The Securities and Exchange Commission today voted to propose amendments to the Regulation S-K requirements for Management's Discussion and Analysis, or MD&A, and also issued agency guidance relating to MD&A. The SEC's actions follow the recommendations included in the SEC Staff's Report on Review of Disclosure Requirements in Regulation S-K ("S-K Study"), which was mandated by the JOBS Act, and the SEC's Disclosure Effectiveness Initiative. As noted in the SEC's fact sheet, the proposed amendments:
- would eliminate Item 301 (selected financial data) and Item 302 (supplementary financial data), and
- amend Item 303 (management's
discussion and analysis) to, among other things,
- 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.
The comment period for the proposal will remain open for 60 days following publication in the Federal Register. However, the guidance will be effective upon publication in the Federal Register.
A Legal Update will follow.
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