4.12 Item 7A gives the foreign currency sensitivity for 2025 only: is the figure a required market risk disclosure that needs the 2024 comparative?
Company D · a US-listed cloud communications software company · SEC-style question
In brief
Item 7A states that a hypothetical 10% adverse change in exchange rates would have increased the 2025 net loss by approximately [amount]; the 2024 Form 10-K gave approximately [amount] for 2024, and neither year gives the other year's figure or explains the change. Regulation S-K Item 305(a)(3) requires the prior-year figure and the reasons for material changes, but only where quantitative disclosure is required for the current year, and the company says it holds no hedges and is not subject to significant foreign currency risk. Whether the figure is a required disclosure is a question for the company.
The evidence, as filed
Screenshot withheld to protect the company’s identity. Even with names, figures and dates boxed out, the wording on these pages could be searched back to the filer. Pages relied on: Form 10-K 2024 (prior year), page 83; Form 10-K 2025, page 79.
What the filing shows, and what the rule requires
| What the filing shows | What the rule requires |
|---|---|
One figure only, in both years: 10% adverse exchange-rate change = approximately [amount] on the 2025 net loss (2024 Form 10-K: approximately [amount]); no comparative and no explanation of the change | If the figure is required quantitative disclosure under Item 305(a)(1): the 2025 figure with the summarized 2024 figure (approximately [amount] as published) and a sentence on why it rose; if it is voluntary: a statement that foreign currency market risk is not material, so that the figure is not read as the required disclosure |
The rule
Regulation S-K Item 305(a)(3)
Registrants shall present summarized market risk information for the preceding fiscal year. In addition, registrants shall discuss the reasons for material quantitative changes in market risk exposures between the current and preceding fiscal years. Information required by this paragraph (a)(3), however, is not required if disclosure is not required under paragraph (a)(1) of this Item 305 for the current fiscal year.
Version: Text in force at the date of this review · Source: Regulation S-K, 17 CFR 229.305 (eCFR text as in force for fiscal 2025)
Regulation S-K Item 305, General Instruction 1 to paragraphs 305(a) and 305(b)
The disclosures called for by paragraphs 305(a) and 305(b) are intended to clarify the registrant's exposures to market risk associated with activities in derivative financial instruments, other financial instruments, and derivative commodity instruments.
Version: Text in force at the date of this review · Source: Regulation S-K, 17 CFR 229.305 (eCFR text as in force for fiscal 2025)
Why it applies here. the same paragraph says the company does not hedge and is not subject to significant foreign currency risk, and the figure is described in terms of translating rest-of-world revenue and expenses, an earnings exposure rather than one measured on financial instruments. If the company judged foreign currency risk on its instruments not material, the figure is voluntary and Item 305(a)(3) does not apply; if the figure is the required disclosure, the 2024 comparative and an explanation of the [n]% rise are missing in both years. The filing does not say which, so the point is put as a question.
Why it matters
If the figure is the required Item 305 disclosure, Item 7A is incomplete in both years; if it is voluntary, the paragraph does not say so, and a reader may take the single figure as the required disclosure.
Exposure
At most a staff comment asking for the comparative or a clarifying statement in future filings
Our workings
the Foreign Currency Risk paragraph (page 79) gives a sensitivity for the year ended [date] only; the 2024 Form 10-K (page 83) gave approximately [amount] for 2024, again without its own prior-year figure.
[n] - [n] = [n], a rise of [n] / [n] = [n]%. Law: Item 305(a)(3) asks for summarized prior-year market risk information and the reasons for material quantitative changes, but switches off where disclosure is not required under Item 305(a)(1) for the current year. Item 305 is aimed at market risk sensitive instruments (derivative and other financial instruments), assessed for materiality category by category, and registrants may include other positions voluntarily.
| Item | Figure | Source |
|---|---|---|
| 10% adverse exchange-rate change, 2025 | [amount] | Form 10-K 2025, page 79 |
| 10% adverse exchange-rate change, 2024 (as published) | [amount] | Form 10-K 2024, page 83 |
| Change | [n] - [n] = [n]; [n] / [n] = [n]% | computed |
Management’s best defense, and our reply
Management would say Item 305 is about market risk sensitive instruments: the company holds no derivatives, its monetary balances in foreign currency are small, and the same paragraph states that it is not subject to significant foreign currency risk, so no quantitative foreign currency disclosure is required under Item 305(a)(1) and, by the paragraph's own exception, no prior-year figure is required under Item 305(a)(3). The [amount] figure measures the translation of rest-of-world results and is given voluntarily. This defense is credible on the text of Item 305 and the company's own statement; what remains open is only whether the figure is in fact the required disclosure, which the filing does not say, so the point stays a question rather than an omission.
The fix
- Next Form 10-K: either add '... compared with approximately [amount] for the year ended [date]', with the reason for the change, or state that foreign currency market risk on financial instruments is not material and that the sensitivity is given for information.
Question for the company
Whether the 10% foreign currency sensitivity in Item 7A is the quantitative disclosure Item 305(a)(1) requires, and if so, why the 2024 figure and the reason for the rise from about [amount] to about [amount] are not given.
Evidence relied on
| # | What it shows | Type | Where |
|---|---|---|---|
| 1 | The only quantitative foreign currency figure in Item 7A: 2025, no comparative | Document | Form 10-K 2025, page 79 |
| 2 | The 2024 figure as published in the prior-year Form 10-K, not repeated in the 2025 Form 10-K | Document | Form 10-K 2024 (prior year), page 83 |
| 3 | The company's own statement that its foreign currency risk is not significant, the basis of the management case | Document | Form 10-K 2025, page 79 |
Absence check
- Document
- Form 10-K 2025
- Where it would appear
- Foreign Currency Risk
- What is missing
- The summarized 2024 foreign currency sensitivity and the reason for the change between 2024 and 2025
- Pages looked at
- p.78-79 (Item 7A) and p.67-77 (Item 7)
- Result
- 'hypothetical 10%' hits only p.78 (the current-year interest-rate statement) and p.79 (the 2025 foreign currency figure itself); '[n]' hits only p.108, inside '[amount]' of operating lease liabilities in the lease note, which is not a market risk figure; the other two terms have no hits anywhere in the report.
Prepared by Pramanex from the company’s public SEC filings, without the company’s involvement, to show how a 10-K Pre-filing Check reads. The company is not named, and nothing on this page is a statement about any identifiable company. Observations are not an audit, review or other attestation or assurance engagement, and not legal advice. An SEC-style question is a question, not a conclusion.
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