Question

Read the Seligman (2000) article, 24-7 Accounting. Based on the content presented in the article, in conjunction with this week’s lecture and other readings, discuss the U.S. Securities and Exchange Commission (SEC) fair disclosure regulation and how an organization complies with this regulation utilizing their accounting information system. Provide at least two practical examples from your research.

Answer 1

Recommendations

• The Commission should consider issuing an interpretive release to make its position on materiality under Regulation FD clearer. This would provide the Commission a constructive opportunity to articulate its views on materiality, using real-world factual scenarios.
  
  • Commission guidance on materiality should focus particularly on clarifying the meaning of "earnings information" as used in the Adopting Release. Are certain income statement items more likely to be deemed material than others? Is the term limited to end of quarter earnings announcements or does it cover any information that may eventually find its way into income statements? What factors should issuers take into account when deciding if they may confirm prior guidance?
    
  • The Commission should also opine on whether plant and factory private tours, which may convey a competitive advantage but not material information, are permissible.
    
• If enforcement action is warranted, the Commission should consider issuing a Section 21(a) report.9 A Section 21(a) report would provide the Commission an opportunity to express its views on materiality under Reg FD.