Tag: Management’s Discussion and Analysis

SEC proposes changes to MD&A and other financial disclosure requirements

On Thursday, once again without holding an open meeting, the SEC voted, with a dissent from Commissioner Allison Lee, to propose to simplify and modernize MD&A and the other financial disclosure requirements of Reg S-K. As summed up in the press release, the proposed amendments are intended to “eliminate duplicative disclosures and modernize and enhance Management’s Discussion and Analysis disclosures for the benefit of investors, while simplifying compliance efforts for companies.”  The proposal is part of the SEC’s Disclosure Effectiveness Initiative and follows on the 2013 S-K Study, the Report on Review of Disclosure Requirements in Regulation S-K, required by Section 108 of the JOBS Act, and the 341-page 2016 concept release, which sought comment on modernizing certain business and financial disclosure requirements in Reg S-K (see this PubCo post). The proposal also took into account the staff’s experience with Reg S-K as part of Corp Fin’s disclosure review program. Once again, the proposal employs a more principles-based approach, describing the objectives of MD&A with the goal of eliciting more thoughtful, less rote analysis.  Some of the proposed changes are fairly dramatic—such as eliminating selected financial data (Item 301), supplementary financial data (Item 302), and that pesky table of contractual obligations, or adding a requirement to disclose critical accounting estimates—while some just address moving parts and conforming changes. Whether the proposal, if adopted, actually leads to more nuanced, analytical disclosure remains to be seen. The proposal will be open for comment for 60 days.