What the SEC Does
The U.S. Congress created the SEC in 1934. Awakened by the Great Crash of 1929, our country decided that for capitalism
to flourish, we needed to protect investors from fraud and unfair sales practices. Since 1934, as our markets have grown and
changed, our laws and the regulations adopted by the SEC have kept pace with Wall Street. Although complex, these laws and
regulations boil down to a couple of very simple and common sense notions:
People who seek your investment dollars must tell you the truth about their businesses.
By contrast, SFAS No. 131 requires that a company provide
for each reportable segment quantitative disclosure of two basic
items - total assets and a measure of profit or loss. The new
standard defines neither segment profit (loss) nor assets.
Instead, management must determine what they will report based on
how they operate their business. In addition, companies must
disclose the following items for each segment, but only if
management includes them in measuring segment profit or loss:
* revenues from external customers;
* revenues from other operating segments;
* interest income;[20]
* interest expense;[21]
* depreciation, depletion and amortization;
* unusual items;
* equity in net income of equity method investees;
* income taxes;
* extraordinary items; and
* significant non-cash items other than depreciation,
depletion, and amortization.
A company also must disclose for each segment the amount of investment in
equity-method investees and total expenditures for additions to
long-lived assets if it includes the amount in its determination
of segment assets.[22]
The company must reconcile the totals of the reportable
segments' amounts for all of these listed items to consolidated
amounts. The FASB required more items to be disclosed per
segment under the new standard because analysts have long wanted
more information and most of the items required should be already
available in management reports.
Today we are amending our narrative and financial reporting
rules to conform their segment reporting requirements to the
FASB's revised accounting standards. We retain, however,
certain requirements relating to disclosure of principal products
or services and major customers that traditionally have differed
from the FASB standards.[23] We address below each of the rule
changes.[24]
1. Description of Business - Item 101
In the past, Regulation S-K Item 101(b)[25] required issuers
to disclose in the business description sections of documents
that they filed with the Commission financial information based
on GAAP's old "industry segment" standard. Under revised Item
101, registrants will report segment information in accordance
with GAAP's new operating segment standard.[26] Other changes to
Item 101 follow.
a. Principal products or services
Item 101 historically has required a discussion, by segment,
of the principal products produced and services rendered by the
issuer, as well as the principal markets for and methods of
distribution of each segment's products and services. On the
other hand, GAAP required, and continues to require, disclosure
of the types of products and services from which each segment
derives its revenues, without reference to principal markets and
methods of distribution. We continue to believe that information
relating to principal markets and distribution methods is useful
to investors; consequently we are retaining this provision.
Item 101 further requires registrants to disclose the
amounts of revenues from each class of similar products and
services based on quantitative thresholds. Specifically, the
issuer must state the amount or percentage of total revenue
contributed by any class of similar products or services that
accounted for 10 percent or more of consolidated revenue in any
of the last three fiscal years, or if total revenue did not
exceed $50,000,000 during any of those three fiscal years, 15
percent or more of consolidated revenue.[27] SFAS No. 131
requires disclosure of revenues from external customers for each
product and service or each group of similar products and
services unless it is impracticable to do so.
Because SFAS No. 131 requires disclosure regardless of
amount, unless impracticable, it appears that the new accounting
standard may require more disclosure than Item 101.
Consequently, we sought public comment as to whether we needed to
maintain the quantitative thresholds of Item 101(c)(1)(i).
Several commenters advocated eliminating the quantitative
thresholds and simply relying on the GAAP standard, which they
said implied a materiality standard for minimum disclosure. We
believe that SFAS No. 131 will result in disclosure of a range of
amounts of products and services, depending upon how a company
defines a class of related products or services. In fact, SFAS
No. 131 may require disclosure of amounts below the existing 10%
threshold of Item 101. We believe a clearly stated minimum
threshold for disclosure is desirable to eliminate any possible
ambiguity that may result from attempts to apply an unwritten
materiality threshold to small amounts of reportable revenues and
is in keeping with the 10% threshold used to report segments
under SFAS No. 131. We therefore have retained these Item 101
thresholds.
edgar.sec.gov
There seems to be a rule that allows confidential filings of information (if properly filed)
We may never find out details of our investment in NAC but IMO the financial gain or loss
should show up on the annual or quarterly.
John
Any informed person wishing to comment regarding disclosure responsibilities are welcome! |
