations. As to the former, the memo identifies the following disclosure considerations, in addition to those captured in the recent SEC guidance (which we reported on here):
Additional Disclosure Considerations
- Voluntary Disclosures/Regulation FD—If a company does not provide a public update on the Tax Act’s impact on its 2017 financial results and anticipated results for 2018, answering investor or analyst questions selectively should be considered carefully because of the risk of a violation of Regulation FD.
- Earnings Release—SAB 118 does not address the financial statements included in a company's earnings release, but companies should consider the extent to which it is appropriate to include the disclosures called for in SAB 118 in their earnings release, including by: (i) specifically identifying amounts that are provisional and including an explanation of the extent to which the impact of the Tax Act is or is not reflected in their earnings release financial statements, and (ii) addressing both positive and negative tax accounting effects of the Tax Act to the extent that they have completed their ASC 740 assessment of such effects.
- Item 2.02 of Form 8-K—Any disclosures regarding material tax accounting effects of the Tax Act that relate to, but are made after the end of, the fiscal period that includes the enactment date could trigger a required Item 2.02 Form 8-K.25
- Other Disclosure in Periodic Reports—Companies should update their discussion of known trends and uncertainties in MD&A, as well as any changes in their business or strategy that may result from the impacts of the Tax Act, and should also consider possible disclosure updates regarding the impact that future tax rates and any impairments could have on contractual provisions, such as debt maintenance covenants and executive compensation targets.
- Non-GAAP Financial Measures—Companies that have completed or provisionally provided for their assessment of the Tax Act’s tax accounting effects and reflected those effects in their financial statements, but then back out that impact to address period-over-period comparability, should be mindful of the non-GAAP presentation and reconciliation requirements.
Suggested risk factor update considerations include cybersecurity, changes in law and policy associated with the Trump administration, sustainability, shareholder activism, and Brexit.
Access numerous additional resources on these pages: Proxy Season 2018, Annual Meeting, Tax Reform, Regulatory Reform, Cybersecurity, ESG, and Brexit, and watch for many more annual reporting and proxy considerations and tips in this week's Society Alert!