More Changes on SEC Periodic Reports: Certifications, Earnings Releases, and Internal Controls

Many public companies have just released earnings information for the quarter ended June 30, 2003 and are in the process of finalizing the Quarterly Report on Form 10-Q due on August 14, 2003. Recent SEC rules affect the way companies furnish earnings releases with the SEC. The rules also change the procedure for filing CEO/CFO certifications and the disclosure required about the company's disclosure controls and procedures and internal control over financial reporting.

Furnish Earnings Releases as Item 12 of Form 8-K

Companies are required to furnish any public announcement or release disclosing material non-public information about the results of operations or financial condition of the company for a completed fiscal period on Form 8-K. The rules created a new Item 12 of Form 8-K for furnishing earnings releases. When Item 12 was created, the SEC had not yet reprogrammed Form 8-K to add Item 12 and, therefore, the SEC issued interim guidance directing companies to furnish the earnings release under Item 9. Effective July 28, 2003, the SEC adopted EDGAR Release 8.6, which among other changes to EDGAR, permits companies to furnish earnings releases as Item 12 of Form 8-K.

In addition to adding Item 12, the EDGAR Release also implements Item 10, 11 and 13 of Form 8-K. Item 10 will be used to disclose amendments to or waivers of a company's code of ethics. Item 11 should now be used for any notice required by Regulation BTR of a suspension of trading under a pension plan. Item 13 is reserved for future use.

CEO/CFO Certifications

Currently, companies file the CEO/CFO certifications required by Section 302 of Sarbanes-Oxley immediately following the "Signatures" section of the report and the CEO/CFO certification required by Section 906 of Sarbanes-Oxley as Exhibit 99. Commencing July 28, 2003, the 302 certifications will be filed as Exhibit 31 and the 906 certification as Exhibit 32. Most companies will file the CEO's certification as Exhibit 31.1 and the CFO's certification as Exhibit 31.2. The CEO and CFO can sign the same 906 certification and file it as Exhibit 32 or have the CEO and CFO sign separate 906 certifications and file them as Exhibits 32.1 and 32.2.

When the SEC adopted final rules implementing Section 404 of Sarbanes-Oxley regarding internal controls and auditor attestation, the SEC also approved amendments to the text of the Section 302 certification. While certain of the changes to the Section 302 certification are delayed until the internal controls report becomes effective, there are some changes to the Section 302 certification that are effective for reports due on or after August 14, 2003. Accordingly, any Form 10-Q for a quarterly period ended on or after June 30, 2003 will need to incorporate these changes into the Section 302 certifications. See attached copy of the new form of the 302 certification to be filed with any Form 10-Q, as well as a marked copy of the Section 302 certification that shows changes from the previous version. There is no substantive change to the text of the 906 certification; however, it is no longer necessary to include the statement recommended by the SEC in its interim guidance that a signed original of the certification has been provided to the company and will be furnished to the SEC or its staff upon request.

Disclosure Regarding Controls and Procedures Required by Item 307 of Regulation S-K

The SEC's final rules implementing the internal control report also amended Item 307 of Regulation S-K, which requires disclosures about the company's controls and procedures. The rules also add a new Item 308 of Regulation S-K regarding internal control over financial reporting. The effectiveness of Item 308 has been delayed and will not be required until the first fiscal year ending on or after June 15, 2004 for "accelerated filers" and for the first fiscal year ending on or after April 15, 2005 for other filers.

The amendments to Item 307, however, are effective now and require that management's evaluation of the company's disclosure controls and procedures be conducted "as of" the last day of the period covered by the report. The prior rule required management to conduct its evaluation within 90 days following the end of the period covered by the report. The SEC's amended rule does not specify when the evaluation must occur, but it does require that the disclosure of management's conclusions about the effectiveness of the disclosure controls must be "as of" the end of the period. Item 307(b), which required management to make certain disclosures about changes in internal controls, is no longer specifically required. However, because the Section 302 certification requires the CEO and CFO to certify that they have "disclosed in the report any change in the registrant's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting," disclosure similar to that previously required by Item 307(b) should still be included in Item 307 until Item 308 becomes effective.