The deadline for comment letters on its proposed rules for faster filings and Web postings doesn't come due until May 23, 2002, but already the Securities and Exchange Commission (SEC) is hearing of alternatives that might be better for both companies and investors. One particularly interesting suggestion came from Jack Ciesielski, owner of R.G. Associates, Inc., an investment research and portfolio management firm, and publisher of "The Analyst's Accounting Observer."
Mr. Ciesielski is concerned about the gap between the due dates of quarterly and annual SEC filings and the dates when companies release their earnings, typically in quarterly press releases. His comment letter included these suggestions for quarterly and annual reporting:
- Quarterly reporting. The SEC is proposing to speed up filings of Forms 10-Q by reducing the time available to file the reports from 45 days to 30 days. Instead, Mr. Ciesielski suggests that the SEC should simply require companies to file their earnings releases and quarterly statements simultaneously. A key reason: "Pro forma reporting has been problematic for the entire financial community in recent years, and the SEC has had to expand its resources to investigate abuses. Coordinating the earnings release with the 10-Q filing might dampen the ardor for 'new metrics' that mean less, and re-emphasize the importance of all of the information in the quarterly financial package."
- Annual reporting. Reporting for the fourth quarter might pose more of a problem, since the companies currently have 90 days to file their year-end reports. (The SEC is proposing to reduce this to 60 days.) Either way, investors will likely want to review the year-end earnings release before then. A possible solution, suggests Mr. Ciesielski, is to require a fourth quarter 10-Q subject to the same requirements as the 10-Qs for the first three quarters. This approach is consistent with recommendations made in the report of the American Institute of CPAs Special Committee on Financial Reporting, "Improving Business Reporting: A Customer Focus," which was released in 1994.