Yesterday, the SEC Division of Corporation Finance issued guidance to companies, inclusive of an illustrative letter with sample comments, regarding their disclosure about the impacts on their business associated with Russia’s invasion of Ukraine.
Among other things, the guidance advises companies to provide detailed disclosure about the following, if “material or otherwise required”:
- Direct or indirect exposure to Russia, Belarus, or Ukraine through the company’s operations, employee base, investments in Russia, Belarus, or Ukraine, securities traded in Russia, sanctions against Russian or Belarusian individuals or entities, or legal or regulatory uncertainty associated with operating in or exiting Russia or Belarus
- Direct or indirect reliance on goods or services sourced in Russia or Ukraine or, in some cases, in countries supportive of Russia
- Actual or potential disruptions in the company’s supply chain
- Business relationships, connections to, or assets in, Russia, Belarus, or Ukraine
In addition to considering business risk and financial statement impacts and associated disclosures, Corp Fin may ask companies to disclose or defend their disclosures concerning board risk oversight, cybersecurity risks, MD&A related topics (known trends and uncertainties, critical accounting estimates, importing/exporting ban impacts, supply chain disruption impacts), non-GAAP measures (to the extent the company is presenting adjustments to account for invasion-related circumstances), and impacts (if any) on their disclosure controls and procedures and internal controls.
See “U.S. regulator asks companies about exposure to Russia's invasion” (Reuters) and our recent reports on the risk and financial reporting implications of the conflict: “Financial Reporting Implications of Russia/Ukraine Conflict,” “Russia – Ukraine: SEC Comment Letters,” “ Russia – Ukraine Conflict: Regulatory & Other Risks,” “Russia/Ukraine Conflict: Form 8-K Disclosures” and “Russia/Ukraine Conflict: Cyber Risk Mitigation” and “Russia/Ukraine Conflict: SEC Filing Disclosure.”
Access additional resources on our Russia | Ukraine Conflict page.
This post first appeared in the weekly Society Alert!