The SEC’s Proposal for Semiannual Reporting

Many large companies support the proposal including business associations, oil & gas, and pharmaceuticals. Eli Lilly, for example, stated that, if the rule is adopted substantially as proposed, it anticipates electing to file semiannual reports on Form 10-S while continuing voluntary quarterly earnings releases. A joint letter from Bristol Myers Squibb, Eli Lilly, Gilead, Johnson & Johnson, Merck, Pfizer, Roivant, Viatris, and Zoetis similarly supports optional semiannual reporting and says some of the companies currently anticipate electing Form 10-S while continuing voluntary quarterly earnings releases.

ExxonMobil also supports the proposal. Its letter argues that investors increasingly rely on earnings releases, presentations, and Form 8-K filings rather than the Form 10-Q itself. ExxonMobil also proposes an optional new Form 8-K item through which companies could file first- and third-quarter financial statements and related information without preparing a full Form 10-Q.

Industry associations including the U.S. Chamber of Commerce, the National Association of Manufacturers, the American Petroleum Institute, MassBio, The National Association of Real Estate Investment Trusts (Nareit), the Aerospace Industries Association, and the Retail Industry Leaders Association all publicly expressed support for the proposal. 

One of the most important supportive letters comes from Financial Executives International’s Committee on Corporate Reporting. FEI CCR says its members include “approximately 50 chief accounting officers and corporate controllers from Fortune 100 and other large public companies, representing more than $19 trillion in market capitalization.” In a survey of CCR members, 58% said they would most likely elect semiannual reporting, while 42% said they would most likely continue filing quarterly. Among those leaning toward semiannual reporting, all said they would continue issuing voluntary quarterly earnings releases.

That is a critical data point: could almost 60% of large (Fortune 100) companies elect semiannual reporting, moving their quarterly reports to purely earnings release processes? While better than nothing, the content, legal liability, assurance and comparability across issuers for earnings releases are markedly lower than those of a Form 10-Q.