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US SEC preparing to scrap quarterly reporting requirement

reuters.com

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Re: US SEC preparing to scrap quarterly reporting requirement

#81

Post by HeWhoLurksLate »

nickff wrote: post #74
runako wrote: post #66

Earlier quoted context omitted.

Longer periods between audited (aka "accurate") results will lead to compounding errors. Fewer people at the company will have a clear idea of how the company is doing. Audits are like CI for finances.

I agree that would be preferable if reporting were less expensive and (legally) risky, and what you're describing is definitely closer to the original intent of the rule (that of giving investors the information available to management), but it would make being a public company even more burdensome than it already is, and the number of public corporations is already in decline.

how much of that decline is due to mergers vs failing vs new private companies being formed instead?

Re: US SEC preparing to scrap quarterly reporting requirement

#82

Post by 3eb7988a1663 »

throw0101c wrote: post #75
nickff wrote: post #60

Earlier quoted context omitted.

The problem with reporting often is that the reports must each be audited (which is time-intensive and expensive), and any errors subject the companies to class-action lawsuits (which only ever benefit the lawyers, but that is a separate matter). I would also prefer more frequent reports, but only if they were less burdensome and risky.

Perhaps the auditing needs to be done on the workflow process and once the automated code is in place there needs to be a traceable chain of modifications to it that need to be justified. The "audit" certifies a certain hash of a repo that produces known-good results, and if you use a different commit in that repo you have explain in an SEC filing why you modified things. Basically reproducible builds for financial r…

I know a few accountants, and I do not think this is possible. There is an incredible amount of manual adjustments that have to occur to get the books in order. I suspect the official process is 100% GAAP approved and great, but the messy reality has thousands of tweaks that were massaged all over the place to correct for one thing or another.

Re: US SEC preparing to scrap quarterly reporting requirement

#85

Post by runako »

nickff wrote: post #74
runako wrote: post #66

Earlier quoted context omitted.

Longer periods between audited (aka "accurate") results will lead to compounding errors. Fewer people at the company will have a clear idea of how the company is doing. Audits are like CI for finances.

I agree that would be preferable if reporting were less expensive and (legally) risky, and what you're describing is definitely closer to the original intent of the rule (that of giving investors the information available to management), but it would make being a public company even more burdensome than it already is, and the number of public corporations is already in decline.

> it would make being a public company even more burdensome than it already is

Every company doesn't have to be public. The US taxpayer underwrites US securities markets, and companies that trade on our public markets have access to some of the deepest pools of low-cost liquidity in the world. But companies are obviously free to list elsewhere.

> the number of public corporations is already in decline.

Separate problem. IIRC HBS studied this and basically the issue is we stopped enforcing our anti-competition laws a while back[1]. So we end up with a fraction of firms that each sector would financially support. Both because it creates giants that are much harder to compete against, and because it allows mergers between competing firms that AFAIK could be deemed illegal under existing laws.

1 - See, for example the Robinson-Patman Act, whose dormancy allows big box retailers to exist. This law has never been repealed.

Re: US SEC preparing to scrap quarterly reporting requirement

#87

Post by donavanm »

alexpotato wrote: post #69

One of my favorite stories about logistics and quarterly earnings deadlines (from when I worked at a pharmaceutical company: "In our business, a truckload of various drugs can easily reach $10-$15 million. Now, if that truck arrives at the depot at 11:59pm March 31st then it's first quarter earnings. If it arrives at 12:01am April 1st then it's second quarter earnings. $15 million is a BIG shortfall, even for us, so…

I worked at a previous listed company where a single $6MM order of hardware being pushed out a week made quarterly p&l positive. Im absolutely sure the same situation occurred every other quarter as well in some part of the business I didnt see.

Re: US SEC preparing to scrap quarterly reporting requirement

#88

Post by irjustin »

nickff wrote: post #60
throw0101c wrote: post #53

Earlier quoted context omitted.

> And it’s not just execs, but the whole corporate machinery that takes 3–6 weeks after quarter end to churn out reports. Release early, release often. If you want corporate machinery to run more smoothly with less effort, force it to operate more frequently not less: when TLS certs had 2-3 year lifespans there was all sorts of manual methods that people forgot how to do; then it was maximum one year. We then got fre…

The problem with reporting often is that the reports must each be audited (which is time-intensive and expensive), and any errors subject the companies to class-action lawsuits (which only ever benefit the lawyers, but that is a separate matter). I would also prefer more frequent reports, but only if they were less burdensome and risky.

I'm generally with the report often camp. It forces automation all the way down even the auditing.

Re: US SEC preparing to scrap quarterly reporting requirement

#89

Post by nickff »

hatsix wrote: post #76
nickff wrote: post #60

Earlier quoted context omitted.

The problem with reporting often is that the reports must each be audited (which is time-intensive and expensive), and any errors subject the companies to class-action lawsuits (which only ever benefit the lawyers, but that is a separate matter). I would also prefer more frequent reports, but only if they were less burdensome and risky.

The reports don't have to each be audited... reduce the auditing to twice a year, increase reporting to monthly... if your report requires remediation, you her bumped to quarterly audits

The company would probably be sued if there were any issues in one of the monthly reports; the money for the plaintiff lawyers is just too appealing. I think monthly 'informal' reports with some legal protections to allow for inaccuracies and inconsistencies, with biennial 'formal' reports would be wonderful. That said, I think allowing companies to select an appropriate reporting interval might be best.

Re: US SEC preparing to scrap quarterly reporting requirement

#90

Post by throw0101c »

readthenotes1 wrote: post #15

European companies report every 6 months and it doesn't seem to do any harm

The UK went back and forth on it:

> Beginning in 2007, UK public companies were required to issue quarterly, rather than semiannual, financial reports. But the UK removed this quarterly reporting requirement in 2014. We studied the effects of these regulatory changes on UK public companies and found that the frequency of financial reports had no material impact on levels of corporate investment. However, mandatory quarterly reporting was associated with an increase in analyst coverage and an improvement in the accuracy of analyst earnings forecasts.

* https://rpc.cfainstitute.org/research/foundation/2017/impact...

So it seems that if you want more accurate analysis for investors (and current stock holders), more frequent is better.

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