To 8-K or Not to 8-K: the SEC’s Guidance on the Impact of the Tax Cut and Jobs Act12.27.17
On December 22, 2017, the Securities and Exchange Commission (the “SEC”) issued guidance relating to the accounting and disclosure issues created for public companies in their fourth-quarter financial reporting obligations by the Tax Cut and Jobs Act (the “Act”), which was signed into law by President Trump on the same date. The guidance generally covers two topics: (1) Staff Accounting Bulletin No. 118, which expresses the views of the SEC’s staff regarding application of U.S. GAAP (and more specifically, ASC Topic 740) when preparing an initial accounting of the income tax effects of the Act; and (2) Compliance and Disclosure Interpretation 110.02, which expresses the views of the SEC’s staff regarding the applicability of Item 2.06 of Form 8-K with respect to reporting the impact of a change in tax rate or tax laws pursuant to the Act.
We recognize that many reporting companies are in the midst of preparing their year-end financial statements and evaluating the effects of the Act on their results of operations and financial results, including the need to re-measure the impairment of some assets. To the extent that a company were to conclude that an impairment has occurred or that other material non-public information should be disclosed, a Form 8-K filing could be required. Depending upon the company’s particular circumstances, that Form 8-K may contain disclosure under Item 2.06 (Material Impairments), Item 2.02 (Results of Operations and Financial Condition) and Item 7.01 (Regulation FD) of Form 8-K and may address the Act’s impact on non-GAAP financial metrics that the company has historically presented.
Given the Act’s potential impact on these kinds of financial reporting obligations, it’s worth noting here that Items 2.02 and 7.01 of Form 8-K do not impact a company’s eligibility to use a shelf registration statement on Form S-3 because the information disclosed under such Items is “furnished,” and not “filed,” with the SEC (unless, of course, a company has specifically requested that such information be considered “filed”). In addition, with respect to certain other Items of Form 8-K that require disclosure judgment calls, such as Item 2.06 (which allows that no filing is required under Item 2.06 if the conclusion is made in connection with the preparation, review or audit of financial statements required to be included in the next periodic report due to be filed), those Items may not impact a company’s S-3 shelf registration eligibility if a required disclosure is ultimately made by the due date of the next quarterly filing.
Please contact Marc Adesso or Wes Scott of Waller’s Capital Markets group with any questions on how to best report changes to your company’s financials or accounting disclosures as result of the recent enactment of the Act.