Form 10-Q Risk Factor Updates: Better Practices for Companies that Restate Risk Factors

Should companies that restate the entire Risk Factors section from the most recent Form 10-K report when they update the risk factor disclosure in their Form 10-Q reports to reflect material changes in that disclosure do anything to identify the changes?  Although not specifically required, we believe that identifying material changes in risk factor disclosure in these cases can offer advantages for companies, including more effective communication with investors and a potentially stronger position in the event of future claims about the company’s disclosure.

If a company chooses to restate the entire Risk Factor section from its most recent Form 10-K report, the company should consider identifying the material new and revised risk factor disclosure contained in the current Form 10-Q report as a “better practice.”  Companies that choose to do so could use one of the following three methods:

  • Identify materially changed disclosure by use of changes such as use of bold or italicized type, accompanied by an explanation of the significance of the bold or italicized type (for example, “Material new risks and material changes in previously disclosed risks are presented in [bold] [italicized] type”);
  • Identify paragraphs or sections that contain materially changed disclosure by use of a parenthetical note that indicates the change and the date of the change (for example, “added June 30, 2023” or “revised April 30, 2023”); or
  • Include a note at the beginning of the Risk Factors section that identifies sections containing materially changed disclosure by disclosure topic (for example, “The disclosure below relating to potential risks arising in connection with adverse claims involving the company’s intellectual property rights contains material changes and/or additions to the company’s earlier disclosures”) or by section heading or caption (for example, “The discussion of potential risks under the caption ‘Disputes Involving Ownership of the Company’s Intellectual Property Rights’ contains material changes and/or additions to the company’s earlier disclosures”).

For additional discussion, please refer to the 10-Q Risk Factors Updates. For questions, please contact members of our Public Company Advisory Practice.