SEC Proposes Amendments to Financial Disclosure Rules, Issues Guidance on MD&A Metrics

February 10, 2020

On January 30, the SEC proposed amendments to certain financial disclosure requirements in Regulation S-K with the aim of reducing duplicative disclosure and focusing on material information. The SEC also issued guidance on disclosure of key performance indicators and metrics in MD&A.

“The proposal and the guidance we are releasing today … would improve the quality and accessibility of registrants’ presentation of financial results and performance metrics,” said Chairman Jay Clayton in the SEC’s press release.

Among other things, the proposed amendments to Regulation S-K would:

  • Eliminate Item 301 (selected financial data) and Item 302 (supplementary financial data);
  • 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 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 Item 303(b), Interim periods, to allow 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 guidance provides that, where companies disclose metrics, they should consider whether additional disclosures are necessary and gives examples of such disclosures.

The proposal is subject to a 60-day public comment period, and the guidance will be effective upon publication in the Federal Register.

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