Yes, the SEC Does Follow Up on Comment Responses!

Comment of the Week

In our workshops and conferences, we emphasize that when a company states it will change its disclosure in future filings in response to an SEC comment, the CorpFin staff will review the company’s future filings to ensure that the company has made the requested changes.  We also discuss how the form of the certifications is a frequent “please amend” comment.

In its Form 10-K for its fiscal year ended November 30, 2022, BestGofer Inc. used this language, including three subparagraphs, for paragraph 4 in its CEO and CFO certifications:

  1. The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the issuer and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

While hopefully none of us have had to memorize the certification language, a quick look at Regulation S-K Item 601(b)31(i) shows us that paragraph 4 should contain these four subparagraphs:

  1. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Interestingly, the company omitted paragraph b above addressing ICFR. (That paragraph is bolded and underlined above.)

In a comment letter dated May 25, 2023, the SEC made this comment:

Form 10-K for the Fiscal Year Ended November 30, 2022

Exhibits 31.1 and 31.2

    1. Please revise the Rule 13a–14(a)/15d–14(a) certifications (Exhibit 31) in your Forms 10-K and 10-Q going forward to also include the language in paragraph 4(b) of Item601(b)(31)(i) of Regulation S-K. Please show us an example of what a revised Exhibit 31 will look like.

The company’s response dated June 8, 2023, indicated that the company would include the required language in future filings.

While a company might hope that this would be the end of the story for a comment like this, the staff does indeed follow up to ensure companies keep their commitments in future filings.  Unfortunately, BestGofer Inc. did not include this required language in a later Form 10-K, which lead to this “please amend” comment in a letter dated June 25, 2025:

Form 10-K for the Fiscal Year Ended November 30, 2024

Item 15. Exhibits, Financial Statement Schedules

Exhibits 31.1 and 31.2, page 12

    1. Your June 8, 2023 response to comment 1 in our letter dated May 25, 2023 indicated you would revise your Exhibit 31 certifications in future Forms 10-K and 10-Q to also include the language in paragraph 4(b) of Item 601(b)(31)(i) of Regulation S-K. However, you have not done so. Please amend your Form 10-K for the fiscal year ended November 30, 2024 and your Form 10-Q for the period ended February 28, 2025 to include revised Exhibit 31 certifications containing the language precisely as set forth in Item 601(b)(31)(i) of Regulation S-K. Also, ensure future Forms 10-K and 10-Q include the correct language in the Exhibit 31 certifications.

As always, your thoughts and comments are welcome!

SEC Announces 2025 Enforcement Results

SEC News

On April 7, 2026, the SEC announced its enforcement results for fiscal year 2025.  In 2025, 456 enforcement actions were filed.  This included 303 standalone actions and 69 “follow-on” administrative proceedings seeking to bar or suspend individuals.  You can read more about these results and the Commission’s strategy to refocus enforcement resources to address situations that harm investors, including fraud and the persons who perpetrate fraud.

As always, your thoughts and comments are welcome!

A Frequent (and Avoidable) Liquidity and Capital Resources Comment

SEC Comment of the Week, SEC Hot Topic

In its June 30, 2025, Form 10-Q, Getty Images Holdings, Inc. made this disclosure in the Liquidity and Capital Resources section of their MD&A:

Operating Activities

Cash provided by operating activities is primarily comprised of net income, as adjusted for non-cash items, and changes in operating assets and liabilities. Non-cash adjustments consist primarily of depreciation and amortization, unrealized gains and losses on our foreign denominated debt, equity- based compensation and deferred income taxes.

For the six months ended June 30, 2025 cash provided by operating activities was $21.9 million, as compared to cash provided by operating activities of $68.0 million for the six months ended June 30, 2024. The decrease in cash provided by operating activities was primarily driven by merger related costs.

In a comment letter dated September 26, 2025, the SEC focused on one of their frequent liquidity and capital resources comment issues:

Liquidity and Capital Resources. – Operating Activities, page 35

Please provide a more informative analysis and discussion of changes in cash flows, including changes in working capital components, for each period presented. In doing so, explain the underlying reasons and implications of material changes between periods to provide investors with an understanding of trends and variability in cash flows from operating activities. Ensure your discussion and analysis is not merely a recitation of changes evident from the financial statements. Refer to Item 303(a) of Regulation S-K and sections IV.B and IV.B.1 of SEC Release No. 33-8350.

In their response letter dated October 9, 2025, Getty Images provided this example of expanded disclosure:

For the six months ended June 30, 2025, cash provided by operating activities was $21.9 million, as compared to cash provided by operating activities of $68.0 million for the six months ended June 30, 2024. The decrease in cash provided by operating activities was primarily driven by merger related costs, of which $26.3 million were paid in the six-month period ending June 30, 2025. These costs were comprised mainly of professional services fees, including legal, advisory, accounting and tax fees. In addition, our cash provided by operating activities was impacted by changes in working capital, including reduced cash flows from the change in timing of collections of accounts receivable and the payments of accrued expenses, increased cash flows from the timing of payments for accounts payable and interest, changes in deferred revenue and an increase in cash paid for taxes of $5.6 million for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024

This discussion of the drivers of cash flow versus a mechanical recitation of operating cash flow reconciling items provides much more useful information.

As always, your thoughts and comment are welcome!

SEC Comment Letter Posting News

SEC News

At “The SEC Speaks in 2026,” a conference presented by PLI in cooperation with the U.S. Securities and Exchange Commission, members of CorpFin announced that the comment letter posting process is about five months behind.  Thus, information about comment letter volume and frequent comment areas will likely not be complete until the posting process is up to date.  The staff did not provide an estimate of how long this would take.

As always, your thoughts and comments are welcome!

P.S., PLI provides a complimentary non-accredited live stream of The SEC Speaks, which you can find here.

C&DI’s Renamed as Corporation Finance Interpretations

SEC News

Over the years we have blogged about the valuable guidance provided by CorpFin’s Compliance and Disclosure Interpretations (C&DIs).  We have even lightheartedly referred to them as the CorpFin “candy” dish.

CorpFin has renamed this section of their guidance as Corporation Finance Interpretations, a shorter and perhaps broader name.  There is still a consolidated, word searchable version of the interpretations.  And we are taking suggestions for fun ways to build a nickname for the now named “CFIs.”

As always, your thoughts and comments are welcome!

PCAOB Creates Audit Practitioner Fellowship Program

PCAOB News

On March 13, 2026, the PCAOB announced its new Audit Practitioner Fellowship Program, in which  audit practitioners will join the PCAOB Office of the Chief Auditor as full-time employees for a two-year term.

According to PCAOB Chairman Demetrios (Jim) Logothetis:

 “This fellowship program will enable the PCAOB to tap into the deep expertise of professionals with in-the-field perspectives on the latest technologies that are reshaping the financial reporting ecosystem.  Their insights will strengthen our ability to anticipate what lies ahead and enhance our understanding of the most pressing issues affecting auditing.”

You can find more information and a link to the application process in this News Release.  The application process will close on May 15, 2026.

As always, your thoughts and comments are welcome!

An SEC Comment on a Control Deficiency

Comment of the Week, Reporting

In its Form 10-Q for the quarter ended June 30, 2025, The Goodyear Tire & Rubber Company disclosed that it had identified errors in its previously issued financial statements related to the historical currency remeasurement of its operations in Turkey, which had been designated a highly inflationary economy beginning April 1, 2022:

NOTE 16.  REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

As discussed in Note 1, in preparing the consolidated financial statements as of and for the three and six months ended June 30, 2025, we identified errors in our previously issued financial statements related to our historical computation of currency remeasurement of our foreign operations in Turkey, which was designated as a highly inflationary economy beginning April 1, 2022. The identified errors impacted our previously issued 2022, 2023 and 2024 annual and interim financial statements. The impact of the errors on the previously issued consolidated statements of operations and comprehensive income for the quarter ended March 31, 2025 were de minimis. There were no impacts on previously reported cash flows from operating, investing and financing activities in any prior periods.

We evaluated the errors in accordance with SEC Staff Accounting Bulletin Nos. 99 and 108 and determined that the related impacts were not material in any previously issued annual or interim financial statements. We revised the prior period amounts presented in these financial statements to correct the errors. The applicable notes to the accompanying financial statements have also been corrected to reflect the impact of the revisions of the previously filed consolidated interim financial statements.

The following tables reflect the impact of the revision to the specific line items presented in our previously reported financial information.

Impacts to Consolidated Statements of Operations and Comprehensive Income (in millions, except per share data)

As you might expect with this type of revision, the SEC asked Goodyear about related ICFR implications in a comment letter dated September 10, 2025:

Form 10-Q for the Period Ended June 30, 2025

Notes to Consolidated Financial Statements

Note 16. Revision of Previously Issued Financial Statements, page 33

    1. We note your disclosure that you identified and corrected immaterial errors related to your historical presentation of your foreign operations in Turkey. Please tell us further details of the error, including, but not limited to, a discussion of who identified the error, when, and how, and whether it was the result of any control deficiency. In your response ensure you include a thorough discussion and description of the control deficiency to the extent one was identified, the Company’s evaluation of whether it was a control deficiency, significant deficiency, or material weakness, and any remediation plans. To the extent the Company concluded there was not a control deficiency, tell us why.

As you can read in the company’s September 23, 2025 response letter, Goodyear explained that the error was identified during second-quarter 2025 close procedures. The issue arose from a manual process used to remeasure inventory and accounts payable balances in Turkey following that country’s designation as highly inflationary.

Management concluded that the root cause was a design deficiency—specifically, the lack of an effectively designed control to verify that manually translated balances agreed to the general ledger.

Importantly, Goodyear evaluated the deficiency under the SEC’s internal control framework and concluded:

  • The deficiency was limited to Turkey, which represented approximately 2% of consolidated revenues and less than 1% of consolidated assets in the affected years.
  • The impact was confined to inventory and accounts payable in Turkey.
  • It was not reasonably possible that the potential misstatement could be larger than the actual error identified.
  • There were no broader indicators of pervasive control failures or fraud.

Based on this analysis, the company determined that the issue constituted a significant deficiency, but not a material weakness, and that its internal control over financial reporting remained effective.

Goodyear also implemented a remediation plan that included redesigning the balance sheet remeasurement control to calculate translated Turkey balances and agree them to the U.S. dollar general ledger.

Following its review of Goodyear’s response, the SEC did not issue additional comments. In other words, the Staff accepted the company’s internal control conclusions.

For practitioners, this comment letter underscores the importance of documenting complex judgments contemporaneously and thoroughly.

As always, your thoughts and comments are welcome!

When Might a Computer System Upgrade Be Material?

Reporting

The reporting requirements for material changes in ICFR apply to both Forms 10-K and 10-Q and are contained in Regulation S-K Item 308(c):

(c) Changes in internal control over financial reporting. Disclose any change in the registrant’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of § 240.13a-15 or 240.15d-15 of this chapter that occurred during the registrant’s last fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

The materiality of some changes in ICFR is fairly easy to determine, such as when a material weakness arises and ICFR goes from effective to ineffective.  But this is not always the case.  For example, determining whether installation of a new or upgraded system creates a material change in ICFR can be a complex and subjective judgment.  This type of change in ICFR is addressed in Question 7 of these Sarbanes-Oxley C&DIs:

After the registrant’s first management report on internal control over financial reporting, pursuant to Item 308 of Regulations S-K or S-B, the registrant is required to identify and disclose any material changes in the registrant’s internal control over financial reporting in each quarterly and annual report. This would encompass disclosing a change (including an improvement) to internal control over financial reporting that was not necessarily in response to an identified material weakness (i.e. the implementation of a new information system) if it materially affected the registrant’s internal control over financial reporting. Materiality, as with all materiality judgments in this area, would be determined upon the basis of the impact on internal control over financial reporting and the materiality standard articulated in TSC Industries, Inc. v. Northway, Inc. 426 U.S. 438 (1976) and Basic Inc. v. Levinson, 485 U.S. 224 (1988).

Lamb Weston Holdings, Inc. provided an example of the issues surrounding this disclosure.  The company is a global producer, distributor, and marketer of frozen potato products. According to the company’s Form 10-K, french fries represent most of their “value-added frozen potato product portfolio.”  On April 3, 2024, Lamb Weston’s stock closed at $101.12.  The next day, on April 4, 2024, the stock closed at $81.53.  Behind this sudden stock drop was this Form 8-K for the company’s third quarter earnings release.  (The company’s third quarter ended on February 25, 2024.)  In the release the company disclosed:

ERP Transition

At the beginning of the fiscal third quarter, the Company transitioned certain central systems and functions, including order to cash, produce to deliver, source to pay, and inventory management, among others in North America to a new ERP system. After the transition, the Company experienced reduced visibility into finished goods inventories at its distribution centers, resulting in a higher-than-expected effect on customer order fulfillment rates. The transition had a greater impact on shipments of higher-margin mixed-product loads than shipments of single-product orders, resulting in unfavorable mix. The Company partnered closely with its customers to minimize the impact and estimates the lower order fulfillment rates reduced sales volume growth by approximately 8 percentage points and net sales by approximately $135 million during the fiscal third quarter, with $123 million and $12 million in the Company’s North America and International segments, respectively.

In total, the Company estimates the ERP transition negatively impacted fiscal third quarter net income by approximately $72 million, and Adjusted EBITDA by approximately $95 million.

Lamb Weston had identified the risks associated with their ERP system transition and included this risk factor in their Form 10-K for their fiscal year ended May 28, 2023:

Problems with the transition, design, or implementation of our new ERP system could interfere with our business and operations and adversely affect our financial condition.

We are in the process of building a new ERP system to replace our existing operating and financial systems. The ERP system is designed to accurately maintain our financial records, enhance operational functionality, and provide timely information to our management team related to the operation of the business. The ERP system implementation process has required, and will continue to require, the investment of significant personnel and financial resources. Due to the uncertainty caused by COVID-19, we paused ERP work in fiscal 2021, after completing the first phase of implementation. We have resumed designing the next phase of our ERP implementation of central functions in North America and are in the test stage. We expect to begin implementing this next phase in fiscal 2024. We have experienced, and may continue to experience, difficulties as we transition to new upgraded systems and business processes. These difficulties have or may include loss of data; difficulty in making payments to third-parties; difficulty in completing financial reporting and filing reports with the SEC in a timely manner; or challenges in otherwise running our business. We may also experience decreases in productivity as our personnel implement and become familiar with new systems and processes. Any disruptions, delays, or deficiencies in the transition, design, and implementation of a new ERP system, particularly any disruptions, delays, or deficiencies that impact our operations, could have a material adverse effect on our business, financial condition, and results of operations. Even if we do not encounter adverse effects, the transition, design, and implementation of a new ERP system, may be much more costly than we anticipated.

As discussed above, whether or not a computer system change is “material” can be a complex judgment.  That said, if a change could be “reasonably likely” to materially affect ICFR, it should be disclosed.  Obviously, we are looking at Lamb Weston’s situation with hindsight, but many times it is better to be conservative in deciding whether to make this kind of disclosure.  Lamb Weston included this disclosure in their third quarter Form 10-Q:

Changes in Internal Control over Financial Reporting

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated any change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended February 25, 2024. During the quarter ended February 25, 2024, we transitioned certain central systems and functions, including order to cash, produce to deliver, source to pay, and inventory management, among others, in North America to a new enterprise resource planning (“ERP”) system, as part of our multi-year effort to upgrade our information systems and ERP infrastructure across the Company. This implementation included changes to certain financial processes impacting key controls related to our internal controls over financial reporting. We have updated our internal controls as appropriate in light of the system implementation and will continue to monitor the impact of the implementation on our processes, procedures, and internal control over financial reporting.

As always, your thoughts and comments are welcome!

SEC Adopts Final Rules and Issues FAQs for the Holding Foreign Insiders Accountable Act

Foreign Private Issuer, SEC News

The Holding Foreign Insiders Accountable Act requires directors and officers of foreign private issuers to file Section 16 reports to disclose their share ownership and transactions.  This reporting requirement is effective as of March 18, 2026.  On February 27, 2026, the SEC adopted Final Rules to implement this requirement.  You can read more and find links to the Final Rules in this Press Release.

On March 9, 2026, CorpFin issued responses to a number of frequently asked questions (FAQs) about this new requirement.  The FAQs address issues including the requirement that all reports must be filed on EDGAR and various deadline details.

As a reminder, it is appropriate to obtain EDGAR IDs for all affected persons well in advance of the March 18, 2026, filing effective date.

As always, your thoughts and comments are welcome!

An Example from the SEC’s “Statistics and Data Visualizations” Webpage

SEC News

As we discussed in this blog post, on August 13, 2025, the SEC published a new webpage that provides a wealth of information about capital market transactions, participants, activity and investors.  As an example, included in the data visualizations is this graph about IPOs:

Underlying the graph is a tabular presentation that further breaks down the underlying data.  The image below is a portion of this table:

As always, your thoughts and comments are welcome!