On January 6, 2012, the SEC’s Division of Corporation Finance (the “Division”) issued “CF Disclosure Guidance: Topic No. 4” regarding companies’ disclosures about exposures to European sovereign debt holdings. The Division provided the guidance to bring about “greater clarity and comparability” in companies’ disclosures.
The guidance points out that disclosure about exposures to European sovereign debt holdings could be required in various sections of a company’s SEC filings, such as MD&A, risk factors, and disclosures about market risk that are provided pursuant to Item 305 of Regulation S-K.
The Division’s guidance does not provide a specific list of countries about which the Division believes companies should provide disclosure. Rather, it states that companies should “determin[e] which countries are covered by this guidance” by “focus[ing] on those experiencing significant economic, fiscal and/or political strains such that the likelihood of default would be higher than would be anticipated when such factors do not exist.” It then provides a detailed list of specific items that companies should consider disclosing, including information broken down by country, type of counterparty (sovereign or non-sovereign), and category of financial instrument (such as loans and leases, held-to-maturity securities, and derivative assets).
The guidance is relatively brief and can be accessed at http://www.sec.gov/divisions/corpfin/guidance/cfguidance-topic4.htm.