Reg FD prohibits selective disclosure of material, nonpublic information by public companies (or by its senior officials or specified other employees) to securities market professionals and shareholders reasonably likely to trade on the information. If a public company does make a disclosure of that kind, the company is required under Reg FD to disclose the information to the public. Information is considered “material” if there is “a substantial likelihood that a reasonable investor would consider the information important in making an investment decision or if the information would significantly alter the total mix of available information.” And that’s where the thorny part comes in. The test for materiality is a subjective one, based on the facts and circumstances. But judgments about materiality of disclosures are often complicated and muddy and frequently made in real time.
by Cydney Posner At Thursday’s meeting of the SEC’s Investor Advisory Committee, the Committee approved the submission of a comment letter urging FASB to reconsider its proposal to make changes to the concept of “materiality” embodied in FASB’s Conceptual Framework for Financial Reporting and FASB’s guidance on Notes to Financial […]
FASB proposes amendments regarding the concept of “materiality” in the context of disclosure requirements
by Cydney Posner FASB has issued two exposure drafts as part of its disclosure framework project, which is intended to facilitate clearer communication of GAAP information required in notes to financial statements. The two proposals are intended to “clarify the concept of materiality.”