SEC Streamlines Requirements for MD&A and Other Financial Statement Disclosures

As part of its effort to encourage public companies to produce financial statements that are more clear, relevant and useful for investors, the SEC has amended Regulation S-K to simplify MD&A (Management’s Discussion and Analysis) and other financial statement disclosures.

The changes, which became effective February 10, 2021, will affect domestic registrants with certain conforming amendments. SEC filings that will be impacted include Forms 10-K, 10-Q, 20-F, and 40-F. Companies must comply with the amended rules beginning with the fiscal year ending on or after August 9, 2021. For calendar year-end companies, this means the year ending December 31, 2021. Early adoption on an item-by-item basis is permitted after the effective date.

In amending these regulations, the SEC has moved away from a prescriptive regulatory framework to a principles-based, registrant-specific approach to disclosure. This is intended to facilitate an understanding of the company from the perspective of its management. To this end, companies will be required to provide a narrative description of financial statements that offers management’s perspective.

The amendments emphasize disclosure of information on the basis of management’s assessment to address matters that are reasonably likely to have a material impact on future operations, and eliminate the prescriptive requirements for:

  • Disclosure of five years of selected financial data;
  • Selected quarterly financial data;
  • The discussion of how inflation and changing prices may have affected results, unless such conditions have had, or are expected to have, a material impact on revenues or income; and
  • A tabular presentation of contractual obligations. However, as part of the discussion of the company’s liquidity and capital resources, a discussion of material cash requirements from contractual obligations is required.

MD&A Disclosure Requirements

Companies are encouraged to focus on the information needed to understand the business results and any material changes. Updated disclosure requirements are intended to establish clear, defined objectives for MD&A. To eliminate repetition, duplicate disclosures that have been made elsewhere will no longer need to be reported in MD&A. The SEC’s intent was to remind companies that MD&A should provide analysis that encompasses short-term results as well as future prospects.  

Liquidity and Capital Resources

The new regulations focus on material short-term and long-term needs, with more significant changes to off-balance sheet arrangements and contractual obligations disclosure.

Off-Balance Sheet Arrangements

A new principles-based instruction replaces previous prescriptive disclosure requirements for off-balance sheet arrangements. This allows for an integrated discussion, rather than including the information in a separate section.

Critical Accounting Estimates

In this area, the new regulations primarily codify existing SEC guidance. Companies are required to include a discussion of why each critical accounting estimate is subject to uncertainty and how much each estimate and/or assumption has changed over the relevant period, and the sensitivity of the reported amount to the methods, assumptions and estimates underlying its calculations.

Weaver’s public company practice group provides independent audit, tax and advisory services to public companies of all sizes from smaller reporting companies to large accelerated filers across a broad spectrum of industries. For more information about these regulatory changes or for general assistance with public company reporting requirements, contact us.

Weaver professionals assist clients and their attorneys, but Weaver professionals do not provide legal advice and are not your lawyers. Consult with your attorney before taking any action related to SEC filings.

© 2021


Phil Ilgenstein

Phil Ilgenstein

Partner, Assurance Services and Public Company Practice Leader


Phil Ilgenstein, CPA, has more than 15 years of experience providing audit and assurance services for a wide variety…

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