A Top Challenge: Identifying Business Trends Appropriate for Disclosure

One of the biggest challenges when crafting disclosure is identifying business trends that might belong in the next Form 10-Q and 10-K. This often falls to the disclosure lawyer as accountants sometimes are – understandably – too close to the numbers and aren’t thinking about the bigger picture.

Having a handle on fluctuations in your business – what might be temporary, what might be a small blip and not really material – can be hard for a lawyer to grasp too. It requires having real conversations with people in operations. People that trust you because you’ve put in the effort to build relationships over time.

Even with the input of the business people, trends can be hard to evaluate. Business people might have their own perspectives on a trend – and its potential materiality – based on their own backgrounds and experience. They might not be looking at the big picture either.

Some of the trend categories are obvious and you’ll see them reflected in 10-Qs and 10-Ks often.

But there are other trend categories that fall into more of a grey area and they might require difficult analysis to determine if they belong in the Management Discussion and Analysis section of a 10-Q or 10-K.  Examples of that include risk factors that are becoming more certain and more timely and should be disclosed as a business trend instead of a risk – and one-time quarterly events that are beginning to recur.  Trends that are emerging can be difficult to evaluate and determine at what point they should be disclosed.

Thanks to Ginny Fogg for her wisdom on this one!

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A Top Challenge: Identifying Business Trends Appropriate for Disclosure