Modernization of Management’s Discussion and Analysis and Other Financial Disclosures

20 November 2020 Foley Funds Legal Focus Blog
Author(s): Jason M. Hille Justin D. Lauria-Banta Peter D. Fetzer Margaret Gembala Nelson Thomas J. Krysa Stephen M. Meli Stuart E. Fross

On November 19, 2020, the Securities and Exchange Commission (SEC) voted to adopt amendments that will modernize, simplify and enhance certain financial disclosure requirements in Regulation S-K.  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.

The amendments impact public companies and business development companies.  The following are the highlights of the amendments as provided by the SEC in its Fact Sheet, and here is the link to the SEC’s release.  We are also attaching a table that highlights the amendments and the SEC forms that are impacted by the amendments, and will provide further insight in subsequent communications. 

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 (the "mandatory compliance date").  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.

If you have questions, or want more detail regarding specific amendments, please talk to your trusted counselor at Foley & Lardner LLP.

Amendments to Management's Discussion and Analysis, Selected Financial Data,
and Supplementary Financial Information
Nov. 19, 2020

The Commission voted to adopt amendments to modernize, simplify and enhance certain financial disclosures called for by Regulation S-K, and related rules and forms, in a manner that reduces the costs and burdens on registrants while continuing to provide material information to investors. The amendments are also designed to improve the readability and navigability of disclosure documents, and discourage repetition and disclosure of immaterial information.


The Commission proposed the amendments on Jan. 30, 2020 as part of its ongoing, comprehensive evaluation of disclosure requirements intended to improve the existing disclosure regime for both investors and companies. The amendments reflect the Commission's consideration of comment letters received in response to the proposal, as well as the staff's experience with Regulation S-K arising from the Division of Corporation Finance's disclosure review program and changes in the regulatory and business landscape since the adoption of Regulation S-K.


The changes to Items 301, 302, and 303 of Regulation S-K sharpen the focus on material information by:

  • Eliminating Item 301 (Selected Financial Data); and
  • Modernizing, simplifying and streamlining Item 302(a) (Supplementary Financial Information) and Item 303 (MD&A).  Specifically, these amendments:
    • 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 Commission guidance on critical accounting estimates;
    • 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, in light of the amended disclosure requirements for liquidity and capital resources and certain overlap with information required in the financial statements; and
    • Amend current Item 303(b), Interim periods (amended Item 303(c)) to modernize, clarify and streamline the item and allow for flexibility in the comparison of interim periods to help registrants provide a more tailored and meaningful analysis relevant to their business cycles.

In addition, the Commission adopted certain parallel amendments to the financial disclosure requirements applicable to foreign private issuers, including to Forms 20-F and 40-F, as well as other conforming amendments to the Commission's rules and forms, as appropriate.



 Brief Summary of Amendments  SEC Forms Impacted

Item 301: Selected Financial Data

  • Eliminated Item 301 requirement to furnish selected financial data for each of the registrant’s last five fiscal years.
  • Replaced the references to Item 301 with a reference to Rule 1-02(bb) of Regulation S-X in Items 1112, 1114, and 1115 of Regulation AB.
  • Forms 10, 10-K, S-1, S-4, and S-11
  • Schedule 14A
  • Form N-2*
  • Forms SF-1 and SF-3

Item 302(a): Supplementary Financial Information

  • Streamlined Item 302(a) to eliminate the disclosure requirement except when there are one or more retrospective changes to the statements of comprehensive income for any of the quarters within the two most recent fiscal years and any subsequent interim period for which financial statements are included or required to be included by Article 3 of Regulation S-X that, individually or in the aggregate, are material.
  • Forms 10, 10-K, S-1, S-4, and S-11
  • Schedule 14A
  • Form N-2*

Item 303(a): Full Fiscal Years

Restructuring and Streamlining

  • Established a new paragraph Item 303(a), to emphasize the purpose of the MD&A section at the outset to clarify and focus registrants.
  • Streamlined the text of Item 303.

Liquidity and Capital Resources

  • Expanded Item 303(b)(1)(ii) (current Item 303(a)(2)) to require a discussion of material cash requirements, in addition to commitments for capital expenditures.
  • Clarified the liquidity and capital resources disclosure requirements of Item 303(b)(1) (for example, specifically requires disclosure of material cash requirements from known contractual and other obligations).

Results of Operations – Known Trends or Uncertainties

  • Amended Item 303(b)(2)(ii) (current Item 303(a)(3)(ii)) to clarify that a registrant should disclose reasonably likely changes in the relationship between costs and revenues.

Results of Operations – Net Sales, Revenues, and Line Item Changes

  • Amended Item 303(b) (current Item 303(a)(3), Item 303(a)(3)(iii) and Instruction 4 to Item 303(a)) to clarify that a registrant should include in its MD&A a discussion of the reasons underlying material changes from period-to-period in one or more line items.

Results of Operations – Inflation and Price Changes

  • Eliminated the specific reference to inflation within current Item 303(a)(3)(iv).

Off-Balance Sheet Arrangements

  • Replaced current Item 303(a)(4) with an instruction emphasizing a more principles-based approach with respect to off-balance sheet arrangement disclosures.
  • Amended Items 2.03 and 2.04 of Form 8-K to retain the definition of “off-balance sheet arrangements” that is in current Item 303(a)(4).

Contractual Obligations Table

  • Eliminated current Item 303(a)(5), the requirement that registrants provide a tabular disclosure of contractual obligations.

Critical Accounting Estimates

  • Adopted Item 303(b)(3) to explicitly require disclosure of critical accounting estimates.
  • Forms 10, 10-K, 10-Q, S-1, S-4, and S-11
  • Form 1-A
  • Schedule 14A
  • Form N-2*

Item 303(c): Interim Periods

  • Amended Item 303(c) (current Item 303(b)) to allow for more flexibility in interim periods compared and eliminated certain instructions, while providing cross-references to similar instructions to Item 303(b).
  • Forms 10, 10-K, 10-Q, S-1, S-4, and S-11
  • Form 1-A
  • Schedule 14A
  • Form N-2*

Effect on Foreign Private Issuers

  • Eliminated Item 3.A and generally conformed Item 5 of Form 20-F to the final amendments to Item 303.
  • Eliminated the contractual obligations disclosure requirement and replaced the off-balance sheet disclosure requirements in Forms 20-F and 40-F with a principles-based instruction.
  • Amended current Instruction 11 to Item 303 to conform to the hyperinflation disclosure requirements of Form 20-F.
  • Form 20-F
  • Form 40-F
  • Forms F-1 and F-4

* Form N-2 states that disclosure under Items 301–303 of Regulation S-K is only required if “the Registrant is regulated as a business development company under the 1940 Act.” 

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.