SEC proposes simplifying disclosure requirements

By Ken Tysiac

The SEC voted to propose amendments designed to simplify and enhance certain company financial disclosures and issued guidance on key performance indicators and metrics in management's discussion and analysis (MD&A).

Item 301 (selected financial data) and Item 302 (supplementary financial data) would be eliminated from Regulation S-K under the proposal. Meanwhile, Item 303 would be amended to:

  • Add a new disclosure to state the principal objectives of MD&A.
  • Replace off-balance-sheet arrangement reporting requirements with a principles-based instruction to discuss off-balance-sheet arrangements in the broader context of MD&A.
  • Eliminate the requirement for tabular disclosure of contractual obligations.
  • Add a new disclosure requirement on critical accounting estimates.
  • Revise the interim MD&A requirement to provide flexibility by allowing 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 MD&A guidance states that when companies disclose metrics, they should consider whether additional disclosures are necessary, and gives examples of such disclosures. The guidance also reminds companies of requirements to maintain disclosure controls and procedures.

The comment period for the proposal will remain open for comment for 60 days after publication in the Federal Register, while the guidance will take effect upon publication in the register.

Ken Tysiac ( is the JofA's editorial director.

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