Trump Pushes Change for Semi-Annual Earnings Reports

US President Donald Trump is promoting the idea of semi-annual earnings reports, scrapping quarterly reports: here's what that means and why it's significant.

An earnings report is an announcement where a company releases all of their latest developments, along with various financial statements for the quarter and projections for the future. Earnings reports are crucial in the stock market, where investors look to a company's most recent earnings to determine its ability to offer a good return to a shareholder.

These announcements, which occur quarterly, also create an environment with high transparency and short-term expectations, which can be viewed in positive or negative ways.

Now, Trump is calling for the Securities and Exchange Commission (SEC) to shift these quarterly reports to twice a year, similar to Australia, New Zealand, and most markets across Europe.

Many large companies have backed Trump's idea of semi-annual reporting, primarily because it simply creates less work for managers and executives. Before a company's earnings report, high-level employees are forced to compile a massive list of data, taking up time and energy that Trump claims could be used doing other, more productive tasks.

Additionally, quarterly reports often motivate companies to focus on short-term goals rather than long-term ones, and expectations from shareholders looking for a spectacular earnings report builds pressure on the company to prioritize small improvements within three months over large changes over several years.

On top of that, most companies seem to beat expectations almost every quarter, which is virtually impossible for the entire market to do every quarter– many corporations purposely set low targets to beat, allowing them to maintain a better reputation. Some people believe that companies are gaming the entire system, permitting spectacular earnings reports that hide the true financial position of the company.

However, Wall Street investors and other experts have raised concerns over the idea. Quarterly reporting also allows for high transparency, as companies are required to release the information every three months and are not able to hide anything. Many investors believe that a shift to semi-annual reporting could lead to an uptick in illegal activity, such as accounting fraud or insider trading, which would go unnoticed for longer periods of time.

Experts have also expressed concern over an increase in volatility, as investors would lack the amount of information that they have now– investors would know less about each stock, leading to larger, more dramatic changes in the market because of that uncertainty.

Nevertheless, the change – if approved – is not expected to occur quickly. Although Trump did push the idea during his first term, the SEC largely ignored it. This year, while they have confirmed that they will "prioritize" his plan, it will likely require extensive discussions and debate before such a massive change is even considered.

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Word of the Day (Merriam-Webster): Askance (adv, uh-SKANSS) - Askance means "in a way that shows a lack of trust or approval" or "with a side-glance."  

In a Sentence: I couldn't help but look askance at the dealer's assurances that the car had never been in an accident.

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