On November 19, 2020, in a 3-2 vote, the Securities and Exchange Commission (SEC) adopted certain amendments as part of its plan to modernize, simplify, and enhance Regulation S-K disclosure requirements applicable to publicly traded companies. Using a principles-based, registrant-specific disclosure approach, the SEC approved these amendments with the expectation that the amendments will further facilitate the disclosure of relevant and material information while enhancing consumer readability and eliminating duplicative disclosures and immateriality. The amendments will take effect 30 days after they are published in the Federal Register. Registrants are required to comply with the amendments beginning with the first fiscal year ending on or after the date that is 210 days after publication in the Federal Register. Carve-outs to certain amendments exist for Smaller Reporting Companies.
We recommend that CFOs, disclosure counsel, and other interested parties become familiar with the amendments, summarized below.
Selected Financial Data—Item 301
- Eliminates Item 301 (Selected Financial Data)
Supplementary Financial Information—Item 302
- Replaces Item 302(a) so that instead of being subjected to a quarterly tabular disclosure requirement, firms are subjected to a principles-based requirement for material retrospective changes
Management’s Discussion and Analysis of Financial Conditions and Results of Operations (MD&A)—Item 303
- Firms must state the objectives of MD&A under Item 303(a)
- Enhances and clarifies disclosure requirements for liquidity and capital resources under Items 303(a)(1) and (2) (amended Item 303(b)(1))
- Amends current Item 303(a)(1) and (2) (amended Item 303(b)(1)) to modernize, enhance and clarify disclosure requirements for results of operations.
- Rolls out a new Item 303(b)(3), designated Critical Accounting Estimates, to clarify and codify Commission guidance on important accounting estimates
- Substitutes Item 303(a)(4), Off-Balance Sheet Arrangements, with a new mandate to discuss obligations as they relate to the broader MD&A section
- Deletes Item 303(a)(5), Tabular Disclosure of Contractual Obligations, in light of the amended disclosure requirements for liquidity and capital resources and to eliminate redundant disclosure previously required elsewhere in the financial statements
- Updates Item 303(b) to modernize, clarify, and streamline the item and allow for flexibility in the comparison of interim periods to help registrants provide an analysis more in line with their respective business cycles.
Also of note are the following carveouts for Smaller Reporting Companies:
Smaller Reporting Company (SRC) – a registrant that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not an SRC, that: had a public float of less than $250 million; or had annual revenues of less than $100 million and had either no public float or a public float of less than $700 million. Business development companies (“BDCs”) do not fall within the SRC definition and are a type of closed-end investment company that is not registered under the Investment Company Act.
- Smaller Reporting Companies are not required to provide Selected Financial Data, Item 301 information.
- Selected Financial Data, Item 303(d) is eliminated for Smaller Reporting Companies
- Exempts smaller reporting companies from the Critical Accounting Estimates, Item 11, Quantitative and Qualitative Disclosures About Market Risk
These amendments reflect the SEC’s continued focus on improving disclosure effectiveness and modernizing the disclosure requirements in Regulation S-K by eliminating or updating disclosure requirements that have been viewed by registrants as outdated. Registrants will need to closely review current disclosures with their counsel in light of the above amendments.
For additional information, please see the following:
 Release No. 2020-290, SEC Adopts Amendments to Modernize and Enhance Management’s Discussion and Analysis and other Financial Disclosures (Nov. 19, 2020), available at: https://www.sec.gov/news/press-release/2020-290.
 Release No. 33-10890, Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information (Nov. 19, 2020), available at: https://www.sec.gov/rules/final/2020/33-10890.pdf.