SEC compliance and disclosure, Form 8-K (sample)

Research conducted by Arthur Mboue

SEC Compliance and Disclosure-(series 6)

(Form 8-K and events that triggers 8-K filing)

By

Arthur Mboue


What is Form 8-K?• The Form 8-K is the filing that companies make to

announce current occurrence of significant corporate events that stakeholders need to know before making business decision related to the company

• The US reporting company is responsible for the filing of 8-K while FPI uses 6-K

• Events leading to the filing of Form 8-K filing– Bankruptcy– Departure of key executive (such as CEO, CFO,…)– Notice of delisting– Change in Accountant– Announcement of new appointment,…


SEC staff commentForms Percentages

S- 81%

F-1 11%

10-K 7%

S-4 0.4%

8-K 0.4%

1-A 0.2%


Historic Evolution of Form 8-K

• Created in 1936• Big implementation in 1977• Differences between 1977 (6 categories with

12 items) and actual (9 sections with 30 items)

Hidden slides


Managing external Reporting Form 8-K

Transactions Corporate reporting

Management Reporting External reporting

The nature of Accounting Policies

Consolidate financial statement reporting and disclosure policy

sales and goods policy

Revenues recognition policy

Methods of Depreciation and Amortization policies

Cash and equivalent policy

Investments securities policy

Inventories (classification) policy

fixed assets policy

contingent liabilities policy

Intangibles assets policy

financial instrument policy

shared based payments policy

retirement benefits policy

Fair value Measurement policy Investment in debt and Equity securities policy

Derivative and Loan (obligation) policy Long term Assets (obligations) policy

Retained Investment (in formerly consolidated) policyAccounting changes

Current assets (restrictions) policy


System of control for financial reporting

Use of Form 8-K checklist

Prepare supporting documentation for triggering events

Assess and verify triggering events

Prepare disclosures memo

Verify that triggering events matches Form 8-K report

Issue version to the CEO for comments

Initiate Filing process

Create a draft of report

Verify accounts of triggering events

Prepare disclosure

Review content of Form 8-K report

Issue form-K report

Require approval for key for Form 8-K filing

Conduct analytical review of these events

Prepare disclosure support documentation

Match SEC report to documented triggering events

Encourage peers, directors, executives to submit comments

Summarize transactions to Form 8-K filingResearch conducted by Arthur Mboue

Form 8-K Checklists• Write Form 8-K report• Double check content of the Form 8-K report• Make needed corrections• Complete remaining required disclosures • Prepare supporting documents for your action plan of Form 8-K

disclosures• Prepare analysis, track and assemble documents requested for

your action plan• Obtain legal and non-legal reviews of Form 8-K report • Obtain executives and board reviews and comments• Prepare report for submission to the SEC• Obtain final approval from the committee• File the report with the SEC’s EDGAR system


Example of Risk• Accounting processes• Auditing matters• Compliance with regulatory issues: missed deadlines• Falsification of financial and managerial data• Contractual fraud• Improper allocation of gifts for tax credits, contract…• Improper vendor or contractor activity• Misinterpretation of triggering events• Poor analysis of materiality of the triggering events


Types of Controls• Preventive Controls

– Only minimize errors and missed filed Form 8-K and thereby avoid the cost of correction, litigation and reputation

– Discourage and deter fraud and penalize laziness– Put new tools and staff before any shortage problems– Minimize legal costs

• Detective Controls– Measure the effectiveness of preventive and deterring controls– Uncover errors and missed filed form 8-K– Uncover misinterpreted triggering events filing– Provide the means to establish accountability– Maximize human capital value



Global HR Models

• Different Channels for talented staff – In house corporate department– Co-sourcing– Outsourcing– Contract personnel– Shared service centers– Centers of excellence

Issues facing companiesProcess barrier Technology barrier People barrier Regulatory barrier

• Multiple triggering events

• Manual processes resulting in delays and errors

• Weak collection trails• Delay variances• Reconciliation of

management and statutory reporting

• Data collection errors and high volumes of late adjustments

• Complex triggering events handled with non standard procedures and significant judgment

• Limited time for analysis

• Lack of documentation• Different time zones,

cultures and languages

• Lack of access to critical data (CAT- consolidated audit trail & MIDAS (market information data analytics system)

• Data transmission problems because of market fragmentation, foreign operation and rise of electronic trading

• Lack of automation• Lack of integration with

source systems and manual data input

• Poor performance of triggering events collection applications

• Limited capabilities to support increasing data volumes, system disparity, and data inconsistencies arising from company growth, mandatory regulation and acquisition w/o real integration

• Lack of a clearly defined accountability framework

• Lack of clear understanding of roles and responsibilities

• Lack of proper training on managerial policies and analytical methods

• Internal politic problems between HQ and subsidiaries over triggering events material for disclosure

• Late delivery from reporting units

• Lack of staff experience with systems and regulation processes

• Constant changing staff with a little acculturation

• Lack of visibility into tasks and activities across multiple locations and systems

• Differing interpretations of triggering events (HQ, subsidiaries,…)

• Added pressure of adopting new regulations and accounting standards

• Resource intensive manual internal control activities

• Lack of internal policies of control deficiencies, decentralization, delegation of decision making (materiality,…)

• Increasing complex statutory, regulatory and internal demands for disclosure coupled with poor delegation



Best Practices • Strategic initial steps

1. Getting Top executive involved2. If it does not exist, form a disclosure control committee3. Educate the board about 8-K triggering events4. Review existing disclosure procedures5. Review the company existing DCP program6. Make sure that multiple staff and directors learn about the occurrence of a triggering event and what it

means for the company7. Select a good team to track and document all triggering events

• Necessary management to achieve a timely disclosure1. implement an early warning system for Form 8-K reporting, press releases and other events2. Put a look back process to search and review whether the company has missed required Form filing and file

amendment or update 10-K and 10-Q3. Enforce deadline4. Track resignation and other officers and directors changes5. Track all relevant unregistered sales of securities6. Consider what is material 7. Promote the awareness of new rules, forms changes and interpretative guidance

• Leading toward a reliable and accurate disclosure1. Prepare reporting timetable2. Implement procedures for drafting press releases and form 8-Ks3. Install tools for gathering needed and crucial information 4. Focus on segregated duties and responsibilities accountable to specified and talented staff and management 5. Prepare the disclosure in the periodic report

Hidden slides


Form 8-K disclosure worksheet (good strategy to control timely filing)

• Names of director, executive or staff and their actions• Reference action words:

1. Received2. Verified3. Certified4. Filed5. WIP6. Exempted7. Cancelled8. Forwarded

Form 8-K

Item number

Triggering Event requiring disclosures Director in charge

Executive in charge

Staff in charge

status

Section I. Registrant’s business and operations

1.01 Entry into ‘material definitive’ agreement that provides for rights or obligations material to and enforceable by or against the agreement

1.02 Termination of material definitive agreement

1.03 Bankruptcy or receivership

1.04 Mine safety reporting of shutdowns and patterns of violations

SECTION II. Financial Information

2.01 Completion of acquisition or disposition of significant amounts of assets (other than ordinary course of business)

2.02 Disclosure of material non public information regarding a completed fiscal year or quarter (Results of operation and financial condition)

2.03 Creation of direct financial obligation or an obligation under an off balance sheet arrangement

2.04 Triggering events that accelerate or increase a direct financial obligation or an obligation under an off balance sheet arrangement

2.05 Costs associated with exit or disposal activities

2.06 Material impairments

SECTION III. Securities and Trading Markets

3.01 Notice of delisting or failure to satisfy a continued listing rule or standard, transfer of listing


Law

SEC compliance and disclosure, Form 8-K (sample)