On March 21, 2019, XBRL US submitted a comment letter responding to the SEC proposal, Request for Comment on Earnings Releases and Quarterly Reports stating our support for quarterly filing. Quarterly reporting is beneficial to investors, other data consumers, and to reporting entities. The earnings announcement and the Form 10-Q are very different documents, and both have value to investors, regulators, and the public. The benefits of quarterly filings, to both investors and the public company making the submission, outweigh the cost of preparation and EDGAR submission:
- Quarterly data is needed by investors and other data consumers for quantitative and trend analysis.
- Other costs of being a public company, such as audit and legal fees, are significantly higher than the cost of preparing periodic filings. Eliminating quarterly filings would have minimal impact on reducing the burden. The cost of quarterly filing is not a deterrent to going public.
- More frequent reporting can result in companies getting more feedback from the capital markets and more analyst coverage; greater frequency and consistency of reporting ensures investors can make better, more informed decisions, because they have access to more current, and therefore more accurate, information.
Less frequent reporting means less transparency into corporate actions, and greater market volatility.
- Annual or semi-annual reporting risks “data leaks” to select groups before the information is made public.
There are key differences between the earnings announcement and the Form 10-Q. The former ensures that all investors have access to potentially market-moving information as quickly as possible; the latter contain carefully vetted, consistent and comparable data for historical modeling. Both documents serve important purposes for the numerous users of financial data – investors, analysts, regulators, the media, watchdog groups. We believe the Commission should continue requiring the 10-Q, and accepting the Form 8-K as they do today.
Key differences between the two documents include:
- 10-Qs, because they are prepared in XBRL format, are easier and less expensive to process than earnings releases.
- 10-Q data has undergone an audit review, which increases the confidence of investors and analysts in the reported data.
- 10-Qs are more reliable and consistent than earnings announcements. 10-Qs are required to be reported by the SEC, but earnings announcements are optional.
- Data reported in the 10-Q has certain required content, and is more consistent than the earnings announcement.
- The earnings announcement can include non-GAAP data, which is also considered valuable to investors.
- The earnings announcement is typically published sooner than the 10-Q. This allows public companies to narrow the gap between the time when earnings data is available at period end, to when it is publicly disclosed. This can also reduce the possibility of data leaks, and the need for internal policing, for those companies that choose to issue the earnings announcement.
- Earnings announcements are typically distributed more broadly than the 10-Q, through commercial newswire services.
Read the XBRL US Letter: XBRL US Comment on Earnings and Quarterly Reporting File No. S7-26-18