Our Securities Group details the now-final rules the Securities and Exchange Commission has approved to streamline Regulation S-K and disclosures for Management’s Discussion and Analysis (MD&A).
On November 19, 2020, the Securities and Exchange Commission (SEC) adopted amendments to Regulation S-K in an effort to modernize, simplify, and enhance certain financial disclosure requirements. The amendments are intended to enhance the focus of financial disclosures on material information for the benefit of investors, while simplifying compliance efforts for registrants.
Modernizing Regulation S-K
Eliminating selected and supplementary financial data (Items 301 and 302)
The adopted amendments eliminate the requirements under Item 301 (Selected Financial Data), meaning registrants will no longer be required to provide five years of selected financial data. Similarly, the amended rules eliminate the requirements under Item 302 (Supplementary Financial Information), meaning registrants will no longer be required to provide two years of tabular selected quarterly financial data. The staff found both items to be duplicative and tailored the amendments to focus on information that is material to investors and registrants.
Modifications of MD&A (Item 303)
Additionally, the amendments modify the Management’s Discussion and Analysis (MD&A) requirements in Item 303 as follows:
To ensure regulatory consistency, the SEC also adopted certain parallel amendments to the financial disclosure requirements that apply to foreign private issuers, including to Forms 20-F and 40-F. Specifically, Item 3.A of Form 20-F (Selected Financial Data), Item 5 of Form 20-F (Operating and Financial Review and Prospects), General Instruction B.(11) of Form 40-F (Off-Balance-Sheet Arrangements), and General Instruction B.(12) of Form 40-F (Tabular Disclosure of Contractual Arrangements) are being amended to conform to the new requirements of Regulation S-K.
The amendments will become effective 30 days after they are published in the Federal Register. Registrants are required to comply with the rule beginning with the first fiscal year ending on or after the date that is 210 days after publication in the Federal Register. Registrants will be required to apply the amended rules in a registration statement and prospectus that on its initial filing date is required to contain financial statements for a period on or after the mandatory compliance date. Although registrants will not be required to apply the amended rules until their mandatory compliance date, they may comply with the final amendments any time after the effective date, so long as they provide disclosure responsive to an amended item in its entirety.
A discussion of the proposed amendments can be found here.
Summary of the Final Amendments
Management’s Discussion and Analysis of financial condition and results of operations for Item 303
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