Blogs

EY's "2018 trends in SEC comment letters" identifies and discusses - inclusive of illustrative SEC Staff comments and associated firm insights - the leading Form 10-K SEC comment letter trends for the 2018 year ended June 30th, as well as the emerging focus areas of new accounting standard and cybersecurity disclosures, and accounting for income tax reform.

As shown below and via the chart's accompanying footnotes, the most common comment area* was MD&A (bumping non-GAAP financial measures into 2nd place) or - more specifically - these areas within MD&A (in order of frequency, with many companies receiving comments in more than one category): (1) results of operations, (2) critical accounting policies & estimates, (3) liquidity matters, (4) business overview, and (5) contractual obligations. Fair Value Measurements and Segment Reporting came in 3rd and 4th, respectively.

A. Ranking 12 months ended 30 June

*Rankings are based on comment letter topics assigned by Audit Analytics for SEC comment letters issued to registrants about Forms 10-K from 1 July 2016 through 30 June 2018. In some cases, individual SEC staff comments are assigned to multiple topics if the same comment covers multiple accounting or disclosure areas.
**This topic was not among the top 10 in 2017.

EY's robust companion report: "SEC Comments and Trends — An analysis of current reporting issues" discusses the SEC Staff's focus areas in more detail - replete with sample comments and links to additional relevant resources; highlights emerging trends related to specific industries, IPO companies, and foreign private issuers; and provides an overview of the Staff's filing review process and suggested best practices for responding to comments.

The firm's letter preceding the report's table of contents includes this noteworthy guidance and insight:

We recommend that companies refrain from making decisions about disclosures solely to avoid a comment letter. If you receive a comment letter from the SEC staff, view it as an opportunity to educate the staff about your facts and how you arrived at the conclusions leading to your disclosure, which may include clarifying your consideration of materiality. Following the best practices in Appendix D often leads to a relatively short dialogue with the SEC staff. We also note that many companies resolve a comment without changing their disclosures.