DISCLOSURE FUNCTION OF SEC Protective disclosure Informative disclosurethe

Disclosure function of sec protective disclosure

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DISCLOSURE FUNCTION OF SEC Protective disclosure Informative disclosure—the emphasis since the early 1970s “We are the investor’s advocate.” William O. Douglas SEC Chairman, 1937–1939 Wolk: Accounting Theory © 2017 SAGE Publications, Inc.
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U.S. SECURITIES AND EXCHANGE COMMISSION SEC managed by five commissioners; 5- year appointments made by the President and confirmed by the Senate Maximum of three commissioners from same political party Consists of headquarters in Washington, DC 11 regional offices and six branch offices $1.7+ billion annual budget for 4,800+ positions Wolk: Accounting Theory © 2017 SAGE Publications, Inc.
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DISCLOSURE PROCESS TODAY Differential disclosure Annual 10-K Quarterly 10-Q Aimed toward professional financial analysts Additional disclosure? Information overload Information asymmetry (selective disclosure) Signaling theory Cost of disclosure for big versus small firms Wolk: Accounting Theory © 2017 SAGE Publications, Inc.
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ITEMS PROVIDING IMPORTANT INFORMATION Summary Annual Report (SAR) Condensed financial statements that omit or boil down the detail contained in traditional audited financial statements Evolved from 1983 FEI study concerned with the readability of annual reports Jenkins Committee Report (1994) AICPA study 1991–1994 Concerned with helping users understand a company’s business Wolk: Accounting Theory © 2017 SAGE Publications, Inc.
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KEY JENKINS REPORT DISCLOSURES Segmental disclosures Core and noncore activities, separate in the financial statements Interim reporting Secondary recommendations Wolk: Accounting Theory © 2017 SAGE Publications, Inc.
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