Many public companies are beginning preparations for filing quarterly reports on Form 10-Q for the second quarter of calendar 2022. As they do so, they should review and consider the U.S. Securities and Exchange Commission (SEC) guidance for public companies regarding disclosures pertaining to Russia's invasion of Ukraine. The guidance includes a list of disclosure considerations, as well as a sample letter highlighting the types of comments that the SEC may issue during its filing review process.

The guidance indicates that, to the extent material or otherwise required, public companies should include detailed disclosures in periodic reports regarding:

• direct or indirect exposure to Russia, Belarus, or Ukraine, including:
  • operations and employees in those countries;
  • investments and securities traded in those countries;
  • dealings with sanctioned parties;
  • legal or regulatory uncertainties resulting from recent events, such as patent maintenance or other issues associated with operating in or exiting those countries;
• direct or indirect reliance on goods or services sourced in those countries;
• actual or potential disruptions in the company's supply chain; and
• other business relationships, connections to, or assets in, Russia, Belarus, or Ukraine.

The guidance also indicates that companies' financial statements should reflect and disclose any impairment of assets, changes in inventory valuations, deferred tax asset valuation allowances, disposal or exiting of business lines, changes in currency exchange rates, changes in contracts with customers, and challenges with collecting receivables due to Russia's invasion.

The guidance reminds companies that have experienced material heightened cybersecurity risks, increased or ongoing supply chain challenges, and volatility related to the trading prices of commodities since Russia's invasion of Ukraine to consider disclosing such matters, regardless of whether they have direct or indirect operations in Russia, Belarus, or Ukraine. In addition, companies should consider how these matters affect:

• management's evaluation of disclosure controls and procedures;
• management's assessment of the effectiveness of internal control over financial reporting; and
• the role of the board in risk oversight of any action or inaction related to Russia's invasion of Ukraine, including consideration of whether to continue or to halt operations or investments in Russia and/or Belarus.

The guidance includes a sample letter highlighting comments that the SEC may issue during its selective review of periodic filings as well as registration statements. Such comments may request revisions or updates to the company's filings in the following categories:

• general impact on business;
• risk factors, including cybersecurity;
• Management's Discussion and Analysis (MD&A);
• non-GAAP measures;
• disclosure controls and procedures; and
• internal control over financial reporting.

Companies preparing their periodic reports should review the sample questions and consider whether disclosure should be updated in these categories.