You might recall that in the FAST Act Modernization and Simplification of Regulation S-K, adopted last year, the SEC amended Item 303 of Reg S-K to provide that, where a company includes in the filing financial statements covering three years, the company may omit “discussion about the earliest of the three years…if such discussion was already included in the registrant’s prior filings on EDGAR…, provided that registrants electing not to include a discussion of the earliest year must include a statement that identifies the location in the prior filing where the omitted discussion may be found.” (See this PubCo post.) Notably, there was no specific condition in the new amendment that discussion of the earliest year not be material, although MD&A continued to be subject to an overarching materiality analysis. Corp Fin has now issued three new CDIs that address omission of the earliest year, summarized below.
110.02 Where a discussion of the earliest of three years is omitted from MD&A, the required statement identifying the location of the discussion in a prior filing does not incorporate that disclosure into the filing unless the registrant expressly states that the information is incorporated by reference.
110.03 Can a company omit discussion of the earliest year if it believes the discussion is necessary? Uh, no, the company may not rely on Instruction 1 to Item 303(a) to omit a discussion of the earliest of three years from its current MD&A if it believes a discussion of that year is necessary. Item 303(a) requires the company to “provide such information that it believes to be necessary to an understanding of its financial condition, changes in financial condition and results of operations. A registrant must assess its information about the earliest of three years and, if it is required by Item 303(a), include it in the current disclosure or expressly incorporate by reference its discussion from a previous filing.”
110.04 Once a company with an effective registration statement (that incorporates its Form 10-K by reference) incorporates a new Form 10-K that excludes a discussion of the earliest year from its MD&A, the filing of the new Form 10-K will operate as a Section 10(a)(3) update, establishing a new effective date for the registration statement. As of the new effective date, the registration statement incorporates by reference only the new Form 10-K, which does not contain the company’s discussion of results for the earliest year (unless, as indicated in Question 110.02, the information is expressly incorporated by reference).