CHAPTER XV REPORTING REQUIREMENTS UNDER THE 1934 ACT RECOMMENDATIONS: Regarding reporting requirements under the 1934 Act: The Commission should encourage companies which file periodic reports on Forms 10-K and 10-Q to substitute, as official filing documents, their annual and quarterly reports to shareholders. The Form 10-K should be reorganized and the disclosure requirements should be written in a way that will minimize duplication and boilerplate language. The reorganized 10-K should contain five sections: (1) a fact sheet consisting principally of capsule financial data and a brief description of the registrant's business; (2) background information about special risks or uncertainties and special or distinctive features of the registrant's opera- A. Introduction This chapter discusses two recommendations intended to reduce the reporting burden on publicly held companies, and at the same time improve the quality of disclosure in both annual reports to shareholders and registration statements and periodic reports filed with the Commission. The first recommendation encourages the filing of annual and quarterly reports to shareholders to meet 10-K and 10-Q requirements. This recommendation will reduce the number of reports prepared by companies and is intended to improve the content quality of the report to shareholders. The second recommendation urges the Commission to revise the reporting requirements on Form 10-K to eliminate unnecessary requirements and present the information which results from remaining requirements in a more effective format. 1/ This recommendation is based on the Committee staff's analysis of the results of the case study of issuers and users of information. B. Filing Annual and Quarterly Reports to Shareholders 1/ Although the changes are presented in the context of companies to publish readable, understandable, annual and quarterly reports which include the infor mation content of the 10-K and 10-Q without the rigidities of those forms, and to file these documents with the SEC in satisfaction of 10-K and 10-Q reporting obligations. For several years the Commission has permitted companies to file their annual and quarterly reports to shareholders 2/ to meet reporting obligations, but few companies have done so. The Advisory Committee believes that the Commission should call attention to the option and encourage registrants to elect it. This recommendation is an attempt to shift the emphasis of SEC-mandated disclosures from a dialogue between reporting companies and the Commission to one between companies and the public. The proposal may also reduce the quality differential between filed documents and reports to shareholders by encouraging registrants to include the more detailed information required by Forms 10-K and 10-Q in their reports to shareholders. This proposal would also reduce the reporting burden for those companies wishing to take advantage of this 2/ E.g., the instruction to Form 10-Q includes the following language: "If the registrant makes available to its stockholders or otherwise publishes within the period prescribed for filing the report, a financial statement containing the information required by this form, the information called for may be incorporated by reference to such published statement provided copies thereof are filed as an exhibit to Part I of the report on this form." option. Only one report instead of two would have to be The Committee recommends four implementing guidelines: (1) The registrant should have the option to make this substitution for any single 10-K or 10-Q annual report or quarterly report should include a mation appears. 4/ (4) The Commission should clearly state that the intention of this program is to encourage registrants to use the annual and quarterly reports to shareholders 3/ The Koppers Company, Inc. Annual Report for 1976, 4/ The Koppers Report does this quite well along with presenting in an unusual way the standard cover sheet for the 10-K on the inside of the fold-out front cover. 98-910 - 77 - 39 with their more communicative writing style to meet 10-K and 10-Q requirements rather than to encourage registrants to send 10-K's and 10-Q's or documents that read like 10-K's or 10-Q's to their shareholders. The last guideline is intended to respond to the charge that this recommendation may cause the annual and quarterly reports to exhibit the technical language and the boilerplate characteristics of 10-K's and 10-Q's. 5/ This is exactly the opposite of what the Committee intends. As a part of the continuous reporting system the annual report has a unique and important position. It is widely circulated, it is useful throughout the spectrum of investor sophistication, it does provide information not available through other media, for instance, the contents of the president's letter. Thus, the Committee believes that present requirements relating to the annual report to shareholders are use 5/ This results in part because some attorneys believe indicates this is probably not the case and that See |