2.02 Market risk disclosure gives no preceding-year sensitivities and does not explain why the exposures changed
Company G · a US-listed specialty pharmaceutical company · Compliance or disclosure gap
In brief
Item 7A gives the [n]-December-2025 sensitivities only: [amount] of interest expense for a 1% rate move, [amounts] of net income for a 10% sterling and euro move, and [amount] on the currency forwards. Regulation S-K requires the preceding year's summary as well and the reasons for material changes. The prior-year figures were [amounts], so the forward-contract exposure roughly tripled without comment.
The evidence, as filed
9 further page extracts: screenshot withheld to protect the company’s identity. The rows below say what each shows.
What the filing shows, and what the rule requires
| What the filing shows | What the rule requires |
|---|---|
Item 7A presents only current-year sensitivities ([amount]; [amounts]; [amount]) with no 2024 comparison and no discussion of the change. | A summary of the [n]-December-2024 sensitivities ([amount]; [amounts]; [amount]) beside the 2025 figures, and the reasons for material changes, in particular the rise in the forward-contract sensitivity. |
| What we checked. Item 7A read in full; whole report searched for the 2024 sensitivity amounts; prior-year Form 10-K Item 7A read | |
The rule
Regulation S-K Item 305(a)(3) - preceding fiscal year market risk information
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.
Version: Text in force at the date of this review · Source: 17 CFR 229.305 (Regulation S-K Item 305), as in force for fiscal 2025
Why it applies here. The forward-contract sensitivity rose [amount], about [n] times, while the notional amount rose only [amount] from [amount]; the sterling figure fell [amount]. The fiscal 2024 Form 10-K had the same gap.
Why it matters
- Readers cannot see how Jazz's market risk moved during the year; the threefold rise in the forward-contract sensitivity is unexplained.
- A staff comment asking for the prior-year figures and the reasons for change in future filings is the realistic outcome; an amendment is unlikely for a disclosure of this size.
Exposure
A staff comment would ask for the preceding-year information and the reasons for changes in future filings; no amendment is likely for a disclosure of this size.
Our workings
Item 7A states a 1% rate change would move 2026 interest expense by [amount], a 10% sterling and euro move would have changed 2025 net income by [amounts], and a 10% adverse move would reduce the fair value of forwards with a notional of [amount] by [amount]. None of the corresponding [n]-December-2024 figures ([amounts] on a notional of [amount]) appears anywhere in this report.
the forward-contract sensitivity rose by [n] - [n] = [n], about [n] times, while the notional rose only by [n] - [n] = [n]; the euro translation sensitivity rose by [n] - [n] = [n] and the sterling one fell by [n] - [n] = -[n].
paragraph (a)(3) of Item 305 requires both the preceding-year summary and the reasons for material changes; the omission is not cured by the prior filing, and a forward sensitivity that tripled on a notional up by about a quarter is the kind of change the paragraph asks the company to explain. The prior-year Form 10-K had the same gap.
| Sensitivity ($ million) | [date] | [date] | Change |
|---|---|---|---|
| Interest expense, 1% rate move (next year) | [n] | [n] | [n] - [n] = [n] |
| Net income, 10% sterling move | [n] | [n] | [n] - [n] = -[n] |
| Net income, 10% euro move | [n] | [n] | [n] - [n] = [n] |
| Forward contracts fair value, 10% adverse move | [n] | [n] | [n] - [n] = [n]; [n] / [n] = [n] times |
| Forward contracts notional | [n] | [n] | [n] - [n] = [n] |
Management’s best defense, and our reply
The company could argue that last year's sensitivities are on file in the prior Form 10-K, that its market risk did not change materially, and that the derivatives note already gives the [n]-December-2024 fair values of the swaps and forwards. Many large filers present current-year sensitivities only without staff objection. However, paragraph (a)(3) says registrants 'shall present' the preceding-year summary in the filing and allows no cross-reference to a prior filing; the note's fair values are balances, not sensitivities; and the forward-contract sensitivity did change materially, from [amount] to [amount], so the reasons are owed as well.
The fix
- Add the [n]-December-2024 figure beside each sensitivity (for example 'compared with [amount] at [date]') and one sentence on why the forward-contract sensitivity rose (larger notional and changed currency mix).
Evidence relied on
| # | What it shows | Type | Where |
|---|---|---|---|
| 1 | Current-year interest rate sensitivity, with no 2024 comparison | Document | Form 10-K 2025, page 105 |
| 2 | Current-year translation sensitivity for sterling and euro, with no 2024 comparison | Document | Form 10-K 2025, page 106 |
| 3 | Notional of currency forwards at [date] | Document | Form 10-K 2025, page 106 |
| 4 | Current-year forward-contract sensitivity, with no 2024 comparison or explanation of the change | Document | Form 10-K 2025, page 106 |
| 5 | Prior-year interest rate sensitivity, published in the prior-year Form 10-K only | Document | Form 10-K 2024 (prior year), page 101 |
| 6 | Prior-year sterling and euro translation sensitivity | Document | Form 10-K 2024 (prior year), page 101 |
| 7 | Prior-year notional of currency forwards | Document | Form 10-K 2024 (prior year), page 101 |
| 8 | Prior-year forward-contract sensitivity | Document | Form 10-K 2024 (prior year), page 101 |
Absence check
- Document
- Form 10-K 2025
- Where it would appear
- Item 7A.
- What is missing
- summarized market risk information for the preceding fiscal year and the reasons for material changes between the years
- Pages looked at
- p.105-106 (Item 7A in full)
- Result
- '[amount]' matches only inside larger figures: the [amount] of chargebacks on p.102 and the [amount] tax benefit on financial-statement pages (printed F-n; see folios), neither a market risk figure. '[amount]' hits financial-statement pages (printed F-n; see folios) and financial-statement pages (printed F-n; see folios), the derivatives notes giving the [date] notional of the forwards - a balance, not a sensitivity. The other terms have no hit. Item 7A itself contains no 2024 sensitivity.
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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