Siddharth Bahl

Siddharth Bahl


On May 3, 2022, the Securities and Exchange Commission’s (the “SEC”) Division of Corporation Finance (the “Division”) released a sample comment letter detailing potential disclosure obligations of public companies of direct or indirect impacts relating to Russia’s invasion of Ukraine and the resulting international response. The SEC’s sample comment letter suggests that applicable disclosures, to the extent material or otherwise required, may include:

  • Direct or indirect exposure to Russia, Belarus, or Ukraine through operations, employees, or investments;
  • Direct or indirect reliance on goods or services sourced in Russia, Ukraine, or countries supportive of Russia’s invasion of Ukraine;
  • Actual or potential supply chain disruptions;
  • Business relationships or assets in Russia, Belarus, or Ukraine;
  • Any known trends or uncertainties;
  • Risks relating to cybersecurity;
  • Changes in disclosure controls or in internal controls over financial reporting; and
  • The role of the board of directors in risk oversight of any related action or inaction (including whether to continue or cease operations or investments in Russia or Belarus).

The SEC’s non-exhaustive list of “sample comments” demonstrates the need for companies to disclose the qualitative and quantitative impact on financial statements from any related impairment of assets, changes in inventory valuation, deferred tax asset valuation allowance, dispositions, de-consolidations, business exits, fluctuations in exchange rates, and changes in contracts with customers. The SEC also reminds companies presenting non-GAAP financial measures not to adjust for estimated lost revenue (see Question 100.04 of the Division’s C&DI for Non-GAAP Financial Measures) or to exclude normal, recurring operating expenses without an explanation (see Question 100.01 of the Division’s C&DI for Non-GAAP Financial Measures).  

While the sample comment letter is merely guidance and does not represent a rule, regulation, or statement of the SEC with any direct legal effect, companies should consider the guidance when preparing SEC filings. The sample comment letter notes the ongoing obligation for companies to consider whether they have experienced or been impacted by matters they previous characterized as potential risks and, if so, to update their disclosure accordingly. Also, even if companies address or have addressed the invasion in their risk factors, an additional discussion in their MD&A sections may be necessary, too, in light of the expectations outlined in the SEC sample comment letter.

If you have any questions about this guidance, please contact a member of Harter Secrest & Emery’s Securities and Capital Markets group at 585.232.6500 or 716.853.1616.

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