Tuesday, September 1, 2020

Not long ago the Securities and Exchange Commission adopted new rules to reduce the amount of disclosure that firms need to make about business risks, legal proceedings, climate change, and other issues.

Those changes go into effect within 30 days of their being published in the Federal Register, which typically happens within a few weeks. So on a practical basis, companies could start filings disclosures according to this new, slimmer standard by the end of this year.

That poses an immediate question for financial analysts: How do you figure out exactly what has changed from one filing to the next?

Like, sure, you could easily see that overall disclosure was reduced from one quarter to the next — but the devil is always in the details. So how do you pinpoint exactly what has changed, to determine what has happened to some point you consider telling or important?

As always, Calcbench has your back. Here’s how you do it.

Start on our Interactive Disclosures page. Pull up the relevant filing for whatever company you’re researching. Figure 1, below, shows the commitments and contingencies disclosure for Apple ($AAPL) in its second-quarter 2020 filing from earlier this summer.

These are the disclosures Apple provides about various lawsuits it is facing, from consumers, regulators, investors, or others. (We chose Apple to demonstrate our search features only because it’s a high-profile name, and have no idea how significant the disclosed matters actually are.)

Notice the third tab on the top, “Compare to Previous Disclosures.” Click on that, and you see a three column display akin to Figure 2, below.

The column on the left is the original disclosure you were looking at; in this case, Apple’s Q2 2020 report. The column on the right is the prior period: Q1 2020.

The column in the middle shows what text has changed between the two periods. Text that was removed from the prior period is shaded in red; text that was added to the current disclosure is shaded in green.

That’s how you can identify textual changes in disclosure quickly and easily.

In this specific case, we zoomed into civil litigation over Apple’s iOS operating system. If you squint, you can see that in February 2020 Apple agreed to settle this litigation, and will ultimately pay somewhere between $310 million to $500 million to plaintiffs. That’s the paragraph shaded in green.

You can use our Compare to Previous Period feature for any disclosure a company makes: MD&A, risk factors, contingencies, segment disclosures, or whatever else you want to research. So however disclosures might change under new SEC reporting rules, Calcbench remains ready to help you find the information you need.

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