Collaboration is Key in Disclosure Research

The sudden change in economic circumstances and the quick change to virtual working has made disclosure research extremely important.

© Prostock-Studio/iStock/Getty Images Plus

FEI Daily spoke with Jenny Simpson, Financial Reporting Manager at Whiting Petroleum, about the importance of learning from peer disclosures, heightened SEC scrutiny, and ESG disclosures.

FEI Daily: Can you describe the typical workflow of conducting disclosure research? How much time do you spend on each quarterly filing and annual filing?

Jenny Simpson: Disclosure research is heavily situation-dependent. Generally, our disclosure research is initiated by a new accounting rule requiring an additional disclosure, or a new accounting rule becoming applicable to us. From there, we will create a list of peer companies for which we would like to see similar disclosures and then we draft our disclosure based on that review. We will also at times re-review our existing disclosures and compare them to our peers to make sure they remain current. I would estimate that we spend 8-16 hours per filing doing disclosure research.

FEI Daily: How important is "learning from peer disclosures" when you draft your company's disclosures? 

Simpson: Learning from peers is a key part of our disclosure process. We want to make sure that we are disclosing similarly to our peers in order to be comparable.  Additionally, peer diclosures help us to understand what other companies’ auditors, counsel and investors are focused on and help us to consider whether those same items are important for our stakeholders.

FEI Daily: Does the emerging topics, for example, COVID's impact on your company's financial performance and the SEC REG-SK, pose additional pressure when drafting the disclosures?

Simpson: Anything with heightened SEC scrutiny does add additional pressure when preparing disclosures. We want to make sure that we have provided adequate disclosure that will not spark any comments from the SEC, so disclosure research has really helped to ensure we are on par with other companies.

FEI Daily: For the new REG-SK disclosure requirement, did you have to communicate and collaborate with other departments (e.g., HR, Legal)

Simpson: Yes, we collaborated with both our legal and HR departments when developing the disclosures required by the new Reg S-K. For example, our human capital disclosure required quite a bit of collaboration among our departments. I was able to create a card with several human capital disclosures that I “liked” that I shared with HR and Legal. This was an extremely efficient way to get all of the information in front of them so they could see the variety of disclosures already out there in conjunction with the requirements established by the SEC. In the past, I would have had to research companies individually and copy and paste each disclosure into a new document. With the idaciti tool, all I had to do was search “human capital” in 10-Ks and “like” the disclosures I wanted others to focus on, which made the process extremely efficient. Having the idaciti tool to implement the new SEC rules was extremely helpful and saved my team a lot of time.

FEI Daily: Is the function of "disclosure research" only applicable to the external reporting group in your company? Or do you think other departments (e.g., Legal, ESG Reporting) also need disclosure research applications to help them?

Simpson: Currently, only our financial reporting team uses this software. However, we do see a huge benefit for other groups in our company, including Investor Relations, Legal, and Communications (which handles our ESG reporting). As commodity prices improve and we are able to expand our G&A budget, we will definitely explore exposing those groups to this awesome tool.

FEI Daily: How important do you think is the collaboration features for a disclosure research application? Having the ability to "bookmark" (like) selected disclosures and sharing with your collages, is this a nice-to-have or must-have?

Simpson: The “like” and “share” features were at first a like-to-have for us but over the past few months have become a need-to-have. As I mentioned in a previous response, the ability to share cards to anyone across our organization has created efficiencies for me and is also the most organized way to present the information to others. I have shared cards with several different stakeholders within our organization and it has always been extremely useful and a great format to present the information to others.

FEI Daily: How do you believe the pandemic and economic events have influenced your company's view on disclosure research? Have you seen a greater interest in doing more peer or market analysis?

Simpson: The pandemic had a profound impact on our industry as commodity prices hit all time lows right at the peak of the shutdown. Given the sudden change in economic circumstances and the quick change to virtual working, disclosure research became extremely important. We monitored 8-K filings nearly daily to understand what companies were disclosing in terms of the impact of the pandemic and resultant economic shutdown as well as whether companies were delaying filing as a result of delays caused by the pandemic. As the pandemic has continued, we have found that disclosure research has become more important as we constantly must keep up with how our peers are disclosing the impacts of industry conditions. As the new SEC rules are implemented and ESG disclosures become an SEC focus, we predict that disclosure research will continue to be an important part of our reporting function.

FEI Daily: Can you describe the types of Disclosure Research applications you used in the past? And if you could have a wish list, what would be the key functionalities you would like to see in a DR application?

Simpson: In the past, we used the “10-K Lookup” tool of Accounting Research Manager. Idaciti currently meets nearly all of our needs from a disclosure research perspective. The key “wish list” for us is a tool that provides relevant search results for the appropriate document and disclosure type. The ability to create specific lists of peer companies from which to search from has also been really important to us, which was extremely easy to implement with idaciti. Furthermore, idaciti has a lot of functionalities that haven’t historically been on our wish list, but have been extremely helpful, including card sharing, the “like” function, and several others.