2022 Reporting Cycle: Form 20-F Amendments and Trends to Consider
The Linklaters US SEC Transactions and Compliance group has published its annual update on Form 20-F amendments and disclosure trends.
For the 2022 reporting cycle, foreign private issuers should be thinking about including – and if needed, enhancing – disclosure in their annual reports about how developments relating to climate change, cybersecurity, supply chains, inflation and the war in Ukraine could affect their risk profiles, financial condition and results of operations. In guidance, speeches and comment letters, the SEC has made it clear that these topics are of high priority, so issuers should actively engage to ensure material developments relating to these topics are considered, and where necessary, adequately disclosed.
The key areas of disclosure focus are set out below. For our full release on Form 20-F amendments and disclosure trends to consider during the 2022 reporting cycle, click here.
Key areas of disclosure focus
1
Climate change
Adoption of the SEC’s climate change disclosure rules is expected in the coming months. In the meantime, the staff of the SEC ("the Staff") has continued to comment on climate-related disclosure in registrants’ annual reports, with a focus on compliance with the SEC’s 2010 climate change guidance and the SEC’s 2021 sample letter.
The SEC has made it clear that registrants should consider the effect of the war in Ukraine on their business even if they do not have operating assets or investments in Russia, Ukraine or Belarus. The Staff has provided disclosure guidance in the form of a sample letter.
The SEC remains focused on cybersecurity disclosure in annual reports, following the proposal of new rules in March 2022. Recent guidance also reminds registrants that a number of existing requirements impose an obligation to disclose cybersecurity risks and incidents, depending on particular business circumstances.
The appropriate presentation and use of non-GAAP financial measures is a subject of consistent and frequent comment in SEC comment letters. The SEC recently provided updated guidance on the topic focused on the appropriateness and clarity of certain adjustments and consistency across periods.
Amidst a deterioration in the global macroeconomic environment in 2022, the Staff has asked companies to disclose more information about inflation, interest rates and supply chain disruption.
While the Staff’s recent comments have sometimes focused on the effects of the war in Ukraine, it has also asked about supply chain disruption more broadly, including with respect to the lingering effects of COVID-19.
The SEC’s Office of the Chief Accountant recently expressed concerns about how registrants are assessing materiality when evaluating financial statement errors. Although made in the context of restatements, the statement makes some key points that you should consider when making your materiality determinations.
If recent developments in the crypto asset markets are material to assessing your business or financial condition, you should consider your disclosure obligations in light of a recent sample letter issued by the Staff.
