Volume 25, No. 9

SEC: On the Hunt for More Disclosure Simplification:  Just like food nourishes and sustains the human body, the information contained in the financial statements is the foodstuff of investment decisions. Sure, some investors might base their decisions on the work of analysts instead of looking primarily at the financial statements – but someone, somewhere turned their attention to the information in the financials in order to assess past performance and current financial status, and then predict their version of future performance. In a world of indexing, derivatives, and all kinds of passive investing, it may be often forgotten - but nothing happens without financial statements.

 Nearly everybody takes a good look at their diet once in a while, making sure that what they’re putting into themselves is the right stuff, while trimming out the bad stuff. So it is with the SEC, as they winnow their financial statement reporting requirements. They’re trying to put their rulebook on a diet using a new proposed rule with a purpose to amend disclosure requirements that may have become “redundant, duplicative, overlapping, outdated or superseded.”

 There’s a lot of redundancy right in that statement of the proposal’s goals. This report summarizes the parts of the proposal that should be most important to investors. It’s not an accounting issue that’s going to jolt anybody – until they can’t find a disclosure they’re accustomed to seeing and then realizing that it’s gone. You only get one chance to have a say in what the SEC boots out of the financials, so it could pay to pay attention – or forever hold your peace.

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