SEC proposal modernizes Regulation S-K disclosures


The SEC issued a Proposed Rule, Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information, to modernize, simplify and enhance certain Regulation S-K disclosure requirements.

The proposed amendments would eliminate Regulation S-K, Item 301, Selected financial data, and Item 302, Supplementary financial information, and would update certain requirements of S-K Item 303, Management’s discussion and analysis of financial condition and results of operations.

The comment period ends 60 days after the Proposed Rule is published in the Federal Register.






In general, the proposal would expand the principles-based nature of the Management’s Discussion and Analysis (MD&A) disclosure framework and would codify previously existing Commission guidance1 on this topic. The proposal would also streamline disclosures and avoid redundancy between MD&A and existing U.S. GAAP disclosures requirements.

The table below provides an overview of certain proposed amendments.


Grant Thornton Insights

Further expansion of the principles-based MD&A disclosure framework, with clearly established objectives, may reduce the amount of boilerplate disclosures in SEC filings. However, meeting the proposed disclosure objectives will require thoughtful analysis and commentary from registrants. If the Proposed Rule is adopted, registrants will need to carefully consider whether they have provided adequate disclosure of material information where certain prescriptive requirements would be removed, such as the contractual obligations table.


Despite voluminous, existing interpretive guidance, MD&A has long been one of the most frequently commented upon areas in SEC filings. Some of the proposed amendments, such as the requirement to disclose the reason for material changes in financial statement line items and the codification of guidance regarding critical accounting estimates, address common themes in SEC staff comments.




Other proposed amendments


Regulation S-K, Item 301 currently requires a registrant that is not a smaller reporting company, as well as certain emerging growth companies (EGCs), to disclose selected financial data derived from audited financial statements covering the last five fiscal years and any additional periods to keep the disclosure from being misleading. The proposal would eliminate Item 301 as the financial data required by this item is included in a registrant’s prior filings, which can be accessed on the SEC’s EDGAR database. In the case of an IPO registration statement, the proposal notes that the majority of IPO candidates are EGCs and, in most cases, are currently only required to provide two years of financial data under Item 301.

The proposal would also eliminate Regulation S-K, Item 302(a), which currently requires disclosure of certain quarterly financial data for the two most recent fiscal years, and would eliminate Item 302(b), Information about oil and gas producing activities. The disclosure required by Item 302(a) can be obtained or compiled based on the information available on EDGAR, and S-K Item 302(b) overlaps with current and proposed U.S. GAAP requirements.

The SEC has also proposed certain parallel amendments to financial disclosures provided by foreign private issuers as well as certain conforming amendments to Forms 20-F and 40-F.





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