Modernization Continues for MD&A and Perhaps Includes a Goodbye to Selected Financial Data and Quarterly Information

Jan 31, 2020

By George Wilson

 

On January 30, 2020 the SEC, as the next part of the JOB’s Act disclosure review, proposed changes to S-K Items 303 (MD&A), and also proposed to eliminate S-K Item 301 Selected Financial Data (the five year summary) and S-K Item 302 Supplementary Financial Data (the quarterly information for two years).

 

According to the SEC’s Release and Related Fact sheet the changes to MD&A would:

  • “Add a new Item 303(a), Objective, to state the principal objectives of MD&A;
  • Replace Item 303(a)(4), Off-balance sheet arrangements, with a principles-based instruction to prompt registrants to discuss off-balance sheet arrangements in the broader context of MD&A;
  • Eliminate Item 303(a)(5), Tabular disclosure of contractual obligations given the overlap with information required in the financial statements and to promote the principles-based nature of MD&A;
  • Add a new disclosure requirement to Item 303, Critical accounting estimates, to clarify and codify existing Commission guidance in this area; and
  • Revise the interim MD&A requirement in Item 303(b) to provide flexibility by allowing companies to compare their most recently completed quarter to either the corresponding quarter of the prior year (as is currently required) or to the immediately preceding quarter.”

Interestingly, the proposed rule would also, for the first time, provide guidance about the use of metrics.  Again, according to the release:

 

“The guidance provides that, where companies disclose metrics, they should consider whether additional disclosures are necessary and gives examples of such disclosures. The guidance also reminds companies of the requirements in Exchange Act Rules 13a-15 and 15d-15 to maintain disclosure controls and procedures and that companies should consider these requirements when disclosing metrics.”

 

More about these changes in future posts, and we will also address them in our Fifth Annual MD&A Hot Topics One Hour Briefing on Monday February 3, 2020.

 

As always, your thoughts and comments are welcome!


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