1.2 Top 10 Topics in Reviews

The topics that constitute the current year’s top 10 list are largely consistent with the prior year’s list. However, the topics of debt, EPS, and signatures, exhibits, and agreements have joined the top 10 list, while the topics of income taxes (ranked 15th in the current year), internal control over financial reporting (ranked 11th in the current year), and fair value (ranked 13th in the current year) have dropped out of the top 10.3 The volume of reviews with a comment on MD&A as a percentage of all reviews with comment letters has continued to increase, whereas the volume of reviews with a comment on non-GAAP measures as a percentage of all reviews with comment letters decreased slightly. These two topics are still the two most significant sources of SEC comments by a wide margin since the SEC staff remains laser-focused on them. Given the SEC staff’s focus on ensuring that disclosures provide decision-useful information from management’s perspective, we expect the volume of comments on MD&A to remain high. While segment reporting remained in 3rd place, the volume of reviews with a comment on this topic increased from 16 percent of all reviews with comment letters to 23 percent of all such reviews, with the increase largely attributable to the staff’s comments on the implementation of the new disclosures required by ASU 2023-07, including significant segment expense disclosures. We also observed an increased number of comments related to signatures, exhibits, and agreements, which rose from 16th place in review year 2024 to 7th place in review year 2025 because of an increase in comments related to potentially missing or incorrect exhibits and certifications. In addition, both debt and EPS moved up into the top 10 list this year, indicating an increase in SEC comments related to the accounting for and disclosure of financial instruments.

The top 10 topics in reviews with comment letters issued in review year 2025 are as follows:

1. MD&A — The fact that MD&A remains a leading source of SEC comments reflects the SEC staff’s continuing emphasis on the objective of MD&A, which, as stated in the SEC’s November 19, 2020, final rule, is “to better allow investors to view the registrant from management’s perspective.” While the staff’s comments have addressed various topics of MD&A, the comments have continued to focus on greater transparency in registrants’ disclosures about (1) the underlying factors causing changes in financial statement line items, particularly when multiple or offsetting factors affect line items (including the need for quantitative disclosure of how much of a change in a financial statement line item is attributable to each underlying factor4); (2) material trends and uncertainties that affect results of operations, including quantification of the impact of such trends and uncertainties; (3) liquidity and capital resources, including material cash requirements; and (4) critical accounting estimates. Comments about material trends and uncertainties often address emerging issues such as geopolitical tensions and the wider macroeconomic environment, including inflationary effects.
2. Non-GAAP measures — Although the number of reviews with a comment on non-GAAP measures fell from 276 in review year 2024 to 239 in review year 2025, the volume of such reviews as a percentage of all reviews with comment letters decreased by only 1 percentage point year over year (from 38 percent in review year 2024 to 37 percent in review year 2025). The decline in the number of reviews with a comment on this topic appears to be attributable to an overall decline in reviews that resulted in a comment letter rather than to a change in focus. The issues raised by the SEC staff in the current year are largely consistent with those raised in the prior year. The staff’s comments on this topic continue to focus on (1) whether there is undue prominence of non-GAAP measures, (2) whether certain adjustments are potentially misleading (e.g., company-specific tailored accounting and the removal of normal, recurring cash operating costs), (3) enhancing the disclosure related to the purpose and use of non-GAAP measures, (4) identification and clear labeling of non-GAAP measures, (5) whether measures are appropriately characterized as liquidity or performance measures, (6) reconciliation requirements, (7) the presentation of the income tax effect of non-GAAP adjustments, and (8) disclosures related to certain financial or operating metrics. Further, the SEC staff has publicly spoken about the importance of registrants’ implementation of appropriate controls related to the disclosure of such measures.
3. Segment reporting — Segment reporting remains a significant source of SEC comments in review year 2025; the volume of reviews with a comment on this topic increased from 16 percent of all reviews with comment letters in review year 2024 to 23 percent of all such reviews in review year 2025. Like comments on legacy ASC 280 segment reporting issued in previous years, recent comments on segment reporting have specifically addressed (1) the identification and aggregation of operating segments, (2) changes in reportable segments, (3) entity-wide disclosures, and (4) reconciliations. The SEC staff has also begun to issue comments on the requirements in ASU 2023-07 which became effective for all public entities for fiscal years beginning after December 15, 2023 (e.g., the 2024 10-K for calendar-year-end public entities). Comments related to ASU 2023-07 commonly addressed (1) disclosures about the chief operating decision maker, (2) significant segment expenses, and (3) measures of segment profit and loss.
4. Revenue recognition — After nearly eight years since public companies’ adoption of the revenue standard (ASC 606), the revenue-related themes have stabilized. These themes include (1) disclosure of significant judgments exercised in applying the standard, (2) accounting for performance obligations, (3) capitalization of contract costs, (4) disaggregation of revenue, (5) contract balances, and (6) remaining performance obligations. The largest volume of revenue-related comments focused on the disclosure of significant judgments exercised in applying the standard. Comments on such significant judgments address an array of revenue issues, including (1) the identification of performance obligations, (2) the determination and allocation of the transaction price, (3) the identification of a measure of progress, and (4) principal-versus-agent determinations.
5. Inventory and cost of sales — Although the number of reviews with a comment on inventory and cost of sales decreased in review year 2025, this volume as a percentage of total reviews remained relatively consistent, reflecting the SEC staff’s continued focus on inventory valuation and the completeness of cost of sales. Inventory comments are primarily related to accounting policy disclosures regarding inventory valuation, particularly the policies and estimates associated with the measurement of inventory. In addition, the SEC staff commonly asks registrants about their cost of sales and gross profit measures and requests disclosure of the types of expenses that are included in or excluded from such measures.
6. Intangible assets and goodwill — Although the number of reviews with a comment on intangible assets and goodwill was lower in review year 2025 than in the prior year, the volume of such reviews as a percentage of total reviews with a comment letter remained the same. Comments on this topic are primarily related to disclosure of (1) methods and significant assumptions used in the quantitative impairment test; (2) the percentage by which estimated fair value exceeds carrying value for each reporting unit and the specific key assumptions used in the fair value determination; (3) triggering events that require assessment; and (4) qualitative factors that were incorporated into the performance of a quantitative analysis, as well as the result of that analysis.
7. Signatures, exhibits, and agreements — The volume of reviews with a comment on this topic as a percentage of all reviews with comment letters increased from 4 percent in review year 2024 to 9 percent in the current year. There are specific SEC requirements related to certain signatures, exhibits, and agreements that must be filed with a registrant’s financial statements. With respect to those requirements, the SEC staff continues to issue comments related to (1) the form and content of a registrant’s quarterly and annual certifications and (2) material contracts (including requests for such contracts to be filed as exhibits).
8. Acquisitions, mergers, and business combinations — Comments on this topic are primarily related to (1) the evaluation of whether a transaction should be accounted for as a business combination or as an asset acquisition, (2) the identification of the accounting acquirer, (3) questions about the allocation of the consideration transferred to identified assets acquired and liabilities assumed, and (4) required public-company disclosures.
9. Debt — In the current year, comments on debt are primarily related to (1) restrictions on debt and the application of Regulation S-X, Rules 4-08(e), 5-04, and 12-04; (2) financial covenant disclosure; and (3) proper financial statement classification of instruments as either debt or equity.
10. EPS — In the current year, comments on EPS are primarily related to the application of the two-class method.

A number of the aforementioned trends are likely to continue in years to come since comment letter topics have been largely consistent year over year. While it is difficult to predict what new comment letter trends are on the horizon, the SEC staff has historically focused on emerging issues such as macroeconomic issues as well as new accounting standards and regulations. Accordingly, we might expect a focus on AI and global trade issues as well as new income tax disclosures that go into effect this year. It remains to be seen how the recent change in SEC leadership and the corresponding changes in the SEC’s priorities will affect the Division’s filing reviews and resulting comment letters, if at all.