SEC Adopts Amendments to Financial Disclosure Rules

December 1, 2020

On November 19, 2020, the SEC adopted amendments to certain financial disclosure requirements in Regulation S-K with the aim of reducing duplicative disclosure and focusing on material information.

“Today’s rules will improve the quality and accessibility of the disclosure that companies provide their investors … giving investors greater insight into the information management uses to monitor and manage the business,” said Chairman Jay Clayton in the SEC’s press release.

The amendments make the following changes to Regulation S-K:

  • Eliminate Item 301 (Selected Financial Data);
  • Revise Item 302(a) to replace the current requirement for quarterly tabular disclosure with a principles-based requirement for material retrospective changes;
  • Add a new Item 303(a), Objective, to state the principal objectives of MD&A;
  • Amend current Item 303(a)(1) and (2) (amended Item 303(b)(1)) to modernize, enhance and clarify disclosure requirements for liquidity and capital resources;
  • Amend current Item 303(a)(3) (amended Item 303(b)(2)) to clarify, modernize and streamline disclosure requirements for results of operations;
  • Add a new Item 303(b)(3), Critical accounting estimates, to clarify and codify existing SEC guidance in this area;
  • Replace current Item 303(a)(4), Off-balance sheet arrangements, with an instruction to discuss such obligations in the broader context of MD&A;
  • Eliminate current Item 303(a)(5), Tabular disclosure of contractual obligations; and
  • Amend current Item 303(b), Interim periods (amended Item 303(c)), to allow for flexibility in the comparison of interim periods.

The amendments will become effective 30 days after publication in the Federal Register. Early compliance with the amended rules will be permitted upon effectiveness, but compliance will not be mandatory until a company’s first fiscal year ending on or after the date that is 210 days after publication in the Federal Register.

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