“’Actual Results May Differ Materially From These Estimates;’ SEC Staff Objects to Disclaimer Language When Giving Preliminary Financial Results” from Bass Berry & Sims advises companies planning to release preliminary financial results to be sufficiently comfortable with investors’ ability to rely on those results. The guidance is supported by a recent comment letter exchange between an IPO registrant and the SEC wherein the registrant included this “non-reliance” disclaimer in its registration statement in relation to its “flash” numbers:
The unaudited preliminary financial information for the fiscal quarter ended June 30, 2021 has not been reviewed or audited by our independent public accounting firm. This preliminary financial information is not a comprehensive statement of our financial results for this period, and our actual results may differ materially from these estimates due to the completion of our financial closing procedures, final adjustments, and other developments that may arise between now and the time the closing procedures for the fiscal quarter are completed. There can be no assurance that these estimates will be realized, and estimates are subject to risks and uncertainties, many of which are not within our control.
SEC Staff commented: “We note your statement in your disclosure that your “actual results may differ materially from these estimates due...” If you choose to disclose preliminary results, you should be able to assert that the actual results are not expected to differ materially from that reflected in the preliminary results [emphasis added]. Accordingly, please remove this statement, as it implies that investors should not rely on the information presented.”Bass Berry observes that companies may release preliminary results before their ordinary course public release of actual financial results in a number of scenarios including a securities offering; knowledge of a material difference between the period’s financial results and market expectations; and in advance of management’s desired participation and discussion of financial performance at a conference or other event.
This post first appeared in the weekly Society Alert!