SEC issues proposal to make quarterly reporting optional

The SEC wants to make reporting more of a choose-your-own-adventure.

On May 5, it announced a proposal that would enable public companies to file semiannually rather than quarterly. Companies that opt to file twice a year would use a new form, 10-S, rather than Form 10-Q, the agency said, and their filing deadline would be either 40 or 45 days after the end of their first semiannual period, depending on their filing status.

The change would give companies greater flexibility over reporting, SEC Chair Paul Atkins said.

“[T]he rigidity of the SEC’s rules has prevented companies and their investors from determining for themselves the interim reporting frequency that best serves their business needs and investors,” he wrote in a statement. “A company might consider factors such as the costs and management time of preparing quarterly reports versus semiannual reports, expectations of its investors, potential effects on its cost of capital, the stage of its business development, the nature of its business model, other avenues of disclosure including earnings calls and current reports on Form 8-K, and prospects of increased research coverage.”

Atkins also framed the proposal as part of his push to encourage more companies to pursue IPOs. “This flexibility might reduce some of the burdens of being a public company and potentially influence a company’s decision to become or remain public,” he wrote.

In the US, public companies have been required to file quarterly since 1970. If the SEC proposal were accepted, the US would follow the lead of the EU and the UK, which permitted semiannual reporting in 2013 and 2014, respectively.

Debate swirls about whether introducing semiannual reporting is a good move for companies, investors, and markets at large. During a March meeting, investors told the SEC that they thought quarterly reporting allowed for more accurate valuations and helped stakeholders make better funding decisions.

Sources have told CFO Brew that they don’t believe a switch to semiannual reporting would significantly reduce the cost and time burden on companies. “If you have to do it twice a year or you have to do it four times a year, you still have to have all the audit, all the compliance, all the team to be able to do it,” Tom Shea, CEO and co-founder of OneStream, pointed out.

The SEC will open a 60-day comment period on the proposal once it’s officially posted on SEC.gov and the Federal Register. In the meantime, keep an eye on the agency. In the next few months, Atkins said, the SEC will likely also consider other proposals that, in his words, “will not only redefine what it means to be a public company, but will make being public attractive again.”