By:  Cydney Posner

Tax Disclosure

In doing your S-K check for your Forms 10-K this year, please remember the 10-K requirement that's not in S-K.  That's the requirement imposed under the Jobs Creation Act. See my postings of 8/25/05.  That Act requires companies to disclose in Item 3 (Legal Proceedings) the requirement to pay certain penalties for failure to disclose on tax returns required information with respect to specified reportable transactions, including transactions identified by the IRS as abusive or tax avoidance (shelter) transactions.

Cover Page

In addition, please remember to double check the Form 10-K cover page, because it has changed.  There are so many new boxes to check (or not check) that the cover page is now cover pages. The new boxes relate to WKSI status, large accelerated or regular accelerated status and other items.

Disclosure of Unresolved Staff Comments

Accelerated filers and WKSIs are now required to disclose outstanding written staff comments that remain unresolved for a substantial period of time in their annual reports on Form 10-K or Form 20-F.  More specifically, these issuers must disclose written comments made in connection with a review of Exchange Act reports that:

  • the issuer believes are material;
  • were issued more than 180 days before the end of the fiscal year covered by the annual report; and
  • remain unresolved as of the date of the filing of the Form 10-K or Form 20-F.
The disclosure must be sufficient to disclose the substance of the comments. Staff comments that have been resolved or that the staff and issuer have agreed will be addressed in future Exchange Act reports do not need to be disclosed. Issuers can provide other information, including their position regarding any unresolved comments. The 180-day time period begins from the date of the first comment letter that
specifically raises the issue, which may be later than the date of the initial comment letter on the filing. Issuers will have the choice to either disclose or refrain from offering securities in registered offerings.

Risk Factors

Of course, the new rules also require risk factors in 10-Ks (where appropriate), but we've all been doing that for a long time anyway.  The difference is that Risk Factors will now be located under a separate Item 1A.

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