3.9 Other SEC Reporting Matters | DART – Deloitte Accounting Research Tool

3.9.1 Certifications

Examples of SEC Comments

We note the language in the Exhibit [A] certifications that you filed did not conform exactly to the language set forth in Item 601(b)(31)(i) of Regulation S-K. Specifically, we note the exclusion of internal control over financial reporting language within the introductory sentence of paragraph 4. Please amend your Form 10-K to revise your certifications to conform exactly to the language set forth in Item 601(b)(31)(i) of Regulation S-K. Please also refer to Regulation S-K C&DI 246.13.
We note that Exhibits [A] and [B] are incomplete, as they omit paragraph 4(c) of Item 601(b)(31) of Regulation S-K. Please amend your filing to include corrected certifications.
Please identify the certifying individual by name and remove their title in the introductory line of the certification. Refer to Item 601(b)(31) of Regulation S-K. Please address this comment as it relates to the certifications filed in connection with your fiscal year [X] Form 10-Qs.
Please amend your filing to provide a revised certification that refers to the correct fiscal year end of December 31, [year X].
The Exhibit 32 certification for your . . . Form 10-Q . . . is not signed by your Principal Executive Officer . . . . As such, please amend the Form 10-Q that includes Exhibit 32 [by providing] the signature of [the] Principal Executive Officer.

Registrants must provide quarterly and annual certifications in the form specified by Regulation S-K, Item 601(b)(31). When these certifications contain errors, registrants are often asked to file an amendment to an entire periodic filing in addition to submitting a corrected certification.

Interpretation 246.14 of the Regulation S-K C&DIs states:

The following errors in a certification required by Item 601(b)(31) are examples of errors that will require the company to file a corrected certification that is accompanied by the entire periodic report: (1) the company identifies the wrong periodic report in paragraph 1 of the certification; (2) the certification omits a conformed signature above the signature line at the end of the certification; (3) the certification fails to include a date; and (4) the individuals who sign the certification are neither the company’s principal executive officer nor the principal financial officer, or persons performing equivalent functions.

The SEC staff often comments when registrants’ certifications, including punctuation marks and parenthetical phrases, do not appear exactly as specified in Item 601(b)(31). The staff routinely notes that including the title, rather than the name, of the certifying officer in the first sentence of the certification constitutes an inappropriate modification. In addition, the staff regularly comments on certifications that are dated incorrectly. The staff also comments frequently on the exclusion of language regarding ICFR from the certifications, which is particularly common in periods in which registrants are initially required to perform an ICFR assessment (e.g., in the years after an IPO or SPAC transaction).

Registrants must include certifications when they are filing amendments to periodic reports. See Question 161.01 of the Exchange Act Rules C&DIs for guidance on what paragraphs can be excluded from certifications filed with amendments to periodic reports.

3.9.2 Use of Experts and Consents

Examples of SEC Comments

Please file all exhibits required by Item 601 of Regulation S-K with your amended 10-K, including, but not limited to, any plans of acquisition, reorganization, arrangement, liquidation or succession, articles of incorporation, bylaws, description of your securities, material contracts, list of subsidiaries, and consents of experts. Please consult Item 601 of Regulation S-K for guidance.
We note that you have engaged third parties to provide independent validations of the inputs and assumptions you use and to evaluate the reasonableness of the advisor’s [net asset value (NAV)] calculations. Please tell us what consideration you have given to identifying the third parties as experts and filing their consents. Please refer to Section 7(a) and Rule 436 of the Securities Act.
We note your Form 10-K is incorporated by reference into your registration statement on Form S-3. We also note your disclosures imply you relied on third-party appraisers to estimate the fair value of your long-lived asset group. Please tell us, and revise future filings to clarify, the role of third-party appraisers and the extent to which management relied on their work, including your consideration of providing a consent from these third-party appraisers. Alternatively, please clarify your references to relying on third-party appraisers. Refer to Question 141.02 of the Division of Corporation Finance’s Compliance & Disclosure Interpretations on Securities Act Sections.
We note that your annual report is incorporated by reference in [your] Form S-3 . . . . As such, please provide the consent of your independent registered public accounting firm or tell us why consent is not required. Refer to Item 601(b)(23)(ii) of Regulation S-K.
The report date referenced in the consent of the independent registered public accounting firm included as exhibit [X] is inconsistent with the report date of the report of the independent registered public accounting firm . . . included [in] your registration statement. Please revise so that these report dates are consistent.
We note that you have included an exhibit with a consent from [your independent registered public accounting firm] for inclusion of its reports pertaining to the audits of your financial statements and the effectiveness of internal control over financial reporting in several previously filed registration statements.

However, the consent references their audit reports dated February [X], [year 1], which were filed with your annual report last year, rather than February [Y], [year 2], which is the date of their audit reports in your more recent annual report.

If you intend to utilize or maintain the registration statements identified in the consent, please obtain and file an updated auditor consent in an amendment to your report.

In their registration statements under the Securities Act (e.g., Forms S-1, S-3, and S-4) and periodic reports under the Exchange Act (e.g., Forms 10-K and 10-Q), registrants sometimes refer to an “independent valuation firm” or other third party. The SEC staff has asked such registrants whether management or the board relied on a third-party expert and will sometimes infer reliance on a third-party expert even when the registrants do not refer to one. Examples of third-party experts that registrants commonly consider or rely on include the following:

Valuation firms, about:
- The valuation of a registrant’s common and preferred stock in an IPO.
- The fair value determination of goodwill and assets acquired and liabilities assumed in a business combination.
- The fair value determination of a long-lived asset group.
- The determination of goodwill impairment.
- The determination of an environmental liability.
An independent actuary, about the estimation of workers’ compensation liability.
Petroleum engineers, about the evaluation of oil and gas reserves.
Pricing services or brokers that provide information used to determine the fair values of financial assets or liabilities. See Section 2.7.2 for additional considerations.
Counsel providing legal opinions.
Tax specialists providing tax opinions.

The SEC staff has stated that in registration statements or periodic reports, registrants generally are not required to refer to an independent valuation firm or other expert. If a registrant does not refer to the expert in its filing, it is not required to name the expert or obtain the expert’s consent; however, certain SEC requirements may compel the registrant to include or summarize an expert’s report or opinion in its filing and could trigger a consent requirement. Registrants that refer to experts in their filings should consider the implications related to periodic reports and registration statements.

In addition, the SEC has historically issued comments asking registrants to amend experts’ language or consents to (1) fix typographical errors, (2) provide updated consents when amended registration statements are filed, (3) include proper dates or titles of referenced financial statements, (4) include the proper date or title of the consent issued by the independent registered public accounting firm, and (5) include the signature of the independent registered public accounting firm in a consent.

3.9.2.1 Periodic Reports (Exchange Act)

Independent registered public accounting firms are not required to consent to the inclusion of their audit or review reports in periodic reports filed in accordance with the Exchange Act (e.g., Forms 10-K or 10-Q).33 However, the guidance below on registration statements should be applied if the registrant (1) refers to an independent valuation firm or other expert in a periodic report and attributes statements in the report to the expert and (2) incorporates that periodic report by reference into a registration statement.

3.9.2.2 Registration Statements (Securities Act)

Historically, when a registrant has referred to third-party experts in a registration statement, the SEC staff has asked the registrant to provide the experts’ consents, including those from the registrant’s independent registered public accounting firm. However, C&DIs issued by the staff appear to indicate that the key to assessing whether a consent will be required is determining the degree to which management takes responsibility for statements related to work performed by a third-party expert that are included in or incorporated into the registration statement. The staff typically evaluates the totality of the disclosure provided when determining whether management is taking responsibility for the conclusion.34

3.9.2.3 Scope

The SEC staff has also commented on the use of “limiting” language in consents provided by third-party experts. The staff has emphasized that an expert’s consent should not contain any language that limits the use of the consent to the registrant or suggests that there is a limit on potential investor reliance.

3.9.3 Material Contracts

Examples of SEC Comments

We note your disclosure in the risk factors . . . and also your later disclosure in the MD&A section regarding the significance of your recurring arrangements with [certain customers]. Please file the respective master service agreement for each customer in accordance with Item 601(b)(10) of Regulation S-K, or tell us why you believe you are not required to file the agreements. Further, please disclose the material terms of the agreements, and discuss any material adverse impact on your operations if either agreement were to be terminated.
Please explain to us your consideration of Item 601(b)(10) of Regulation S-K in determining whether to file as an exhibit the Collaboration and License Agreement with [Customer A].
Please file all exhibits required by Item 601 of Regulation S-K with your amended 10-K, including, but not limited to, any plans of acquisition, reorganization, arrangement, liquidation or succession, articles of incorporation, bylaws, description of your securities, material contracts, list of subsidiaries, and consents of experts. Please consult Item 601 of Regulation S-K for guidance.

Regulation S-K, Item 601, requires registrants to file certain material contracts as exhibits if, during the reporting period, such contracts (1) become effective or (2) are executed, amended, or modified. For example, Item 601(b)(10) requires a registrant to file:

Every material contract that is “not made in the ordinary course of business.”
Any material contract “made in the ordinary course of business”:
- With certain parties, such as directors, officers, promoters, voting trustees, certain security holders, or underwriters, other than contracts involving only the purchase or sale of current assets at a price that equals a determinable market price.
- On which the registrant’s business substantially depends.
- For the acquisition or disposition of any property, plant, or equipment for consideration exceeding 15 percent of the registrant’s total consolidated fixed assets.
- For a lease under which part of the property is held by the registrant.
Generally, any management contract or compensatory plan, contract, or arrangement in which a director or NEO of the registrant participates (such contracts are considered material) and any other material management contract or any other compensatory plan, contract, or arrangement in which any other executive officer of the registrant participates.35
Any other material compensatory plan, contract, or arrangement “adopted without the approval of security holders pursuant to which equity may be awarded” in which any employee of the registrant (i.e., regardless of whether the employee is an executive officer) participates.

Accordingly, the SEC staff issues comments when registrants omit certain material agreements. Recent comment letters have instructed registrants to do either of the following:

File the material agreements in their entirety, including schedules and related exhibits, as exhibits to Form 10-K or 10-Q or separately on Form 8-K in accordance with Item 601.
Explain why they have not filed the agreements.

For SEC staff views on when registrants may be required to file agreements as exhibits under Item 601, see Sections 146, 206, and 246 of the Regulation S-K C&DIs.

3.9.4 Interactive Data — eXtensible Business Reporting Language

3.9.4.1 SEC Staff’s Review and Observations

Examples of SEC Comments

The staff notes that you have not submitted electronically and posted on your corporate Web site every Interactive Data File required to be submitted and posted during the preceding 12 months. Please file this information pursuant to Rule 405 of Regulation S-T.
The XBRL Document and Entity Identification Information rendered as part of your filing appears to contain a number of data element errors, including but not limited to, your classification as a nonaccelerated filer. Please revise to comply with the requirements of Section 405 of Regulation S-T and the EDGAR Filer Manual.
Please amend your quarterly report to include the interactive data exhibits required by Item 601(b)(101) of Regulation S-K.
We remind you that non-accelerated filers and smaller reporting companies are required to present inline XBRL data for the first Form 10-Q for a fiscal period ending on or after the June 15, 2021 compliance date. In future periodic filings, please submit inline XBRL information to comply with Item 601(b)(101) of Regulation S-K.
With respect to XBRL tagging of Form 10-K, please utilize the appropriate taxonomy instead of customary tags. Please avoid customary tags . . . . In addition, please explain why custom tags, as opposed to appropriate taxonomy, were utilized in the Annual Report.

The SEC staff continues to monitor registrants’ interactive data file (i.e., iXBRL) submissions for completeness and compliance with the provisions of Regulation S-T, Rule 405. The staff often asks whether the registrant has (1) submitted its interactive data files as an exhibit to Form 10-K and Form 10-Q in accordance with Regulation S-K, Item 601(b)(101); (2) checked the appropriate box on the cover page of its Form 10-K or 10-Q to indicate that all required interactive data files have been submitted; and (3) posted its interactive data files on its Web site. When a registrant has omitted a required interactive data file exhibit, the staff may ask why and request an amended filing that includes the missing information. Further, on September 7, 2023, the Division issued a sample letter highlighting comments that it may issue to registrants “regarding their disclosure obligations as they relate to XBRL and [iXBRL].” As a result, we expect the SEC staff to continue focusing on these disclosure obligations in its reviews of registrants’ periodic filings and registration statements.

The SEC staff also considers the quality of interactive data filings and has commented broadly on the problems encountered in that regard. For example, the staff has indicated that it continues to see basic errors in interactive data submissions and has directed registrants to its observations on the SEC’s Web site for additional details. Specifically, the staff has reminded registrants to (1) use negative values properly, (2) ensure the completeness of tagging, and (3) use custom tags only when appropriate. See Deloitte’s April 20, 2020, Heads Up, which further discusses developments in XBRL reporting.

3.9.4.2 Requirement to Include Calculation Relationships

Sections 6.14 and 6.15 of the EDGAR Filer Manual provide guidance on complying with the requirement to include calculation relationships in an interactive data file. In addition, the SEC staff’s “Dear CFO” letter, which was posted to the SEC’s Web site in July 2014 and has been sent to a number of public companies, reminds registrants that the XBRL rules require them to “include calculation relationships for certain contributing line item elements for [the] financial statements and related footnotes.” The letter advises registrants to “take the necessary steps to ensure that [they] are including all required calculation relationships” in their XBRL files.

3.9.4.3 Interactive Data Requirements in Other Filings

Example of an SEC Comment

Please provide the XBRL interactive data file that is required to be submitted pursuant to Item 601(b)(101)(i) of Regulation S-K. For guidance, please refer to Regulation S-K Compliance and Disclosure Interpretations Question 146.17, available at: http://www.sec.gov/divisions/corpfin/guidance/regs-kinterp.htm.

Under Regulation S-T and Regulation S-K, Item 601(b)(101)(i), registrants must submit an interactive data file as an exhibit to a registration statement if the registration statement contains (1) financial statements and (2) a price or price range. For purposes of Item 601(b)(101)(i), the disclosure of the “offering price” of a shelf offering, an at-the-market offering, an exchange offer, or a secondary offering in a filed registration statement is construed as a price or price range.

In addition, Item 601(b)(101)(i) highlights that an interactive data file would be required for a Form 8-K filing “when the Form 8-K contains audited annual financial statements that are a revised version of financial statements that previously were filed with the Commission and that have been revised pursuant to applicable accounting standards to reflect the effects of certain subsequent events, including a discontinued operation, a change in reportable segments or a change in accounting principle.”

Further, registrants should monitor new rules issued by the SEC as a result of the Dodd-Frank Act or other legislation to see whether they require XBRL tagging of specified information that otherwise would be outside the scope of the SEC’s interactive data requirements.

3.9.5 Audit Report Requirements

Examples of SEC Comments

We note the reference to the report of other auditors . . . for the financial statements . . . . Please amend your filing to include the audit report for the . . . financial statements. Refer to the requirements of Rule 2-02 and 8-02 of Regulation S-X.
Please have your [auditors] revise their audit report to comply with PCAOB AS 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion. Refer to SEC Release 34-81916.
Please revise to indicate the related notes to the consolidated financial statements were also audited. Refer to AS 3101.08d.
We note that the audit report does not address critical audit matters identified, if any. Please revise to comply with AS 3101.
[T]he audit report needs to state the city within the country from which the report was issued pursuant to PCAOB AS 3101.10c.
We note that you filed an audit opinion that covers only your [year 2] financial statements, and that you previously reported a change in auditors effective September [X], [year 2].

However, you must obtain and file an audit opinion or audit opinions for both fiscal years to comply with Rule 8-02 of Regulation S-X. Under these circumstances, you may either arrange with the prior auditor for a reissuance of their audit opinion or engage your current auditor to re-audit the [year 1] financial statements.

If you are able to rely on the prior audit work, please confirm that you have made appropriate arrangements with the prior auditor for a reissuance of their opinion.

The SEC staff has commented when a registrant does not comply with (1) Regulation S-X, Rule 2-02, and (2) PCAOB Auditing Standard (AS) 3101, as amended.36 For example, the staff has commented when a registrant:

Includes a report from its auditor that does not appropriately identify the financial statements, including the related notes and any related schedules, covered by the audit report.
Includes a report from its auditor for a fiscal year ending on or after December 15, 2017, that does not comply with PCAOB AS 3101, as amended.
Includes a report from its auditor that does not indicate that the auditor conducted the audits in accordance with (1) PCAOB standards for issuers or (2) U.S. generally accepted auditing standards for nonissuers (with certain exceptions, as noted in paragraph 4210.4 of the FRM).
Is not an EGC and includes a report from its auditor that does not address critical audit matters.
Does not include the report of the other auditor when its principal auditor makes reference to the work of the other auditor in the principal auditor’s report on either the financial statements or ICFR.

The SEC staff will generally ask the registrant to amend its filing or provide a revised audit report if the report is not in compliance with the technical requirements of Regulation S-X, Rule 2-02(a), or Regulation S-T, Rule 302, including the requirements related to typed “signatures” in electronic submissions.

In addition, the CAQ issued Alert 2012-16 to remind auditors that it “would not be appropriate for the auditor’s report for issuers or other entities that require compliance with PCAOB requirements to reference only the auditing standards of the PCAOB” since this qualifying language may imply that the auditor did not adhere to other standards of the PCAOB (e.g., its independence standards). The alert also encouraged registrants and auditors to review paragraph 4110.5 of the FRM for additional information about the applicability of certain PCAOB requirements to various SEC filings.

Other Deloitte Resources

August 30, 2019, Heads Up, “Critical Audit Matters Make Their Debut!”

June 20, 2017, Heads Up, “PCAOB Adopts Changes to the Auditor’s Report”

3.9.6 Exclusive Forum Provisions

Example of an SEC Comment

We note that your forum selection provision in your bylaws identifies the Court of Chancery of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) as the exclusive forum for certain litigation, including any “derivative action.” Please disclose whether this provision applies to actions arising under the Securities Act or Exchange Act. If the provision applies to Securities Act claims, in future filings, please clearly describe any risks to investors related to the provision and also disclose that there is uncertainty as to whether a court would enforce such provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. If the provision does not apply to actions arising under the Securities Act or Exchange Act please revise in future filings to clearly indicate that the provision does not apply to any actions arising under the Securities Act or Exchange Act.

In recent years, the SEC has increased its focus on exclusive forum provisions contained in registrants’ charters, bylaws, and articles of incorporation. Exclusive forum provisions provide that a particular court is the sole and exclusive forum for certain types of litigation. As a result of these provisions, the SEC staff has commented that registrants must clarify whether the designation of a particular court as the exclusive forum would apply in lawsuits brought to enforce any duty or liability created by the Securities Act or Exchange Act.