Navigating SEC Comment Letter Trends for 2025 Financial Reporting

For 2025 financial reporting by public companies, the SEC’s comment letter trends offer a critical roadmap for staying compliant and transparent while signaling the SEC’s focus. These trends serve as an opportunity for companies to sharpen their disclosures and strengthen investor trust.

Management’s Discussion and Analysis (MD&A) remains the SEC’s top priority. The staff is digging into the "why" behind material changes in results of operations, pressing for detailed quantitative and qualitative analysis. They’re also zeroing in on liquidity matters and critical accounting estimates, expecting companies to spell out known trends, uncertainties, and significant expense components. This isn’t just boilerplate—it’s about telling a clear, company-specific story. In 2025, expect pointed questions if MD&A disclosures are generic.

Non-GAAP financial measures are still under the microscope. The SEC isn’t letting up on prominence—GAAP measures must take center stage, with non-GAAP figures playing a supporting role, backed by robust reconciliations. Every adjustment needs a defensible "why" that proves its usefulness to investors. With enforcement actions highlighting misleading non-GAAP disclosures in recent years, 2025 filers should double-check compliance with Item 10(e) of Regulation S-K to avoid red flags.

Segment reporting continues to draw attention, with the SEC probing how companies identify and aggregate operating segments, measure profit or loss, and handle entity-wide disclosures. The new FASB ASU 2023-07 on segment expense disclosures will likely amplify this focus, especially for companies juggling multiple profit measures. In 2025, expect the staff to test whether your segment story aligns with how management actually runs the business.

Revenue recognition remains a key area. The SEC is laser-focused on ASC 606 compliance, particularly disaggregated revenue disclosures and remaining performance obligations. If revenue streams look murky or the disclosures lack granularity, anticipate pushback. With economic uncertainty lingering into 2025, clarity here will be non-negotiable.

Business combinations are another significant one. The SEC is scrutinizing pro forma disclosures, significance tests, and the valuation of goodwill and intangible assets. Post-acquisition, they’re watching how companies justify asset values—especially in volatile markets. For 2025, robust documentation of valuation assumptions seems to be the best defense against comment letters.

Speaking of goodwill and intangible assets, impairment testing is getting extra attention. The staff wants to see clear indicators of potential impairment and the reasoning behind your assumptions. With macroeconomic headwinds like inflation moderating but still in play, 2025 filings should proactively address how these factors impact impairment analysis.

Smaller registrants aren’t immune—comment letters are trending up for this group too. The SEC expects the same rigor, regardless of size, and stresses the value of understanding their perspective. Keep contemporaneous records of every significant accounting and disclosure decision.

Looking ahead, new issues may emerge in 2025—think AI disclosures or new cybersecurity rules. The core message of the SEC is transparency, consistency, and accountability. Companies that proactively align with these trends may avoid comment letters and enhance credibility with investors.