That’s on our mind today because the SEC recently published a comment letter exchange the agency had with Lyft ($LYFT) about how the ride-sharing business discusses cash used in operating activities. 

The letters themselves don’t say anything too controversial. Basically, SEC staff told Lyft that they wanted to see more detail about material changes in cash from operating activities, and about how the company plans to meet its cash requirements. Lyft then responded with examples of expanded disclosure on those two points, which the company promised to include in future filings. 

Our point is simply that if you, another company, aren’t certain about exactly what you should include in footnote disclosures — which can often be a lengthy mix of obscure data and narrative discussion — SEC comment letters offer a glimpse into the SEC’s thinking. You can see what’s on the agency’s mind, and how other companies tried to answer those expectations; and then craft a more useful disclosure that, ideally, will avoid any exchange of SEC comment letters at all.

For example, the SEC comment letters asked specifically about Lyft’s 10-K filing for the period ending Dec. 31, 2023. Lyft responded by saying that it had updated and expanded its disclosure of cash related to operations for its Q1 2024 filing, and then included a sample with the new material underlined:

“Cash provided by operating activities was $156.2 million for the three months ended March 31, 2024, which consisted of a net loss of $31.5 million primarily offset by changes in working capital of $97.4 million. The year over year decrease in net loss from $187.6 million to $31.5 million was a result of increase in our revenues and the actions we have taken to reduce our operating expenses. Net loss was also offset by non-cash adjustments for stock-based compensation expense of $80.1 million, which decreased year over year due to a reduction in headcount driven by the restructuring activities initiated in prior years, and depreciation and amortization expense of $32.4 million. The changes in working capital were primarily driven by insurance, which saw (i) an increase in our insurance reserves due to a rise in commercial auto insurance rates on a per mile basis compared to the prior year and an increase in ride volume in the first quarter of 2024 compared to previous quarters and (ii) an increase in accounts payable which was primarily due to the timing of insurance claim payments.”

Apparently responses like that worked, because in a follow-up letter dated June 6 the SEC said it had completed its review of Lyft’s filing.

As we’ve noted before on this blog, SEC comment letters can be somewhat difficult to find and analyze. The SEC does release all comment letters eventually, but they are released on a time delay that can range from several weeks to months. Then you need to hunt-and-peck through the letters to figure out the right chain of conversation.

Calcbench simplifies that for our users by indexing all comment letters. We maintain a dedicated page for recent comment letters, and when you find a company that piques your interest, we display the entire comment letter chain by date so you can understand who wrote what to whom, on what date, and what the reply was.

You can also research whether a company has received any comment letters in the past (most have, even if the letter only says the SEC has reviewed its filing and has nothing else to say) by going to the Disclosure & Footnotes Query page and then selecting “SEC Comment Letters” from the pull-down menu of disclosure choices on the left side of your screen.

Why bother with this at all? Because you can find a lot of stuff in comment letters, including some pretty obscure disclosure issues by industry or accounting topic. Chances are that if you’re struggling with a disclosure issue, somebody else has already struggled through that same issue too — and with a little bit of digging in Calcbench, you can find out how they resolved it.