December 7, 2020
On November 19, 2020, the Securities and Exchange Commission (SEC) voted 3-2 to adopt additional amendments to Regulation S-K for public companies, including Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A). These amendments reflect the latest development in the SEC’s ongoing disclosure effectiveness initiative, which seeks to modernize and streamline public company disclosure requirements. According to the SEC, the latest amendments are also designed to improve the readability and navigability of SEC disclosure documents and discourage repetition and disclosure of immaterial information. As discussed below for calendar-year companies, the amendments will take effect beginning with annual reports for the year ending December 31, 2021, but the SEC will permit voluntary earlier adoption.
Summary of the Amendments
The amendments primarily affect Items 301, 302, and 303 of Regulation S-K by eliminating Item 301 (Selected Financial Data) and modernizing Item 302(a) (Supplementary Financial Information) and Item 303 (MD&A).
In brief, the amendments will:
Effective Date and Transition
The amended rules will become effective 30 days after publication in the Federal Register. Public companies will be required to comply with the rules beginning with the first fiscal year ending on or after the date that is 210 days after publication in the Federal Register. For calendar-year companies, the rules will therefore apply to annual reports for the year ending December 31, 2021. Although public companies will not be required to apply the amended rules until the mandatory compliance date, they may voluntarily 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. For example, if a company wished to stop providing the contractual obligations table in MD&A before the mandatory compliance date, it could do so, but the company would also be required to comply with all of the other amended Item 303 disclosure requirements as well – it could not pick and choose some of the old and some of the new.