# Management's Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information

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URL: https://www.frixlaw.com/law-library/documents/fr%3A2020-26090

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** January 11, 2021
- **Citation:** 86 FR 2080

## Text

SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 210, 229, 230, 239, 240, and 249
[Release No. 33-10890; 34-90459; IC-34100; File No. S7-01-20]
RIN 3235-AM48
Management's Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information

AGENCY:

Securities and Exchange Commission.

ACTION:

Final rule.

SUMMARY:

We are adopting amendments to modernize, simplify, and enhance certain financial disclosure requirements in Regulation S-K. Specifically, we are eliminating the requirement for Selected Financial Data, streamlining the requirement to disclose Supplementary Financial Information, and amending Management's Discussion & Analysis of Financial Condition and Results of Operations (“MD&A”). These amendments are intended to eliminate duplicative disclosures and modernize and enhance MD&A disclosures for the benefit of investors, while simplifying compliance efforts for registrants.

DATES:

Effective date:
The final rules are effective February 10, 2021.

Compliance date: See
Section II.F for further information on transitioning to the final rules.

FOR FURTHER INFORMATION CONTACT:

Angie Kim, Special Counsel, Office of Rulemaking, at (202) 551-3430, or Ryan Milne, Associate Chief Accountant, Office of the Chief Accountant, at (202) 551-3400 in the Division of Corporation Finance, U.S. Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION:

We are adopting amendments to:

Commission reference
CFR citation (17 CFR)

Regulation S-X
§§ 210.1-01 through 210.13-02.

Item 1-02(bb)
§ 210.1-02(bb).

Regulation S-K
§§ 229.10 through 229.1406.

Item 10
§ 229.10.

Item 301
§ 229.301.

Item 302
§ 229.302.

Item 303
§ 229.303.

Item 914
§ 229.914.

Regulation AB
§§ 229.1100 through 229.1125.

Item 1112
§ 229.1112.

Item 1114
§ 229.1114.

Item 1115
§ 229.1115.

Securities Act of 1933
1
(“Securities Act”)

Rule 419
§ 230.419.

Form S-1
§ 239.11.

Form S-20
§ 239.20.

Form S-4
§ 239.25.

Form F-1
§ 239.31.

Form F-4
§ 239.34.

Securities Exchange Act of 1934
2
(“Exchange Act”)

Rule 14a-3
§ 240.14a-3.

Schedule 14A
§ 240.14a-101.

Form 20-F
§ 249.218.

Form 40-F
§ 249.220f.

Form 8-K
§ 249.308.

Form 10-K
§ 249.310.

Securities Act and Investment Company Act of 1940
3
(“Investment Company Act”)

Form N-2
§§ 239.14 and 274.11a-1.

1
15 U.S.C. 77a
et seq.

2
15 U.S.C. 78a
et seq.

3
15 U.S.C. 80a-1
et seq.

Table of Contents

I. Introduction

A. Background

B. Overview of the Final Amendments

II. Description of the Final Amendments

A. Selected Financial Data (Item 301)

1. Proposed Amendments

2. Comments

3. Final Amendments

B. Supplementary Financial Information (Item 302)

1. Proposed Amendments

2. Comments

3. Final Amendments

C. Management's Discussion and Analysis of Financial Condition and Results of Operations (Item 303)

1. Restructuring and Streamlining

2. Capital Resources—Material Cash Requirements (New Item 303(b)(1) and Amended Item 303(b)(1)(ii))

3. Results of Operations—Known Trends or Uncertainties (Amended Item 303(b)(2)(ii))

4. Results of Operations—Net Sales and Revenues (Amended Item 303(b)(2)(iii)) 600

5. Results of Operations—Inflation and Price Changes (Current Item 303(a)(3)(iv), and Current Instructions 8 and 9 to Item 303(a))

6. Off-Balance Sheet Arrangements (New Instruction 8 to Item 303(b))

7. Contractual Obligations Table (Current Item 303(a)(5)) and Amended Item 303(b)(1)—
Liquidity and Capital Resources
)

8. Critical Accounting Estimates (New Item 303(b)(3))

9. Interim Period Discussion (Amended Item 303(c))

10. Safe Harbor for Forward-Looking Information (Current Item 303(c))

11. Smaller Reporting Companies (Current Item 303(d))

D. Application to Foreign Private Issuers

1. Form 20-F

2. Form 40-F

3. Item 303 of Regulation S-K (Hyperinflation Requirement in Item 303 for FPIs)

E. Additional Conforming Amendments

1. Roll-up Transactions—Item 914 of Regulation S-K

2. Regulation AB—Items 1112, 1114, and 1115

3. Summary Prospectus in Forms S-1 and F-1

4. Business Combinations—Form S-4, Form F-4, and Schedule 14A

5. Form S-20

F. Compliance Date

III. Other Matters

IV. Economic Analysis

A. Introduction

B. Baseline and Affected Parties

C. Potential Benefits and Costs of the Amendments

1. Overall Potential Benefits and Costs

2. Benefits and Costs of Specific Amendments

D. Anticipated Effects on Efficiency, Competition, and Capital Formation

E. Alternatives

V. Paperwork Reduction Act

A. Summary of the Collections of Information

B. Summary of Comment Letters and Revisions to PRA Estimates

C. Effects of the Amendments on the Collections of Information

D. Incremental and Aggregate Burden and Cost Estimates for the Final Amendments

VII. Final Regulatory Flexibility Act Certification

VIII. Statutory Authority

I. Introduction

A. Background

On January 30, 2020, the Commission proposed amendments to Regulation S-K,
4

and related rules and forms to: (1) Eliminate Item 301, Selected Financial Data and Item 302, Supplementary Financial Information; and (2) modernize, simplify, and enhance the disclosure requirements in Item 303, MD&A.
5

The Commission also proposed certain parallel amendments to financial disclosure requirements applicable to foreign private issuers (“FPIs”).
6

The proposed amendments were part of an ongoing, comprehensive evaluation of our disclosure requirements
7

and focused on modernizing and improving disclosure by reducing costs and burdens while continuing to provide investors with all material information.

4
17 CFR 229.10 through 229.1406.

5

See
Management's Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information, Release No. 33-10750 (Jan. 30, 2020) [85 FR 12068 (Feb. 28, 2020)] (the “Proposing Release”).

6
An FPI is any foreign issuer other than a foreign government, except for an issuer that (1) has more than 50% of its outstanding voting securities held of record by U.S. residents; and (2) any of the following: (i) A majority of its executive officers or directors are citizens or residents of the United States; (ii) more than 50% of its assets are located in the United States; or (iii) its business is principally administered in the United States.
See
17 CFR 230.405.
See also
17 CFR 240.3b-4(c).

7

See
Proposing Release at Section I.A.

Many commenters supported the objectives of the proposed amendments or were generally in favor of the proposals.
8

We also received suggestions to modify or further consider aspects of the proposed amendments that commenters believed could be clarified or improved.
9

After reviewing and considering the public comments, we are adopting the majority of the amendments as proposed. As discussed further below, in certain cases, we are adopting the proposed rules with modifications that are intended to address comments received.

8
Comment letters for the Proposing Release are
available at https://www.sec.gov/comments/s7-01-20/s70120.htm.
Unless otherwise indicated, comment letters cited in this release are to the Proposing Release. In addition, the SEC's Investor Advisory Committee adopted recommendations (“IAC Recommendation”) with respect to the proposal and other disclosure matters, asking the Commission and staff to: Reconsider whether to permit all companies to omit fourth quarter information from annual reports; closely monitor accounting developments relating to reverse factoring; continue to monitor the use of non-GAAP measures by reporting companies; and reconsider whether to permit omission of the tabular contractual obligations information in annual reports.
See
U.S. Securities & Exchange Commission Investor Advisory Committee, Recommendation of the SEC Investor Advisory Committee Relating to Accounting and Financial Disclosure (May 21, 2020),
available at https://www.sec.gov/spotlight/investor-advisory-committee-2012/accounting-and-financial-disclosure.pdf.

See also
letter from the Investor-as-Owner Subcommittee of the SEC Investor Advisory Committee dated April 27, 2020.

9
In addition, some commenters provided input addressing whether there is a need for additional disclosure requirements relating to environmental, social, or governance issues (“ESG”) and sustainability matters.
See
letters from RSM US LLP dated April 20, 2020 (“RSM”); Edison Electric Institute and American Gas Association dated April 28, 2020 (“EEI & AGA”); U.S. Chamber of Commerce's Center for Capital Markets Competitiveness dated May 4, 2020 (“Chamber”); Principles for Responsible Investment dated April 28, 2020; Institute for Policy Integrity, New York University School of Law dated April 28, 2020; E. Warren, United States Senator dated April 28, 2020; Center for Audit Quality dated April 28, 2020 (“CAQ”); Ernst & Young, LLP dated April 28, 2020 (“E&Y”); The Forum for Sustainable and Responsible Investment dated June 17, 2020. These commenters reflected a range of views. For example, some commenters broadly supported the establishment of comprehensive ESG disclosure requirements, while others recommended prescriptive line-item requirements specifically addressing climate risk disclosures. Other commenters asserted that the existing disclosure principles in Regulation S-K are sufficient to elicit disclosure of material information and objected to new rules that would require all registrants to include topic-specific disclosure on ESG and sustainability matters irrespective of the applicability to registrants' particular operations and finances. In keeping with the Commission's principles-based approach to MD&A, we are not adding any new requirements to Item 303 with respect to ESG or sustainability matters, and continue to emphasize the Commission's existing guidance on these topics.
See
Commission Guidance Regarding Disclosure Related to Climate Change, Release No. 33-9106 (Feb. 8, 2010) [75 FR 6290 (Feb. 8, 2010)].

B. Overview of the Final Amendments

We are adopting changes to Items 301, 302, and 303 of Regulation S-K that would reduce duplicative disclosure and focus on material information. Our amendments:

• Eliminate Item 301 (Selected Financial Data); and

• Modernize, simplify, and streamline Item 302(a) (Supplementary Financial Information) and Item 303 (MD&A). Specifically, these amendments will:

○ Revise Item 302(a) to replace the current requirement for quarterly tabular disclosure with a principles-based requirement for material retrospective changes;

○ Add a new Item 303(a),
Objective,
to state the principal objectives of MD&A;

○ Amend Item 303(a),
Full fiscal years
(amended Item 303(b)) and Item 303(b),
Interim periods
(amended Item 303(c)) to modernize, clarify, and streamline the items;

○ Replace Item 303(a)(4),
Off-balance sheet arrangements,
with an instruction to discuss such obligations in the broader context of MD&A;

○ Eliminate Item 303(a)(5),
Tabular disclosure of contractual obligations,
and amend Item 303(b)(1),
Liquidity and Capital Resources,
to specifically require disclosure of material cash requirements from known contractual and other obligations as part of an enhanced liquidity and capital resources discussion; and

○ Add a new Item 303(b)(3),
Critical accounting estimates,
to clarify and codify Commission guidance on critical accounting estimates.
10

10

See Commission Guidance Regarding Management's Discussion and Analysis of Financial Condition and Results of Operation,
Release No. 33-8350 (Dec. 19, 2003) [68 FR 75056 (Dec. 29, 2003)] (the “2003 MD&A Interpretive Release”).

We are also adopting certain parallel amendments to Forms 20-F and 40-F, including Item 3.A of Form 20-F (Selected Financial Data), Item 5 of Form 20-F (Operating and Financial Review and Prospects), General Instruction B.(11) of Form 40-F (Off-Balance Sheet Arrangements), and General Instruction B.(12) of Form 40-F (Tabular Disclosure of Contractual Obligations).
11

The following table summarizes some of the changes we are adopting, as described more fully in Section II (Final Amendments):
12

11
We discuss the amendments that affect FPIs in Section II.D
infra.
We are adopting corresponding changes for FPIs to all items, except for Items 302(a) and 303(b).

12
The information in this table is not comprehensive and is intended only to highlight

some of the more significant aspects of the final amendments. It does not reflect all of the amendments or all of the rules and forms that are affected. All changes are discussed in their entirety below. As such, this table should be read together with the referenced sections and the complete text of this release.

Current item
or issue

Summary description
of amended rules

Principal objective(s)

Discussed
below in section

Item 301,
Selected financial data

Registrants will no longer be required to provide 5 years of selected financial data
Modernize disclosure requirement in light of technological developments and simplify disclosure requirements
II.A.

Item 302(a),
Supplementary financial information

Registrants will no longer be required to provide 2 years of tabular selected quarterly financial data. The item will be replaced with a principles-based requirement for material retrospective changes
Reduce repetition and focus disclosure on material information. Modernize disclosure requirement in light of technological developments
II.B.

Item 303(a),
MD&A

Clarify the objective of MD&A and streamline the fourteen instructions
Simplify and enhance the purpose of MD&A
II.C.1.a.

Item 303(a)(2),
Capital resources

Registrants will need to provide material cash requirements, including commitments for capital expenditures, as of the latest fiscal period, the anticipated source of funds needed to satisfy such cash requirements, and the general purpose of such requirements
Modernize and enhance disclosure requirements to account for capital expenditures that are not necessarily capital investments
II.C.2 and II.C.7.

Item 303(a)(3)(ii),
Results of operations

Registrants will need to disclose known events that are reasonably likely to cause a material change in the relationship between costs and revenues, such as known or reasonably likely future increases in costs of labor or materials or price increases or inventory adjustments
Clarify item requirement by using a disclosure threshold of “reasonably likely,” which is consistent with the Commission's interpretative guidance on forward-looking statements
II.C.3.

Item 303(a)(3)(iii),
Results of operations

Clarify that a discussion of material
changes
in net sales or revenue is required (rather than only material
increases
)

Clarify MD&A disclosure requirements by codifying existing Commission guidance
II.C.4.

Item 303(a)(3)(iv),
Results of operations
Instructions 8 and 9
(Inflation and price changes)

The item and instructions will be eliminated. Registrants will still be required to discuss these matters if they are part of a known trend or uncertainty that has had, or the registrant reasonably expects to have, a material favorable or unfavorable impact on net sales, or revenue, or income from continuing operations
Encourage registrants to focus on material information that is tailored to a registrant's businesses, facts, and circumstances
II.C.5.

Item 303(a)(4),
Off-balance sheet arrangements

The item will be replaced by a new instruction to Item 303. Under the new instruction, registrants will be required to discuss commitments or obligations, including contingent obligations, arising from arrangements with unconsolidated entities or persons that have, or are reasonably likely to have, a material current or future effect on such registrant's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements, or capital resources even when the arrangement results in no obligation being reported in the registrant's consolidated balance sheets
Prompt registrants to consider and integrate disclosure of off-balance sheet arrangements within the context of their MD&A
II.C.6.

Item 303(a)(5),
Contractual obligations

Registrants will no longer be required to provide a contractual obligations table. A discussion of material contractual obligations will remain required through an enhanced principles-based liquidity and capital resources requirement focused on material short- and long-term cash requirements from known contractual and other obligations
Promote the principles-based nature of MD&A and simplify disclosures
II.C.7 and II.C.2.

Instruction 4 to Item 303(a)
(Material changes in line items)

Incorporate a portion of the instruction into amended Item 303(b). Clarify in amended Item 303(b) that where there are material changes in a line item, including where material changes within a line item offset one another, disclosure of the underlying reasons for these material changes in quantitative and qualitative terms is required
Enhance analysis in MD&A. Clarify MD&A disclosure requirements by codifying existing Commission guidance on the importance of analysis in MD&A
II.C.1.b.

Item 303(b),
Interim periods

Registrants will be permitted to compare their most recently completed quarter to either the corresponding quarter of the prior year or to the immediately preceding quarter. Registrants subject to Rule 3-03(b) of Regulation S-X will be afforded the same flexibility
Allow for flexibility in comparison of interim periods to help registrants provide a more tailored and meaningful analysis relevant to their business cycles
II.C.9.

Critical Accounting Estimates
Registrants will be explicitly required to disclose critical accounting estimates
Facilitate compliance and improve resulting disclosure. Eliminate disclosure that duplicates the financial statement discussion of significant policies. Promote meaningful analysis of measurement uncertainties
II.C.8.

We discuss the final amendments below in the order that each Item appears in Regulation S-K.

II. Description of the Final Amendments

A. Selected Financial Data (Item 301)

1. Proposed Amendments

Current Item 301
13

requires registrants to furnish selected financial data in comparative tabular form for each of the registrant's last five fiscal years and any additional fiscal years necessary to keep the information from being misleading. Instruction 1 to Item 301 states that the purpose of the item is to supply in a convenient and readable format selected financial data that highlights certain significant trends in the registrant's financial condition and results of operations. Instruction 2 to Item 301 lists specific items that must be included, subject to appropriate variation to conform to the nature of the registrant's business, and provides that registrants may include additional items they believe would enhance an understanding of, and highlight, other trends in their financial condition and results of operations.
14

13

See also infra
Section II.D for a discussion of related amendments to Form 20-F.

14
Instruction 2 to Item 301 of Regulation S-K states that, subject to appropriate variation to conform to the nature of the registrant's business, the following items shall be included in the table of financial data: Net sales or operating revenues; income (loss) from continuing operations; income (loss) from continuing operations per common share; total assets; long-term obligations and redeemable preferred stock (including long-term debt, capital leases, and redeemable preferred stock); and cash dividends declared per common share.

Smaller reporting companies
15

are not required to provide Item 301 information.
16

Emerging growth companies (“EGCs”)
17

that are providing the information called for by Item 301 in a Securities Act registration statement need not present selected financial data for any period prior to the earliest audited financial statements presented in connection with the EGC's initial public offering (“IPO”) of its common equity securities.
18

In addition, an EGC that is providing the information called for by Item 301 in a registration statement, periodic report, or other report filed under the Exchange Act need not present selected financial data for any period prior to the earliest audited financial statements presented in connection with its first registration statement that became effective under the Exchange Act or Securities Act.
19

15
Item 10(f)(1) of Regulation S-K defines a smaller reporting company (“SRC”) as 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.

16
Item 301(c) of Regulation S-K [17 CFR 229.301(c)].

17
An EGC is defined as a company that has total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year and, as of December 8, 2011, had not sold common equity securities under a registration statement. A company continues to be an EGC for the first five fiscal years after it completes an IPO, unless one of the following occurs: Its total annual gross revenues are $1.07 billion or more; it has issued more than $1 billion in non-convertible debt in the past three years; or it becomes a “large accelerated filer,” as defined in Exchange Act Rule 12b-2.
See
Securities Act Rule 405 and Exchange Act Rule 12b-2.

18
Item 301(d)(1) of Regulation S-K [17 CFR 229.301(d)(1)].

19
Item 301(d)(2) of Regulation S-K [17 CFR 229.301(d)(2)].

The Commission proposed to eliminate Item 301 in part because of advances in technology since the item's adoption in 1970 that allow for easy access to the information required by this item on the Commission's Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”).
20

The Commission also noted that Item 301 was originally intended to elicit disclosure of material trends and that requiring five years of selected financial data is not necessary to achieve this because of the requirement for discussion and analysis of trends in Item 303.
21

20

See
Proposing Release at Section II.A.

21

See
Proposing Release at Section II.A.

2. Comments

Commenters broadly supported the proposals.
22

A few commenters stated that Item 301 creates additional complexity or costs when evaluating whether to recast earlier years or when

recasting earlier years, such as when there is a new accounting standard or change in business.
23

For example, one commenter stated that the costs of providing the earlier two years can be significant and elaborated that these costs include: Internal costs to prepare any restatement and disclosures; implementation of internal controls; and external costs such as legal and audit fees.
24

Another commenter stated that it recently disposed of a portion of its business and revising the full five years under Item 301 was difficult and time consuming, and it believed that the disclosure was not useful to investors.
25

22

See, e.g.,
letters from PriceWaterhouseCoopers LLP dated April 23, 2020 (“PWC”); Pfizer, Inc. dated April 24, 2020 (“Pfizer”); Eli Lilly and Company dated April 24, 2020 (“Eli Lilly”); EEI and AGA; KPMG LLP dated April 28, 2020 (“KPMG”); CAQ; FedEx dated April 28, 2020 (“FedEx”); Nasdaq, Inc. dated April 28, 2020 (“Nasdaq”); Nareit dated April 28, 2020 (“Nareit”); Financial Executives International dated April 28, 2020 (“FEI”); SIFMA dated April 28, 2020 (“SIFMA”); Institute of Management Accountants dated April 28, 2020 (“IMA”); E&Y; UnitedHealth Group dated April 28, 2020 (“UnitedHealth”); Medtronic dated April 29, 2020 (“Medtronic”); Chamber; ABA Business Law Section dated June 5, 2020 (“ABA”); Society for Corporate Governance dated June 22, 2020 (“Society”).

23

See, e.g.,
letters from Eli Lilly; EEI & AGA; FEI.

24

See
letter from FEI.

25

See
letter from Eli Lilly.

Some commenters opposed the proposal and recommended retaining this item.
26

These commenters suggested that eliminating the item would increase the time and costs for investors to obtain the same disclosure through other means.
27

Some of these commenters also stated that eliminating Item 301 would result in the loss of disclosure, noting specifically the loss of the earlier two years where a corporation discontinues its operations, changes its accounting standards, or otherwise materially restates prior period results.
28

A few commenters also expressed the view that the proposal would negatively impact trend disclosure, especially for the full five years, because, in their observation, registrants do not typically provide this disclosure despite requirements in Item 303 and Commission guidance calling for it.
29

These commenters stated that they “have not noted [trend] disclosure being provided by registrants in MD&A to any significant extent, and have certainly not seen evidence of this type of disclosure encompassing a full five-year trend analysis.”
30

26

See, e.g.,
letters from NASAA dated April 28, 2020 (“NASAA”); California Public Employees' Retirement Systems dated April 28, 2020 (“CalPERS”); CFA Institute and Council of Institutional Investors dated April 28, 2020 (“CFA & CII”); Dan Jamieson dated May 1, 2020 (“D. Jamieson”).

27

See id.

28

See
letters from NASAA (observing loss of information where there is a change in accounting standard or restatement, noting that in both scenarios the lost disclosure would be particularly significant); CFA & CII (observing loss of information where there are discontinued operations or restatements); D. Jamieson.

29

See
letters from CFA & CII; D. Jamieson.

30

See id.

A few commenters, while not objecting to the proposed elimination of the item, recommended continued consideration of investor input as to the overall utility of Item 301.
31

One of these commenters stated that many registrants disclose trends for the periods covered by the financial statements, and if Item 303 is intended to elicit five-year trend disclosure, Item 303 should be clarified to make this objective clear.
32

31

See
letters from Grant Thornton dated April 28, 2020 (“Grant Thornton”) (encouraging “the SEC to continue outreach to investors on the overall utility of selected financial data and supplementary financial information prior to finalizing rulemaking in this area”); BDO USA, LLP dated April 28, 2020 (“BDO”) (stating its belief that “investors are best positioned to provide feedback about whether the Selected Financial Data . . . should be eliminated or retained”).

32

See
letter from BDO.

3. Final Amendments

We are adopting the amendments to eliminate Item 301 as proposed. We agree with commenters that the earlier two years required by Item 301 can create additional costs and complexity. We acknowledge the input of some commenters that the earlier two years required by Item 301 can help illustrate material trends. However, this disclosure is typically available in prior filings on EDGAR.
33

We also continue to believe that the disclosures required by Item 303 should continue to elicit material trend disclosure. Item 303 currently requires disclosure of trend data,
34

and will continue to require this information under the amendments,
35

and we reiterate Commission guidance that has emphasized the importance of this disclosure in MD&A.
36

In light of these requirements, we do not anticipate that eliminating Item 301 will discourage trend disclosure or otherwise reduce disclosure of material trends. We acknowledge commenters that stated that our amendments may increase the time and costs to investors to obtain historical disclosures elsewhere. However, we expect that these search costs are likely to decrease over time as investors adjust to new disclosure formats.
37

33
In addition, filings are generally available on registrants' websites and other third-party websites. We note that the elimination of Item 301 includes the exchange rate disclosure requirements for FPI's in Instruction 5 of Item 301. This is consistent with the Commission's prior removal of exchange rate data disclosure requirements in former Item 3.A.3 of Form 20-F, in which the Commission similarly cited the ready availability of exchange rate disclosure information on a number of websites as a basis for eliminating that requirement.
See
Disclosure Update and Simplification, Release No. 33-10532 (Aug. 17, 2018) [83 FR 38768 (Aug. 7, 2018)].
Id.
at 107.

34

See, e.g.,
Item 303(a)(1) and (a)(2)(ii).

35

See, e.g.,
amended Item 303(a), Item 303(b)(1)(i), Item 303(b)(1)(ii)(B), and Item 303(b)(2)(ii).

36

See, e.g.,
2003 MD&A Interpretive Release.

37

See infra
Section IV.C.2.a.

Notwithstanding the amendments to eliminate Item 301, we encourage registrants to consider whether trend information for periods earlier than those presented in the financial statements may be necessary as part of MD&A's objective to “provide material information relevant to an assessment of the financial condition and results of operations.”
38

We also encourage registrants to consider whether a tabular presentation of relevant financial or other information, as part of an introductory section or overview, including to demonstrate material trends, may help a reader's understanding of MD&A.
39

38

See
amended Item 303(b).

39

See
2003 MD&A Interpretive Release at Section III.A.

This Commission guidance also states that registrants could benefit from adding an introductory section or overview.
40

Notwithstanding the amendments to eliminate Item 301, registrants should continue to consider whether such tabular disclosure as part of an introductory section or overview, including to demonstrate material trends, would be appropriate.

40

See id.

B. Supplementary Financial Information (Item 302)

1. Proposed Amendments

Current Item 302(a)(1) requires disclosure of selected quarterly financial data of specified operating results,
41

and current Item 302(a)(2) requires disclosure of variances in these results from amounts previously reported on a Form 10-Q.
42

Item 302(a) does not apply to SRCs or FPIs and, because it only applies to companies that already have a class of securities registered under Section 12 of the Exchange Act at the time of filing, it does not apply to first-time registrants conducting an IPO and registrants that are only required to file reports pursuant to Section 15(d) of the Exchange Act.
43

When Item 302(a) applies, it requires certain information

for each full quarter within the two most recent fiscal years and any subsequent period for which financial statements are included or required by Article 3 of Regulation S-X.
44

Item 302(a)(3) requires a description of the effect of any discontinued operations and unusual or infrequently occurring items recognized in each quarter, as well as the aggregate effect and the nature of year-end or other adjustments that are material to the results of that quarter.
45

If a registrant's financial statements have been reported on by an accountant, Item 302(a)(4) requires that accountant to follow appropriate professional standards and procedures regarding the data required by Item 302(a).
46

41
Item 302(a)(1) of Regulation S-K [17 CFR 229.302(a)(1)]. Item 302(a)(1) specifies disclosure of: Net sales; gross profit (net sales less costs and expenses associated directly with or allocated to products sold or services rendered); income (loss) from continuing operations; per share data based upon income (loss) from continuing operations; net income (loss); and net income (loss) attributable to the registrant.

42
Item 302(a)(2) of Regulation S-K [17 CFR 229.302(a)(2)]. When the data supplied pursuant to Item 302(a) varies from amounts previously reported on the Form 10-Q filed for any quarter, such as when a combination between entities under common control occurs or where an error is corrected, the registrant must reconcile the amounts given with those previously reported and describe the reason for the difference.

43
Item 302(a)(5) and (c) of Regulation S-K [17 CFR 229.302(a)(5) and (c)].

44
Item 302(a)(1) and (a)(3) [17 CFR 229.302(a)(1) and (a)(3)].

45
Item 302(a)(3) of Regulation S-K [17 CFR 229.302(a)(3)]. The requirement applies to items recognized in each full quarter within the two most recent fiscal years and any subsequent interim period for which financial statements are included or are required to be included.

46
Item 302(a)(4) of Regulation S-K [17 CFR 229.302(a)(4)].

The Commission proposed to eliminate Item 302(a), intending to address the largely duplicative disclosures that result from this prescriptive requirement. However, the Commission recognized that, while most of the financial data required by Item 302(a) can be found in prior quarterly reports on EDGAR, the item requires separate disclosure of certain fourth quarter information, which is not otherwise required to be disclosed. The Commission also recognized that the proposal may result in the loss of the effect of a retrospective change in the earliest of the two years.
47

In the Proposing Release, the Commission stated that, where fourth quarter results are material or there is a material retrospective change, existing requirements, such as those in Item 303 would still elicit this disclosure.
48

47
Because Item 302(a)(2) requires disclosure of variances in results from amounts previously reported for the two most recent fiscal years, the effect of a retrospective change in any quarter for which a Form 10-Q is filed in the more recent of the two fiscal years will be disclosed in the selected quarterly data. However, absent Item 302(a)(2), this variance would not be specifically required to be disclosed until the following year in the corresponding fiscal quarter in which the retrospective change occurred. Additionally, disclosure in the Form 10-Q for this corresponding fiscal quarter would not include the effects of this change in the earliest of the two years presented in the Form 10-K, as this Form 10-Q would be limited to the current and prior-year interim periods.

48

See
Proposing Release at Section II.B.1.

The Commission also proposed to eliminate Item 302(b) (Supplementary Financial Information—Information about Oil and Gas Producing Activities) due to overlap with a U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) requirement.
49

49

See
ASC 932-235-50.
See also
Proposing Release at Section II.B.2.

2. Comments

The proposal generated a wide range of responses. Many commenters supported the proposal.
50

A number of these commenters suggested that fourth quarter information is easily derived, such as by subtracting the third quarter from year-to-date amounts
51

or is otherwise frequently disclosed in registrants' earnings releases.
52

Other commenters expressed the view that registrants would voluntarily present Item 302(a) disclosure absent a requirement.
53

One of these commenters, while supportive of the proposal, expressed concern about the loss of certain fourth quarter information and the effects of material retrospective changes.
54

This commenter recommended revising the instructions to Item 303 to require (i) a discussion of the fourth quarter in MD&A but only when this quarter differs materially from previously reported quarterly information and (ii) disclosure of material retrospective changes.

50

See, e.g.,
letters from PWC; Pfizer; Eli Lilly; EEI & AGA; KPMG; CAQ; FedEx; Nasdaq; Nareit; FEI; SIFMA; IMA; UnitedHealth; Medtronic; Chamber; ABA; Society.

51

See, e.g.,
letters from Eli Lilly; FEI; SIFMA; IMA; UnitedHealth; Medtronic; Society.

52

See
letter from UnitedHealth.

53

See
letters from KPMG; CAQ.

54

See
letter from ABA.

A number of commenters, however, opposed the proposal to eliminate Item 302(a).
55

All of these commenters suggested that a separate presentation of fourth quarter data is useful to investors,
56

with one of these commenters stating that for “a significant number of companies, fourth quarter results cannot be derived from annual results.”
57

A few of these commenters also questioned the cost savings, if any, to registrants if Item 302(a) were eliminated, stating that registrants already have the procedures in place to disclose this information.
58

55

See, e.g.,
letters from E&Y; NASAA; CalPERS; CFA & CII; D. Jamieson.
See also
IAC Recommendation.

56

See id.

57

See
IAC Recommendation.

58

See, e.g.,
letters from NASAA; CalPERS.
See also
IAC Recommendation.

Several commenters opposing the proposal stated that eliminating Item 302(a) would result in either delays in the disclosure of retrospective revisions until the following Form 10-Q or a loss of disclosure on the effect of a retrospective change on the earliest of the two years for such revisions.
59

Some of these commenters questioned whether the loss of the fourth quarter data may be mitigated by disclosure elicited under Item 303
60

and/or Accounting Standards Codification 270 (Interim Reporting).
61

One of these commenters expressed the view that registrants would voluntarily report fourth quarter data, but noted that eliminating Item 302(a) would result in investors losing the benefit of having an auditor review of the fourth quarter.
62

One of these commenters recommended that, if Item 302(a) were retained, the line items required for presentation be conformed to key subtotals in the registrant's interim statement of comprehensive income in order to eliminate the potential for inconsistencies between the item requirements and the registrant's financial statements.
63

59

See, e.g.,
letters from E&Y; CFA & CII; D. Jamieson.
See supra
footnote 47.

60

See
letters from E&Y; NASAA.

61

See
letter from E&Y.

62

See id.

63

See
letter from E&Y.

A few commenters, while not objecting to the proposed elimination of Item 302(a), recommended continued consideration of investor input on the utility of Item 302(a) before finalizing any rulemaking.
64

All of these commenters suggested revisions to provide for disclosure of material retrospective changes, either by revising Item 302(a),
65

or through revisions to Item 303.
66

Some commenters also recommended revising Item 302(a) to allow newly reporting registrants to exclude this data for interim periods prior to those presented in its IPO registration statement.
67

64

See, e.g.,
letters from RSM; Grant Thornton; BDO.

65

See
letter from RSM.

66

See
letters from Grant Thornton (questioning whether current Item 303 would elicit this disclosure); BDO (stating that, if Item 303 is expected to elicit disclosure of material retrospective changes, this should be clarified in the item).

67

See
letters from Grant Thornton; E&Y.

Several commenters recommended coordinating with the Public Company Accounting Oversight Board (PCAOB) to clarify the requirement in Accounting Standard (AS) 4105.06, which requires auditors to review fourth quarter data where an annual report includes Item 302(a) disclosure.
68

68

See, e.g.,
letters from PWC; KPMG; CAQ; RSM; Grant Thornton; BDO; Deloitte & Touche, LLP dated April 28, 2020 (“Deloitte”). The text of AS 4105.06 is
available at https://pcaobus.org/Standards/Auditing/Pages/AS4105.aspx.

With respect to the proposal to eliminate Item 302(b), one commenter specified that it supported the

proposal,
69

and no commenters specifically opposed the proposal.

69

See
letter from Chamber.

3. Final Amendments

We are adopting amendments to Item 302(a), with modifications from what was proposed in response to comments received. Specifically, we are retaining the item and streamlining its requirements to require disclosure only when there are one or more retrospective changes that pertain to the statements of comprehensive income for any of the quarters within the two most recent fiscal years and any subsequent interim period for which financial statements are included or required to be included by Article 3 of Regulation S-X and that, individually or in the aggregate, are material.
70

Our amendments will require registrants to provide an explanation of the reasons for such material changes and to disclose, for each affected quarterly period and the fourth quarter in the affected year, summarized financial information related to the statements of comprehensive income (as specified in Rule 1-02(bb)(ii) of Regulation S-X) and earnings per share reflecting such changes. The affected quarters may include, depending on the facts and circumstances, a single quarter in which the material retrospective change applies, or it may flow through to subsequent quarters during the relevant look-back period (
i.e.,
the quarters within the two most recent fiscal years and any subsequent interim period for which financial statements are included or required to be included by Article 3 of Regulation S-X).
71

Consistent with a commenter's suggestion,
72

we are amending Item 302(a) to refer to amended Rule 1-02(bb)(ii). This will link amended Item 302(a) to the summarized financial information related to the statements of comprehensive income specified in amended Rule 1-02(bb)(1)(ii) of Regulation S-X,
73

thereby providing registrants flexibility in the line items presented. We are also adopting amendments to Rule 1-02(bb), as proposed, to clarify that the disclosure of summary financial information may vary, as appropriate, to conform to the nature of the entity's business.
74

Lastly, our amendments retain all Item 302(a) references in our rules and forms.
75

70
Some examples of a retrospective change that may trigger Item 302(a) disclosure include: Correction of an error; disposition of a business that is accounted for as discontinued operations; a reorganization of entities under common control; or a change in an accounting principle. These examples are not intended to be an exhaustive list, and may not always be material such that disclosure would be required under amended Item 302(a). Further, not all changes in accounting principles would result in a retrospective change. For example, certain calendar year-end EGCs that elected to take advantage of the extended transition period for new or revised financial accounting standards in their initial public offerings, will adopt in accordance with U.S. GAAP ASC 842,
Leases
for the full fiscal year in their 2022 Form 10-K filed in 2023 and will not adopt ASC 842 in interim periods until the Forms 10-Q filed in 2023. We do not view the adoption of ASC 842 in the 2022 Form 10-K, in this scenario, to constitute a retrospective change that should trigger disclosure under Item 302(a) in the registrant's 2022 Form 10-K. By contrast, a registrant that loses EGC status as of December 31, 2022, would have a retrospective change that would require evaluation of materiality under Item 302(a) because the registrant would be required to adopt ASC 842 in the 2022 Form 10-K for both the full fiscal year and interim periods within that fiscal year.

71
In the previous example of a registrant that loses EGC status, the affected quarters would include all four since the material retrospective change was as of January 1st.

72

See
letter from E&Y.

73
Rule 1-02(bb)(1)(ii) generally refers to the same line items required by current Item 302(a).

74

See
Proposing Release at footnote 337.

75

See
discussion in Section II.E.
infra.

The final amendments do not revise the population of registrants that are not required to provide disclosure pursuant to Item 302(a),
76

including, but not limited to, first time registrants conducting an IPO or registrants that are only required to file reports pursuant to Section 15(d).

76

See
amended Rule 302(a)(2).

We continue to believe that requiring quarterly financial data when there have not been one or more retrospective changes that are material, either individually or in the aggregate, would duplicate disclosures provided elsewhere, such as in Forms 10-Q or, in the case of fourth quarter results, can be derived from annual results disclosed in the Form 10-K. Our amendments eliminate these duplicative disclosures. We do, however, agree with commenters that timely disclosure of the effects of material retrospective changes may be important to investors, and lack of such disclosure could impact the ability to derive fourth quarter information when there have been such changes. As discussed in the Proposing Release, Item 303 should elicit some disclosure where there has been a material retrospective change. However, we believe that the amended Item 302(a) disclosures will further aid investors' understanding of the reasons for the material retrospective change and the related quantitative effect on the quarterly periods affected. Accordingly, our amendments are intended to address this discrete area.

We also believe amended Item 302(a) will better highlight material retrospective changes, as disclosure will only be required where there are such changes, which may be important to investors. For this reason, we believe amended Item 302(a) may be important in the context of both Exchange Act and Securities Act forms and accordingly, are retaining requirements to provide disclosure pursuant to this item in these forms.
77

Further, by limiting the disclosure only to affected quarters, we believe the final amendments will balance the costs to registrants of preparing such disclosures, while providing investors with material information regarding the impact of material changes.

77

See
discussion in Section II.E.
infra.

We acknowledge commenters who stated that, absent Item 302(a), fourth quarter results may not always be available or readily derived from annual results. We continue to believe that, in most instances, fourth quarter information can be readily derived from annual results, and as such, amended Item 302(a) does not generally require fourth quarter disclosure on a standalone basis.
78

Our amendments are intended to address the most common reason why fourth quarter data would not be easily calculable.

78
We acknowledge the view expressed in the IAC Recommendation regarding the ability to derive fourth quarter results based on the assessment described in their letter of selected net income data from the years 2010 through 2019.
See
IAC Recommendation. The information provided in the IAC Recommendation was not sufficient for us to replicate the referenced study, and the data and methodology were not otherwise in a publicly available source. Nevertheless, it appears that the data provided in the IAC Recommendation is not inconsistent with the staff's observations and conclusions regarding the ability to calculate fourth quarter data in most instances. Based on the information provided in the IAC Recommendation, assuming that the fewest number of companies studied (3,000) and the largest incidents of difference reported (300) occurred in the same year, it follows that there would have been no difference between reported and derived fourth quarter results for 90% of companies in such year. The data presented further suggests that, in the year where the greatest number of differences were observed between reported and derived fourth quarter results, 100 companies had less than a 1% difference and only 30 companies had a greater than 10% difference. We believe these findings are consistent with our view that in the substantial majority of cases, fourth quarter data is readily derivable. Based on our own observations and calculations, in most if not all instances, any differences that would cause fourth quarter data to not be derivable from year-end and third-quarter year-to-date results would be due to a retrospective change or changes. Under the final amendments, when there is a material retrospective change or changes, fourth quarter financial data would be required.

Additionally, and as some commenters stated, we expect that some registrants will voluntarily provide fourth quarter disclosure or disclosure of selected quarterly financial

information. In such instances, that information would be subject to the PCAOB AS 2710 requirements for auditors to read and consider such information for material inconsistencies with the audited financial statements. These procedures are lesser in scope as compared to the review procedures required by AS 4105.06 that are to be performed on fourth quarter data when presented in an annual report pursuant to Item 302(a).
79

79
The text of AS 4105.06 is
available at https://pcaobus.org/Standards/Auditing/Pages/AS4105.aspx.
The final amendments update the outdated reference in current Item 302(a)(4) from the Statements of Auditing Standards issued by the Auditing Standards Board of the American Institute of Certified Public Accountants to the current reference of the Auditing Standards issued by the Public Company Accounting Oversight Board.

In a change from current Item 302(a), amended Item 302(a) will apply beginning with the first filing on Form 10-K after the registrant's initial registration of securities under sections 12(b) or 12(g) of the Exchange Act.
80

We are making this change because we agree with commenters that it would be unnecessarily burdensome for registrants to provide disclosure for interim periods prior to those presented in an IPO registration statement.
81

Although some commenters suggested that disclosure should not be required for any quarterly periods not previously presented on a standalone basis, such as in a Form 10-Q,
82

we believe that such an approach would unduly delay disclosure of the impact of material retrospective changes. For this reason, and because the commenters' suggestions related primarily to current Item 302(a), which requires disclosure in every annual report, while amended Item 302(a) will require disclosure in more limited circumstances, we believe that it is appropriate to require newly reporting registrants to provide Item 302(a) disclosure, if applicable, beginning in their first Form 10-K. Nonetheless, when a new registrant has a material retrospective change to its year-to-date interim period information in its most recent registration statement, but has not yet disclosed that interim period information in quarterly increments, we would not object if Item 302(a) disclosures are presented for the affected year-to-date interim period and the fourth quarter in the affected year.
83

80

See
amended Item 302(a)(2).
See also
footnote 70
supra.

81

See, e.g.,
letters from Grant Thornton and E&Y.

82

See, e.g.,
letters from Grant Thornton; E&Y (recommending that “new registrants be exempted from providing the disclosure until their second annual report, and in registration statements thereafter, to avoid requiring selected quarterly data to be presented for interim periods not previously presented in any periodic quarterly reports.”).

83
For example, after conducting an IPO, a registrant files its first Form 10-K in which Item 302(a) information would be required. The Item 302(a)-triggering material retrospective change occurred during a quarter that has only been presented as a part of the year-to-date interim period statement of comprehensive income filed in the IPO registration statement. In this circumstance, we would not object if the quantitative Item 302(a) disclosure in the Form 10-K comprised information for the same interim period previously presented in the registration statement (rather than for each affected quarter during that time), along with the fourth quarter, in the affected year.

Finally, we proposed to eliminate Item 302(b), disclosure of oil and gas producing activities, on the condition that the FASB finalize amendments to U.S. GAAP that would require incremental disclosure called for by Item 302(b). The FASB has not yet finalized the amendments, so we are retaining Item 302(b) and may reconsider the proposal in the future.

C. Management's Discussion and Analysis of Financial Condition and Results of Operations (Item 303)

Item 303 of Regulation S-K requires disclosure of information relevant to assessing a registrant's financial condition, changes in financial condition, and results of operations. The disclosure requirements for full fiscal years in Item 303(a) include five components: Liquidity, capital resources, results of operations, off-balance sheet arrangements, and contractual obligations.
84

Item 303(b) covers interim period disclosures and requires registrants to discuss material changes in the items listed in Item 303(a), other than the impact of inflation and changing prices on operations.
85

Item 303(c) acknowledges the application of a statutory safe harbor for forward-looking information provided in off-balance sheet arrangements and contractual obligations disclosures. Item 303(d) provides certain accommodations for SRCs.

84
Item 303(a)(1)-(5) of Regulation S-K [17 CFR 229.303(a)(1)-(5)].

85

See
Item 303(b) and Instruction 7 to Item 303(b) of Regulation S-K [17 CFR 229.303(b)].

The Commission proposed amendments to Item 303 of Regulation S-K that were intended to modernize, simplify, and enhance the MD&A disclosures for investors while reducing compliance burdens for registrants.
86

After consideration of the comments received, and as discussed in more detail below, amended Item 303 will provide the following:

86
We discuss
infra
in Section II.D our amendments that will make certain parallel changes to Item 5 of Form 20-F (Operating and Financial Review and Prospects), General Instruction B.(11) of Form 40-F (Off-Balance Sheet Arrangements), and General Instruction B.(12) of Form 40-F (Tabular Disclosure of Contractual Obligations).

• New Item 303(a) states the objectives of MD&A that will apply throughout amended Item 303. It also incorporates much of the substance of Instructions 1, 2, and 3 to current Item 303(a).

• Amended Item 303(b) provides the requirements for full fiscal year disclosure and comprises three main requirements:

○ Item 303(b)(1) provides the overarching requirements for liquidity and capital resources disclosures, and reflects an enhanced principles-based requirement focused on material short- and long-term cash requirements, including those from known contractual and other obligations. Items 303(b)(1)(i) and (ii) provide the specific disclosure requirements for liquidity and capital resources, respectively.

○ Item 303(b)(2) provides the requirements for results of operations disclosures, and includes minor amendments such as eliminating the current requirement to discuss the impact of inflation and changing prices where material; and

○ Item 303(b)(3), requires disclosure of critical accounting estimates, and largely clarifies and codifies Commission guidance in this area.

• The instructions to amended Item 303(b) have been streamlined, such as by eliminating unnecessary cross-references to industry guides, and replace the requirement for off-balance sheet arrangement disclosures (current Item 303(a)(4)) with an instruction to discuss these obligations in the broader context of MD&A disclosure.

• Amended Item 303(c) provides for interim disclosure requirements, and will allow for more flexibility in the interim periods compared. The item's instructions have also been streamlined by eliminating certain instructions and providing cross-references to similar instructions to Item 303(b); and

• Current Item 303(a)(5) will be eliminated, and current Items 303(c) and (d) will be eliminated as conforming changes.

The following table outlines the new structure of Item 303 as a result of these amendments:
87

87
The information in this table is not comprehensive and is intended only to highlight the general structure of the current rules and final amendments. It does not reflect all of the amendments or all of the rules and forms that are affected. All changes are discussed in their entirety throughout this release. As such, this table should be read together with the referenced sections and the complete text of this release.

Current structure
Amended structure
Discussed in section(s)

N/A

Item 303(a),
Objective

II.C.1.

Item 303(a),
Full fiscal years

Item 303(b),
Full fiscal years

II.C.1.

Item 303(a)(1),
Liquidity

Item 303(a)(2),
Capital resources.

Item 303(b)(1),
Liquidity and Capital Resources
(i) Liquidity.
(ii) Capital Resources.

II.C.2 and II.C.7.

Item 303(a)(3),
Results of operations

Item 303(b)(2),
Results of operations

II.C.3, II.C.4, & II.C.5.

(i) Unusual or infrequent events.
(i) Unusual or infrequent events.

(ii) Known trends or uncertainties.
(ii) Known trends or uncertainties.

(iii) Material increases.
(iii) Material changes.

(iv) Inflation and changing prices.

Item 303(a)(4),
Off-balance sheet arrangements

Replace with Instruction 8 to Item 303(b)
II.C.6.

Instructions 1, 2, 3, 4, and 5 to Item 303(a)(4).

Item 303(a)(5),
Tabular disclosure of contractual obligations

Eliminate (with some content incorporated into Item 303(b)(1) (Liquidity and Capital Resources) and Instruction 4 to Item 303(b))
II.C.2 and II.C.7.

2003 MD&A Interpretative Release, Critical accounting estimates

Item 303(b)(3),
Critical accounting estimates

II.C.8.

Instruction 1 to Item 303(a)
Instruction 1 to Item 303(b) (with amendments)
II.C.1.

Instruction 2 to Item 303(a)

Eliminate (with content incorporated into
Objective
)

II.C.1.

Instruction 3 to Item 303(a)

Eliminate (with content incorporated into
Objective
)

II.C.1.

Instruction 4 to Item 303(a)
Instruction 2 to Item 303(b) (with amendments and some content incorporated into Item 303(b))
II.C.1 and II.C.4.

N/A
Instruction 3 to Item 303(b)
II.C.7.

Instruction 5 to Item 303(a)
Instruction 4 to Item 303(b) (with amendments and content incorporated into Item 303(b)(1) (Liquidity and Capital Resources))
II.C.2 and II.C.7.

Instruction 6 to Item 303(a)
Instruction 5 to Item 303(b) (with minor amendments)
II.C.1.

Instruction 7 to Item 303(a)
Instruction 6 to Item 303(b)
II.C.10.

Instruction 8 to Item 303(a)
Eliminate
II.C.5.

Instruction 9 to Item 303(a)
Eliminate
II.C.5.

Instruction 10 to Item 303(a)
Instruction 7 to Item 303(b)
II.C.1.

Instruction 11 to Item 303(a)
Instruction 9 to Item 303(b) (with amendments)
II.D.3.

Instruction 12 to Item 303(a)
Instruction 10 to Item 303(b) (with non-substantive amendments)
II.C.1.

Instruction 13 to Item 303(a)
Eliminate
II.C.1.

Instruction 14 to Item 303(a)
Eliminate
II.C.1.

Item 303(b),
Interim periods
(1) Material changes in financial condition.
(2) Material changes in results of operations, Rule 3-03(b) of Regulation S-X matters.

Item 303(c),
Interim periods
(1) Material changes in financial condition.
(2) Material changes in results of operations.
(i) Material changes in results of operations (year-to-date).
(ii) Material changes in results of operations (quarter comparisons).

II.C.9.

Instruction 1 to Item 303(b)
Instruction 1 to Item 303(c) (with amendments to reference Instructions 2, 3, 4, 6, 8, and 11 to proposed Item 303(b))
II.C.9.

Instruction 2 to Item 303(b)
Eliminate
II.C.9.

Instruction 3 to Item 303(b)
Eliminate
II.C.9.

Instruction 4 to Item 303(b)
Instruction 2 to Item 303(c)
II.C.9.

Instruction 5 to Item 303(b)
Eliminate
II.C.9.

Instruction 6 to Item 303(b)
Eliminate
II.C.9.

Instruction 7 to Item 303(b)
Eliminate
II.C.9.

Instruction 8 to Item 303(b)
Instruction 11 to Item 303(b)
II.C.9.

Item 303(c),
Safe harbor

Eliminate
II.C.10.

Item 303(d),
Smaller reporting companies

Eliminate
II.C.11.

1. Restructuring and Streamlining

a. Objective of MD&A (New Item 303(a))

i. Proposed Amendments

The first paragraph of current Item 303(a) instructs registrants to discuss their financial condition, changes in financial condition, and results of operations for full fiscal years.
88

The paragraph then sets forth the items that must be included in this discussion, including liquidity, capital resources, results of operations, off-balance sheet arrangements, contractual obligations, and any other information a registrant believes would be necessary to understand its financial condition, changes in financial condition, and results of operations.

88
Item 303(a) of Regulation S-K [17 CFR 229.303(a)].

The Commission proposed adding a new Item 303(a) to succinctly state the objectives of MD&A by incorporating a portion of the substance of current Instruction 1, and much of the substance of current Instructions 2 and 3 into the item.
89

As part of new Item 303(a), the Commission also proposed codifying guidance that states that a registrant should provide a narrative explanation of its financial statements

that enables investors to see a registrant “through the eyes of management.”
90

By emphasizing the purpose of MD&A at the outset of Item 303, the proposal was intended to provide clarity and focus to registrants as they consider what information to discuss and analyze. The proposal was also intended to facilitate a thoughtful discussion and analysis, and encourage management to disclose factors specific to the registrant's business, which management is in the best position to know, and underscore materiality as the overarching principle of MD&A.
91

89

See
Proposing Release at Section II.C.1. As a result of this proposed amendment, the remainder of Item 303 was proposed to be renumbered. Herein we distinguish the rule numbering prior to these amendments from the amended rule numbering by reference to “current” and “amended.”

90

See
2003 MD&A Interpretative Release, at 75056.
See also
1989 Interpretative Release, at 22428.

91

See
Proposing Release at Section II.C.1.

ii. Comments

Most commenters supported the proposal to add new Item 303(a) to state the purposes of MD&A at the forefront.
92

One of these commenters nonetheless expressed concern with incorporating, as part of new Item 303(a), guidance that MD&A is “from management's perspective,” stating that this is such a broad statement that compliance could be difficult and it could be interpreted to mandate disclosure of otherwise confidential information (
e.g.,
competitive advantages, target markets).
93

A few commenters questioned the proposal.
94

Some of these commenters, while not opposed to the proposal, did not believe it would improve MD&A.
95

Instead, these commenters suggested more explicit and prescriptive requirements, such as providing examples of the types of items to be discussed.

92

See, e.g.,
letters from Grant Thornton; Nasdaq; FEI; IMA; RSM; Society.

93

See
letter from RSM.

94

See, e.g.,
letters from ABA; CFA & CII; D. Jamieson.

95

See
letters from CFA & CII; D. Jamieson.

One commenter objected to replacing the word “should” with “must” both in proposed Item 303(a) and throughout the item, stating these terms are not interchangeable.
96

This commenter stated that only “should” allows the requisite flexibility appropriate for MD&A whereas “must” results in a “checklist item” that creates exposure to absolute liability and second guessing. Another commenter suggested revising proposed Item 303(a) and the remainder of the item to account for the statement of cash flows, stating that existing MD&A rules largely pre-date the requirement in U.S. GAAP to provide statements of cash flows.
97

96

See
letter from ABA.

97

See
letter from E&Y (stating that the statement of cash flows has not been integrated in MD&A like the balance sheet and income statement and recommended replacing “changes in financial condition” with “cash flows” throughout Item 303 and adding “cash flows” to proposed Item 303(a)).

iii. Final Amendments

We are adopting the amendments largely as proposed. Amended Item 303(a) calls for the following disclosure, which is expected to better allow investors to view the registrant from management's perspective:

• Material information relevant to an assessment of the financial condition and results of operations of the registrant, including an evaluation of the amounts and certainty of cash flows from operations and from outside sources.

• Material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be indicative of future operating results or of future financial condition. This includes descriptions and amounts of matters that have had a material impact on reported operations as well as matters that are reasonably likely based on management's assessment to have a material impact on future operations.

• The material financial and statistical data that the registrant believes will enhance a reader's understanding of the registrant's financial condition, cash flows and other changes in financial condition, and results of operations.

Registrants should regularly revisit these objectives in Item 303(a) as they prepare their MD&A and consider ways to enhance the quality of the analysis provided. These objectives provide the overarching requirements of MD&A and apply throughout amended Item 303. As such, they emphasize a registrant's future prospects and highlight the importance of materiality and trend disclosures to a thoughtful MD&A.
98

These amendments are intended to remind registrants that MD&A should provide an analysis that encompasses short term results as well as future prospects.
99

Consistent with this amendment and current guidance, and in a slight modification from our proposals, amended Item 303(a) specifies that the disclosure must include matters that are reasonably likely, based on “management's assessment” to have a material impact on future operations.
100

98
As proposed, our amendments replace the word “shall” with “must” throughout Item 303 to clarify the rule and avoid any ambiguity associated with the use of “shall.” Our amendments to Item 303 do not replace “should” in the current requirements with “must.” However, in some instances our amendments update Form 20-F by replacing “should” with “must” to conform the requirements to Item 303, consistent with our other amendments to Form 20-F. We do not believe the use of “must” in these instances modifies the overall flexibility of MD&A's principles-based approach.

99

See, e.g.,
2003 MD&A Interpretive Release and 1989 MD&A Interpretive Release.

100
This language codifies Commission guidance on forward-looking information where the Commission stated, that as part of the two-step test, “management must make two assessments.”
See
1989 MD&A Interpretive Release, at 22330.
See also
footnote 145 below.

Consistent with this approach, our amendments also incorporate current guidance that MD&A is intended to provide disclosures from “management's perspective.” In response to the input of one commenter, we have slightly reframed the reference to “management's perspective” to make clear that disclosure that meets the requirements of the item generally is expected to better allow an investor to view the registrant from management's perspective.

In response to one commenter's suggestion, we are slightly revising our proposals to explicitly incorporate cash flows as part of MD&A's objective.
101

Amended Item 303(a) specifies that MD&A must include financial and other statistical data that will enhance a reader's understanding of the registrant's financial condition, “cash flows,” and other changes in financial condition and results of operations. In light of this amendment and existing references to cash flows, we do not believe it is necessary to replace every reference to “changes in financial condition” with “cash flows,” as suggested by this commenter. Given the historical and continued importance of materiality in MD&A, we are not, as suggested by some commenters, adopting modifications to be more explicit or prescriptive. Rather, we continue to believe that MD&A's materiality-focused and principles-based approach facilitates disclosure of complex and often rapidly evolving areas, without the need to continuously amend the text of the rule to update or impose additional prescriptive requirements.
102

These amendments are intended to further emphasize these goals.

101

See supra
footnote 97. Amended Item 303(a)'s reference to “the amounts and certainty of cash flows from operations and from outside sources,” which is in current Instruction 2 to Item 303(a), predates the cash flow statement.
See
Amendments to Annual Report Form, Related Forms, Rules, Regulations and Guides; Integration of Securities Act Disclosure Systems, Release No. 33-6231, (Sept. 2, 1980) [45 FR 63630 (Sept. 25, 1980)].

102

See
Proposing Release at footnote 95 and corresponding text.

b. Reasons Underlying Material Changes (Amended Item 303(b))

i. Proposed Amendments

In light of the proposal to add new Item 303(a), the Commission proposed re-captioning current Item 303(a) as Item 303(b), which would continue to apply to all MD&A disclosures.
103

The Commission also proposed moving to the amended Item 303(b) the portion of current Instruction 4 that provides that where the consolidated financial statements reveal material changes from year to year in one or more line items, the causes for the changes shall be described.
104

The Commission also proposed to amend that portion of current Instruction 4 to clarify that MD&A requires a narrative discussion of the “reasons underlying” material changes rather than only the “causes” for material changes.
105

This proposal was intended to encourage registrants to provide a more meaningful discussion of the underlying reasons that may be contributing to material changes in line items. The Commission also proposed amending the item to clarify that registrants should discuss material changes within a line item even when such material changes offset each other, consistent with prior Commission guidance.
106

103
Current Item 303(b) of Regulation S-K, which relates to interim periods requires a “discussion of material changes in those items specifically listed in [Item 303(a)], except that the impact of inflation and changing prices on operations for interim periods need not be addressed.”
See
1989 MD&A Interpretive Release at n. 38 and 39 and corresponding text (“The second sentence of Item 303(b) states that MD&A relating to interim period financial statements `shall include a discussion of material changes in those items specifically listed in paragraph (a) of this Item, except that the impact of inflation and changing prices on operations for interim periods need not be addressed.' As this sentence indicates, material changes to each and every specific disclosure requirement contained in paragraph (a), with the noted exception, should be discussed.”); 2003 MD&A Interpretive Release (“Disclosure in MD&A in quarterly reports is complementary to that made in the most recent annual report and in any intervening quarterly reports.”).

104
Instruction 4 to Item 303(a) of Regulation S-K [17 CFR 229.303(a)].

105

See
Proposing Release at Section II.C.1.

106

See, e.g.,
1989 MD&A Interpretive Release (providing an example of a description of the effects of offsetting developments in material changes in revenue: “Revenue from sales of single-family homes for 1987 increased 6 percent from 1986. The increase resulted from a 14 percent increase in the average sales price per home, partially offset by a 6 percent decrease in the number of homes delivered. Revenues from sales of single-family homes for 1986 increased 2 percent from 1985. The average sales price per home in 1986 increased 6 percent, which was offset by a 4 percent decrease in the number of homes delivered.”).

ii. Comments

Some commenters supported this proposal, stating that it effectively codifies prior guidance.
107

Some commenters recommended revising the proposal to limit the requirement to provide quantitative disclosure where it is “reasonably available” and material, stating that registrants often struggle with isolating reasons for material changes as they can be highly interrelated.
108

Other commenters suggested expanding the proposal to provide examples of the type of “causes” of changes to be discussed, stating this would facilitate a meaningful discussion.
109

107

See
letters from IMA; Society.

108

See
letters from RSM; E&Y (also observing that this quantitative disclosure can be challenging when such factors are not already quantified for internal purposes and that the resulting disclosure often yields discussion of individual drivers of change that are not material).

109

See
letters from CFA & CII (providing the following as examples: Economic trends and industry conditions that impact sales and costs related to key products and services including whether sales or revenues are attributable to changes in prices or to changes in volume of goods or services that are sold; information on fixed and variable costs in the cost structure; information on primitive value drivers of most businesses such as materials, labor costs, and the maintenance capex needed to survive as a business; currency effects on every line item; large acquisitions as a separate segment or required discussion so that investors can discern whether the synergies are actually emerging as expected; and the productivity of new investments (capex, R&D) as opposed to older investments); D. Jamieson.

iii. Final Amendments

We are adopting the amendments largely as proposed, with a slight modification. The Commission has focused on improving the analysis in MD&A for many years. Yet, despite specific instructions in Item 303(a) that “the discussion shall not merely repeat numerical data contained in the consolidated financial statements,”
110

the Commission has previously observed that many registrants simply recite the amounts of changes from year to year that are readily computable from their financial statements.
111

Similarly, the staff continues to seek greater analysis in MD&A,
112

and others, including commenters, have also observed that the quality of analysis in MD&A could be improved.
113

110

See
Instruction 4 to current Item 303(a) of Regulation S-K.

111

See Business and Financial Disclosure Required by Regulation S-K,
Release No. 33-10064 (Apr. 13, 2016) [81 FR 23915 (Apr. 22, 2016)] (“S-K Concept Release”) at Section IV.B.3.b.i.

112

See
S-K Concept Release at Section IV.B.4.b.
See also
SEC Comment Letter Trends
available at https://www.pwc.com/us/en/cfodirect/publications/sec-comment-letter-trends.html.

113

See, e.g.,
letter from CFA & CII.
See also
letter from Better Markets to the S-K Concept Release dated July 21, 2016. Comment letters related to the S-K Concept Release are
available at https://www.sec.gov/comments/s7-06-16/s70616.htm.
We refer to these letters throughout as “S-K Concept Release Letters.”

In light of these observations and our efforts seeking greater analysis, we continue to believe these amendments are necessary. Accordingly, we are adopting the amendments largely as proposed to enhance the analysis in MD&A. By moving a portion of current Instruction 4 to Item 303(a) to the main text of amended Item 303(b) and clarifying that the provision requires underlying reasons for material changes in quantitative and qualitative terms, our amendments underscore the importance of the analysis provided in MD&A. In a change from what was proposed, we are eliminating language in current Instruction 4 that the reasons for material changes must be described to the extent necessary to an understanding of the registrant's business as a whole. We believe this language is duplicative of the language in amended Item 303(a) and the amendments discussed in this section.

Consistent with MD&A's principles-based approach, we are not adopting the suggestion of some commenters to provide examples of the types of changes to be discussed.
114

Also consistent with MD&A's principles-based approach, and as proposed, the amendments require discussion of underlying reasons only for “material” changes. We believe these amendments will encourage registrants to provide a more meaningful discussion of the underlying reasons that may be contributing to material changes in line items, and avoid simply reciting amounts of changes. We acknowledge, as suggested by some commenters, that isolating reasons for specific material changes, and quantifying such isolated reasons, can sometimes be challenging because they can be highly interrelated. In such circumstances, we encourage registrants to acknowledge this fact, and to explain such interrelated circumstances to the extent possible.
115

114

See
letters from CFA & CII; D. Jamieson.

115

See
Securities Act Rule 409 [17 CFR 230.409] and Exchange Act Rule 12b-21 [17 CFR 240.12b-21], which generally states that information required need be given only insofar as it is known or reasonably available to the registrant.

c. “Segment Information . . . Other Subdivisions (
e.g.,
Geographic Areas Product Lines)” (Amended Item 303(b))

i. Proposed Amendments

Item 303(a) currently requires that, where in the registrant's judgment a discussion of segment information and/or other subdivisions (
e.g.,
geographic areas) of the registrant's business would be appropriate to an understanding of such business, the discussion shall focus on each relevant “reportable”

segment and/or other subdivision. The Commission proposed removing the reference to a “reportable” segment and, instead, proposed requiring a discussion of “each relevant segment and/or other subdivision.” The Commission also proposed adding “product lines” as another example of a subdivision of a registrant's business that should be discussed where necessary to an understanding of the registrant's business. Finally, the Commission proposed certain other amendments to streamline the text of Item 303.

ii. Comments

Commenters were generally opposed to removing the term “reportable” before segment.
116

Many of these commenters suggested that registrants typically focus their MD&A on reportable segments, consistent with the financial statements.
117

Some of these commenters questioned whether removal of the term “reportable” was intended to effect a substantive change and sought clarification.
118

Another of these commenters stated that the proposal could create uncertainty among registrants about what must be disclosed and could lead to greater detail than is reasonably useful to investors.
119

Only one commenter provided input on the addition of “product lines” as an example of a subdivision, stating that the proposal could be interpreted as a requirement rather than an example.
120

116

See, e.g.,
letters from RSM; KPMG; FEI; Medtronic; E&Y; Deloitte.

117

See, e.g.,
letters from RSM; KPMG; IMA; Deloitte; E&Y.

118

See
letters from Deloitte; E&Y.

119

See
letter from IMA.

120

See
letter from KPMG.

iii. Final Amendments

We are adopting the amendments largely as proposed, with some modifications in response to comments received. Specifically, we are retaining the term “reportable” segment in amended Item 303(b). As a result, and similar to current Item 303, the amendments require that the discussion focus on each “reportable segment” and/or or other subdivision of the business and on the registrant as a whole. While the proposal to remove the term “reportable” was not intended to suggest a further disaggregation of MD&A beyond the reportable segment level, we acknowledge commenter feedback about the potential confusion that could be created by removal of the term.

We are adopting the proposed amendment to include “product lines” as an example of a subdivision of a registrant's business that should be discussed where, in the registrant's judgment, it is necessary to an understanding of the registrant's business. This additional example is not intended to require product line disclosure where, in the registrant's judgment, it is not necessary to an understanding of the registrant's business. Rather, it is intended to remind registrants of the type of disclosure that may be required.

Lastly, we are adopting as proposed several amendments that will further streamline the text of Item 303:

• Instruction 8 to current Item 303(b) indicates that the term “statement of comprehensive income” is defined by Rule 1-02 of Regulation S-X.
121

We are moving this language to the full fiscal year requirement in amended Item 303(b) as Instruction 11 to clarify that the instruction applies to both full fiscal year and interim period MD&A disclosure.
122

121
17 CFR 210.1-02(cc). Rule 1-02 defines a “statement of comprehensive income” as follows: “[t]he term statement(s) of comprehensive income means a financial statement that includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. . . . A statement of operations or variations thereof may be used in place of a statement of comprehensive income if there was no other comprehensive income during the period.” Thus, references to a statement of comprehensive income would include a statement of operations prepared by certain issuers, such as BDCs.

122

See
Section II.C.9.

• We are also eliminating current Instructions 13 and 14 to Item 303(a) to simplify the item. These instructions call the attention of bank holding companies and property-casualty insurance companies to Guide 3
123

and Guide 6,
124

respectively. Registrants that apply industry guides should still consider them in preparing their disclosures generally, but we do not believe the cross-reference is necessary to an understanding of the requirements of Item 303.

123
17 CFR 229.801(c) and 17 CFR 229.802(c). We recently adopted rules relating to Guide 3.
See Update of Statistical Disclosures for Bank and Savings and Loan Registrants,
Release No. 33-10835 (Sept. 11, 2020) [85 FR 66108 (Oct. 16, 2020)]. The new rules update the disclosures that investors receive, codify certain Guide 3 disclosures and eliminate other Guide 3 disclosures that overlap with Commission rules, U.S. GAAP, or International Financial Reporting Standards (“IFRS”). In addition, the Commission relocated the codified disclosures to a new subpart of Regulation S-K and rescinded Guide 3.

124
17 CFR 229.801(f).

Capital Resources—Material Cash Requirements (New Item 303(b)(1) and Amended Item 303(b)(1)(ii))

a. Proposed Amendments

Current Item 303(a)(2) requires a registrant to discuss its material commitments for capital expenditures as of the end of the latest fiscal period, and to indicate the general purpose of and the anticipated sources of funds needed to fulfill such commitments.
125

A registrant also must discuss, among other things, any known material trends, favorable or unfavorable, in its capital resources, and indicate any expected material changes in the mix and relative cost of such resources.
126

125
Item 303(a)(2)(i) of Regulation S-K [17 CFR 229.303(a)(2)(i)].

126
Item 303(a)(2)(ii) [17 CFR 229.303(a)(2)(ii)].

The Commission proposed amending current Item 303(a)(2) to specify, consistent with the Commission's 2003 MD&A Interpretive Release, that a registrant should broadly disclose material cash commitments, including but not limited to capital expenditures. Specifically, the Commission proposed requiring a registrant to describe its material cash “requirements,” including commitments for capital expenditures, as of the end of the latest fiscal period, the anticipated source of funds needed to satisfy such cash requirements, and the general purpose of such requirements.
127

127

See
2003 MD&A Interpretive Release, at 75063.

The proposal was intended to require registrants to disclose known material cash requirements and to modernize Item 303(a)(2) by specifically requiring this disclosure in addition to capital expenditures. The Commission recognized that, while capital expenditures remain important in many industries, certain expenditures and cash commitments that are not necessarily capital investments in property, plant, and equipment may be increasingly important to companies, especially those for which human capital or intellectual property are key resources. The proposals were intended to encompass these and other material cash requirements. The proposal was also intended to enhance the discussion of capital resources and complement the proposed deletion of the contractual obligations table.
128

128

See also
Section II.C.7
infra.

b. Comments

While commenters generally supported the proposal to amend Item 303(a)(2) to broaden the disclosure

beyond capital expenditures,
129

a few commenters stated that use of material cash “requirements” was too broad and provided recommendations on how to limit the requirement to facilitate compliance.
130

These commenters stated that registrants would struggle to identify which commitments to disclose
131

and that the proposals could result in extensive new record keeping and controls.
132

These commenters recommended limiting the proposal by requiring “material cash commitments” instead of “material cash requirements,”
133

focusing on material cash commitments outside of normal operations,
134

or providing guidance on the expected content of these disclosures, including examples.
135

One of these commenters recommended modernizing the liquidity and capital resources requirements, such as by merging and streamlining the two sections.
136

129

See, e.g.,
letters from EEI & AGA; FEI; IMA; Chamber; Society; CFA & CII; D. Jamieson.

130

See, e.g.,
letters from FEI; IMA; E&Y.

131

See
letters from E&Y; FEI (stating that the term “requirements” is too broad, registrants have numerous cash requirements including the payment of operating expenses (
e.g.,
salaries and wages, raw materials, utilities, taxes) and the change from “commitments” to “requirements” would lead to inconsistent application).

132

See
letter from IMA.

133

See
letter from FEI.

134

See
letter from IMA.

135

See
letter from E&Y.

136

See id.

Another commenter stated that the proposal may broaden the current capital resources requirement.
137

This commenter recommended limiting the proposal to require only a discussion of cash to fund current operations (
i.e.,
working capital cash requirements), but only if working capital is insufficient for the next 12 months. Other commenters supported the proposal and recommended enhancing it by retaining the contractual obligations table.
138

137

See
letter from SIFMA (also recommending restating, in any final release, guidance from the 2003 MD&A Interpretive Release that a discussion of working capital cash requirements is required where there are material trends or uncertainties relating to the sufficiency of cash funding sources through working capital).

138

See
letters from CFA & CII; D. Jamieson.

c. Final Amendments

We are adopting amendments to the capital resources requirement as proposed. We acknowledge commenter suggestion to use the term material cash “commitments.” However, we are retaining the term material cash “requirements” as we believe this term is more consistent with the intended purpose of MD&A and with prior Commission guidance.
139

The Commission has consistently emphasized the need for attention to disclosure of cash requirements.
140

139

See
2003 MD&A Interpretive Release at 75062, which states that a “company is required to include in MD&A, to the extent material, . . . the existence and timing of commitments for capital expenditures and other known and reasonably likely cash requirements.”

140

See
2003 MD&A Interpretive Release.

We acknowledge commenters' concerns that registrants have numerous cash requirements and that the amendments could therefore result in extensive new record keeping and controls. As noted above, we do not expect that registrants would have to deviate substantially from current practices with respect to an assessment of material cash requirements as the amendments reflect current Commission guidance and resulting disclosure practices.
141

Further, our amendments are limited to and address only those cash requirements that are material and accordingly, do not reflect a new threshold for these disclosures and should not require extensive or new procedures or controls. We are not, as suggested by one commenter limiting the amendments to require only disclosure of material cash requirements outside of normal operations, as registrants can and do have cash requirements related to their normal operations that are material. Additionally, and consistent with the suggestion of one commenter, our amendments create Item 303(b)(1) to provide the overarching requirements for liquidity and capital resources disclosures in order to clarify the liquidity and capital resources requirements, as discussed in more detail below in Section II.C.7.

141
Commission staff has observed that registrants have provided discussion of material cash requirements pursuant to the requirements of MD&A and consistent with the 2003 MD&A Interpretive Release.

3. Results of Operations—Known Trends or Uncertainties (Amended Item 303(b)(2)(ii))

a. Proposed Amendments

Item 303(a)(3)(ii) currently requires a registrant to describe any known trends or uncertainties that have had or that the registrant reasonably expects will have a material impact (favorable or unfavorable) on net sales or revenues or income from continuing operations.
142

In addition, if the registrant knows of events that will cause a material change in the relationship between costs and revenues, the change in the relationship must be disclosed.
143

142
Item 303(a)(3)(ii) of Regulation S-K [17 CFR 229.303(a)(3)(ii)].

143
Examples given include known future increases in costs of labor or materials or price increases or inventory adjustments.
See id.

The Commission proposed amending Item 303(a)(3)(ii) to provide that when a registrant knows of events that are
reasonably likely
to cause (as opposed to
will
cause) a material change in the relationship between costs and revenues, such as known or reasonably likely future increases in costs of labor or materials or price increases or inventory adjustments, the reasonably likely change must be disclosed. This proposed amendment was intended to conform the language in this paragraph to other Item 303 disclosure requirements for known trends,
144

and align Item 303(a)(3)(ii) with the Commission's guidance on forward-looking disclosure, which specifies that, where a trend, demand, commitment, event, or uncertainty is known, management must make an assessment consistent with the two-step test the Commission articulated for disclosure of forward-looking information.
145

144

See, e.g.,
Item 303(a)(1), which requires registrants to “[i]dentify any known trends or any known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in the registrant's liquidity increasing or decreasing in any material way.” Item 303(a)(1) of Regulation S-K [17 CFR 229.303(a)(1)].

145

See
1989 MD&A Interpretive Release, at 22430, where the Commission articulated a two-step test for assessing when forward-looking disclosure is required in MD&A; Where a trend, demand, commitment, event or uncertainty is known, management must make two assessments: (1) Is the known trend, demand, commitment, event or uncertainty likely to come to fruition? If management determines that it is not reasonably likely to occur, no disclosure is required. (2) If management cannot make that determination, it must evaluate objectively the consequences of the known trend, demand, commitment, event or uncertainty, on the assumption that it will come to fruition. Disclosure is then required unless management determines that a material effect on the registrant's financial condition or results of operations is not reasonably likely to occur.

b. Comments

Commenters were mixed in their support for or opposition to the proposal. Several commenters either generally opposed the two-step test
146

or specified opposition to the “reasonably likely” standard for MD&A.
147

Some of these commenters stated the two-step test or the term “reasonably likely” is unclear,
148

with some stating that the current two-step test is not well understood and thus not well applied.
149

One of these commenters recommended replacing

the two-step test with the probability/magnitude test in
Basic
v.
Levinson,
stating this test is simple, understandable, and already applied regularly in other contexts.
150

This commenter also recommended, if the two-step test is retained, replacing the negative presumption in the test with an affirmative determination. This commenter stated that the negative presumption elicits disclosure that may not be material.
151

Another of these commenters requested clarification on whether use of the term “reasonably likely” is intended to expand the scope of required disclosure.
152

This commenter also requested additional Commission guidance on the timeframe for which management should consider its outlook.

146

See, e.g.,
letters from Nareit; FEI; ABA.

147

See, e.g.,
letters from SIFMA; ABA; CalPERS.

148

See, e.g.,
letters from ABA; FEI; SIFMA.

149

See
letters from ABA; FEI.

150

See
letter from ABA citing
Basic Inc.
v.
Levinson,
485 U.S. 224 (1988) (“
Basic”
).

151
This commenter recommended making the two-step test a preliminary note to Item 303 and rewording it as follows: Where a trend, demand, commitment, event or uncertainty is known, management should make two assessments: (1) Does management reasonably expect that the known trend, demand, commitment, event or uncertainty will occur?, and (2) If so, the registrant should assess materiality as if the known trend, demand, commitment, event or uncertainty will occur, and provide disclosure if the impact on financial condition, results of operations or liquidity would be material.

152

See
letter from Nareit.

Several commenters, however, supported the proposal,
153

with some of these commenters stating that it reflects current practice.
154

One of these commenters further stated that because the second step in the two-step test requires a registrant to prove a negative while the proposal does not specifically incorporate this negative, the final release should state the two-step test is being superseded by the proposed language.
155

This commenter further recommended replacing throughout Item 303 the term “reasonably likely” with “reasonably expects,” stating the latter is a clearer standard in practice.

153

See, e.g.,
letters Pfizer; EEI & AGA; SIFMA; Chamber; Society.

154

See
letters from IMA; EEI & AGA.

155

See
letter from Society.

c. Final Amendments

We are adopting Item 303(b)(2)(ii) with these amendments substantially as proposed, but with slight modifications to clarify that the “reasonably likely” threshold applies throughout Item 303. Furthermore, our amendments to Item 303(a) state that, as part of MD&A's objectives, whether a matter is “reasonably likely” to have a material impact on future operations is based on “management's assessment.” We believe that using a consistent threshold for forward-looking disclosure throughout MD&A will help avoid both potential confusion and inconsistent application that could result from disparate thresholds. Additionally, our amendments reflect a standard that is consistent with longstanding Commission guidance, and we agree with those commenters that stated this term reflects current practice.

We acknowledge that some commenters stated that the term “reasonably likely” may be unclear or not well understood. After careful consideration of these comments, we continue to believe that the “reasonably likely” threshold is the appropriate standard for prospective matters and forward-looking information that is required under Item 303. In response to commenters who suggested that the two-step test is unclear, not well understood, or difficult to apply, we are clarifying and explaining further how registrants should analyze and disclose information regarding known trends, demands, commitments, or uncertainties. In doing so, we reiterate the Commission's longstanding emphasis that analysis in this area should be based on objective reasonableness.
156

156

See
1989 MD&A Interpretive Release at Section III.B (stating “Each final determination resulting from the assessments made by management must be objectively reasonable, viewed as of the time the determination is made.”).

As the Commission has previously stated with respect to the evaluation of whether a known trend or uncertainty is reasonably likely, “the development of MD&A disclosure should begin with management's identification and evaluation of what information. . .is important to providing investors and others an accurate understanding of the company's current and prospective financial position and operating results.”
157

When considering whether disclosure of a known event or uncertainty is required,
158

the analysis is based on materiality and what would be considered important by a reasonable investor in making a voting or investment decision.
159

The “reasonably likely” threshold does not require disclosure of any event that is known but for which fruition may be remote, nor does it set a bright-line percentage threshold by which disclosure is triggered. Rather, this threshold requires a thoughtful analysis that applies an objective assessment of the likelihood that an event will occur balanced with a materiality analysis regarding the need for disclosure regarding such event.
160

157

See
2002 Commission Statement at 3747.

158

See
1989 MD&A Interpretive Release at 22429 (“Required disclosure is based on currently known trends, events, and uncertainties that are reasonably expected to have material effects. . . . In contrast, optional forward-looking disclosure involves anticipating a future trend or event or anticipating a less predictable impact of a known event, trend or uncertainty.”).

159

See Basic Inc.
v.
Levinson,
485 U.S. 224 (1988) at 231, quoting
TSC Industries, Inc.
v.
Northway, Inc.,
426 U.S. 438 (1976) (“TSC Industries”) at 449 (“to fulfill the materiality requirement, `there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the `total mix' of information made available.' ”).
See also
Exchange Act Rule 12b-2 [17 CFR 240.12b-2] (“The term “material,” when used to qualify a requirement for the furnishing of information as to any subject, limits the information required to those matters to which there is a substantial likelihood that a reasonable investor would attach importance in determining whether to buy or sell the securities registered.”); Securities Act Rule 405 [17 CFR 230.405] (“The term material, when used to qualify a requirement for the furnishing of information as to any subject, limits the information required to those matters to which there is a substantial likelihood that a reasonable investor would attach importance in determining whether to purchase the security registered.”); Adoption of Integrated Disclosure System, Release No. 33-6383 (Mar. 3, 1982) [47 FR 11380 (Mar. 16, 1982)] (noting that the definitions in Rule 12b-2 and Rule 405 were “based on the definition as set forth by the Supreme Court in
TSC Industries
”); S-K Concept Release at Section III.B.1 (quoting the Commission Guidance Regarding Disclosure Related to Climate Change, Release No. 33-9106 (Feb. 8, 2010) [75 FR 6290 (Feb. 8, 2010)] at 6292-6293 in stating that “materiality standards for disclosure under the federal securities laws . . . provide that information is material if there is a substantial likelihood that a reasonable investor would consider it important in deciding how to vote or make an investment decision, or, put another way, if the information would alter the total mix of available information.”).

160
We are not adopting the suggested “reasonably expects” threshold suggested by some commenters. Consistent with our discussion herein, we believe the analysis should focus on an objective determination of the likelihood of an event occurring, rather than on whether management's expectation of such event occurring would be objectively reasonable.

Taking these concepts into account, when applying the “reasonably likely” threshold, registrants should consider whether a known trend, demand, commitment, event, or uncertainty is
likely
to come to fruition. If such known trend, demand, commitment, event or uncertainty would reasonably be likely to have a material effect on the registrant's future results or financial condition, disclosure is required. Known trends, demands, commitments, events, or uncertainties that are not remote or where management cannot make an assessment as to the likelihood that they will come to fruition, and that would be reasonably likely to have a material effect on the registrant's future results or financial condition, were they to come to fruition, should be disclosed if a reasonable investor would consider omission of the information as significantly altering the mix of information made available in the

registrant's disclosures.
161

This analysis should be made objectively and with a view to providing investors with a clearer understanding of the potential material consequences of such known forward-looking events or uncertainties. Because the analysis does not call for disclosure of immaterial or remote future events, it should not result in voluminous disclosures or unnecessarily speculative information.
162

161

Id.

162

See, e.g.,
Off-Balance Sheet Arrangements and Contractual Obligations Adopting Release at 5985 (stating “We believe that the `reasonably likely' threshold best promotes the utility of the disclosure requirements by reducing the possibility that investors will be overwhelmed by voluminous disclosure of insignificant and possibly unnecessarily speculative information.”).
See also Matrixx Initiatives, Inc.
v.
Siracusano,
131 U.S. 1309 (2011) (“
Matrixx Initiatives
”) at 1318, quoting
TSC Industries
at 449. In
Matrixx Initiatives,
the Court applied the materiality standard, as set forth in
TSC Industries
and
Basic.
In articulating these standards, the Supreme Court recognized that setting too low of a materiality standard for purposes of liability could cause management to “bury shareholders in an avalanche of trivial information.”
Id.
at 1318, quoting
TSC Industries
at 448-449.

As noted above, some commenters also indicated that application of the two-step test as the Commission articulated it in 1989 may result in disclosure that is not material or present challenges to registrants, such as by requiring a registrant to prove a negative. This was not the intended result of that test, and we believe that the clarifications we have provided above regarding the appropriate application of the analysis should alleviate these concerns. The “reasonably likely” threshold, which requires that management evaluate the consequences of the known trend, demand, commitment, event, or uncertainty, is grounded in whether disclosure of the event or uncertainty would be material to investors. We remind registrants that this approach is not intended to, nor does it require, registrants to affirm the non-existence or non-occurrence of a material future event.
163

Instead, it requires management to make a thoughtful and objective evaluation, based on materiality, including where the fruition of future events is unknown.
164

163
We are not, as suggested by a commenter, reformulating the language to require an affirmative determination. Such reformulated language would substantively alter the called for disclosures as it would not account for circumstances where management cannot determine whether a known trend, demand, commitment, event or uncertainty is likely to come to fruition.

164
Accordingly, we are not, as suggested by one commenter, providing specific guidance on a timeframe for which management should consider its outlook for forward-looking information as such timeframe will depend on the nature of and the facts and circumstances surrounding the forward-looking disclosure.

We are not, as recommended by one commenter, adopting the probability/magnitude test of
Basic.
In
Basic,
the Supreme Court framed the issue of materiality of forward-looking disclosure as depending on a balancing of both “the indicated probability that the event will occur and the anticipated magnitude of the event in light of the totality of the company activity.”
165

We agree with commenters that the probability/magnitude test could result in disclosure of issues that are large in potential magnitude but low in probability.
166

The probability/magnitude test in
Basic
was developed in the context of a potential merger, where the probability of the event, the potential timing, and the expected effects may be readily estimated. Some commenters have noted that the probability/magnitude test can be difficult to apply where there is uncertainty as to the probability, timing, and magnitude of the financial impact of future events.
167

As articulated above, we believe that the “reasonably likely” threshold provides registrants with a tailored and meaningful framework from which to objectively analyze whether forward-looking information is required and provides specific guidance on how registrants should evaluate known events or uncertainties where the likelihood of fruition cannot be ascertained.

165
See
Basic
(quoting
SEC
v.
Texas Gulf Sulphur Co.,
401 F.2d 833, 849 (2d Cir. 1968)).

166

See
S-K Concept Release Letter from Stephen Percoco dated July 24, 2016.

167

See, e.g.,
S-K Concept Release Letters from the Sustainability Accounting Standards Board dated July 1, 2016;
See also
letters from Edward D. White dated July 20, 2016; Thomas F. Steyer dated July 20, 2016; Michael R. Bloomberg dated July 26, 2016; Brita Voss dated July 6, 2016 (supporting the recommendations of the Sustainability Accounting Standards Board).

4. Results of Operations—Net Sales and Revenues (Amended Item 303(b)(2)(iii))

a. Proposed Amendments

Item 303(a)(3)(iii) currently specifies that, to the extent the “financial statements” disclose “material increases” in net sales or revenues, a registrant must provide a narrative discussion of the extent to which such “increases” are attributable to increases in prices, or to increases in the volume or amount of goods or services being sold, or to the introduction of new products or services.
168

The Commission previously clarified that a results of operations discussion should describe not only increases but also decreases in net sales or revenues.
169

Accordingly, the Commission proposed amending Item 303(a)(3)(iii) to apply to disclosures in the “statement of comprehensive income,” codify prior guidance, and clarify the requirement by tying the required disclosure to “material changes” in net sales or revenues, rather than solely to “material increases” in these line items.

168
Item 303(a)(3)(iii) of Regulation S-K [17 CFR 229.303(a)(3)(iii)].

169

See
1989 MD&A Interpretative Release, at n. 36 (“Although Item 303(a)(3)(iii) speaks only to material increases, not decreases, in net sales or revenues, the Commission interprets Item 303(a)(3)(i) and Instruction 4 as seeking similar disclosure for material decreases in net sales or revenues.”).

b. Comments

Several commenters specifically supported this proposal,
170

with one of these commenters stating that registrants already provide this disclosure.
171

No commenters specifically opposed this proposal.

170

See, e.g.,
letters from FEI; IMA; Chamber; Society; CFA & CII; D. Jamieson.

171

See
letter from FEI.

c. Final Amendments

We are adopting Item 303(b)(2)(iii) with these amendments as proposed. We believe clarifying in the rule text that disclosure is required of “material changes” in net sales or revenues will facilitate compliance. This clarification is consistent with MD&A's focus on the importance of an analysis that should consist of material substantive information and present a balanced view of the underlying dynamics of the business.
172

We also believe this amendment will complement our change to Item 303(b) which will require that, where the financial statements reveal material changes from period-to-period in one or more line items, registrants must describe the underlying reasons for these material changes in quantitative and qualitative terms.

172

See
2003 MD&A Interpretive Release at Section III.B.4.

5. Results of Operations—Inflation and Price Changes (Current Item 303(a)(3)(iv), and Current Instructions 8 and 9 to Item 303(a))

a. Proposed Amendments

Item 303(a)(3)(iv)
173

generally requires registrants, either for the three most recent fiscal years or for those fiscal years in which the registrant has been engaged in business, whichever period is shorter, to discuss the impact of inflation and price changes on their net sales, revenue, and income from continuing operations. Instruction 8 to

Item 303(a) clarifies that a registrant is only required to provide this disclosure to the extent material. The instruction further states that the discussion may be made in whatever manner appears appropriate under the circumstances and that no specific numerical financial data is required, except as required by Rule 3-20(c) of Regulation S-X,
174

which applies to FPIs. Instruction 9 to Item 303(a) states that registrants that elect to disclose supplementary information on the effects of changing prices may combine such disclosures with the Item 303(a) discussion and analysis or provide it separately (with an appropriate cross-reference).
175

173
Item 303(a)(3)(iv) of Regulation S-K [17 CFR 229.303(a)(3)(iv)].

174
Rules 3-20(c) and 3-20(d) of Regulation S-X provide the situations when a registrant must discuss hyperinflation. Rule 3-20(d) generally describes a hyperinflationary environment as one that has cumulative inflation of approximately 100 percent or more over the most recent three-year period.

175
Instruction 9 to Item 303(a).

The Commission proposed eliminating Item 303(a)(3)(iv) and Instructions 8 and 9 to encourage registrants to focus their MD&A on material information that is tailored to their respective facts and circumstances. In the Proposing Release, the Commission stated that a specific reference to inflation and changing prices may give undue attention to the topic.
176

Registrants are already expected to discuss the impact of inflation or price changes if they are part of a known trend or uncertainty that has had, or is reasonably likely to have, a material favorable or unfavorable impact on net sales, revenue, or income from continuing operations.
177

176

See
Proposing Release at Section II.C.5.

177

See
Item 303(a)(3)(ii) [CFR 229.303(a)(3)(ii)] and amended Item 303(b)(2)(ii).

b. Comments

Commenters generally supported eliminating Item 303(a)(3)(iv) and Instructions 8 and 9 to Item 303(a), as proposed.
178

Some commenters stated that registrants should focus their MD&A on registrant-specific material information and that eliminating this item and the related instructions would aid in that endeavor.
179

Other commenters stated that where inflation is material, registrants would still be required to disclose this under current rules.
180

One commenter noted that in order to satisfy this item, many registrants provide “boilerplate disclosures” and stated that as a result, few, if any, disclosures in response to this item have been of value to investors.
181

No commenters specifically opposed this proposal.

178

See, e.g.,
letters from EEI & AGA; FedEx; Nasdaq; FEI; IMA; Chamber; Society.

179

See, e.g.,
letters from EEI & AGA; Nasdaq.

180

See, e.g.,
letters from FEI; IMA.

181

See
letter from IMA.

c, Final Amendments

We are eliminating Item 303(a)(3)(iv) and Instructions 8 and 9 to Item 303(a) as proposed. Consistent with the discussion above and in the Proposing Release, under amended Item 303, registrants will be required to discuss the impact of inflation or changing prices if they are part of a known trend or uncertainty that had, or is reasonably likely to have a material impact on net sales, revenue, or income from continuing operations. Further, amended Item 303 requires that, where the financial statements reveal material changes from period-to-period in one or more line items, registrants must describe the underlying reasons for these material changes in quantitative and qualitative terms, which may also implicate a discussion of inflation and changing prices.
182

182

See
amended Item 303(b).

6. Off-Balance Sheet Arrangements (New Instruction 8 to Item 303(b))

a. Proposed Amendments

In 2002, the Sarbanes-Oxley Act
183

was enacted and added Section 13(j) to the Exchange Act, which required the Commission to adopt rules providing that each annual and quarterly financial report required to be filed with the Commission disclose all material off-balance sheet arrangements.
184

To implement Section 13(j), in 2003, the Commission adopted specific disclosure requirements for off-balance sheet arrangements in current Item 303(a)(4).
185

When adopting Item 303(a)(4), the Commission reiterated that, while at that time only one item in Item 303 specifically identified off-balance sheet arrangements,
186

other requirements “clearly require[d] disclosure of off-balance sheet arrangements if necessary to an understanding of a registrant's financial condition, changes in financial condition or results of operations.”
187

The 2003 amendments supplemented and clarified the disclosures that registrants must make about off-balance sheet arrangements and required registrants to provide those disclosures in a separately designated section of MD&A.
188

183
Sarbanes-Oxley Act of 2002, Pub. L. 107-204, 116 Stat 745 (Jul. 2002) (“Sarbanes-Oxley Act”).

184
Section 401(a) of the Sarbanes-Oxley Act added Section 13(j) to the Exchange Act [15 U.S.C. 78m(j)], which directed the Commission to adopt rules requiring each annual and quarterly financial report filed with the Commission to disclose “all material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the issuer with unconsolidated entities or other persons, that may have a material current or future effect on financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses.”

185

See
Off-Balance Sheet Arrangements and Contractual Obligations Adopting Release, at 5983.

186
Item 303(a)(2)(ii) of Regulation S-K [17 CFR 229.303(a)(2)(ii)].

187

See
Off-Balance Sheet Arrangements and Contractual Obligations Adopting Release, at 5983.

188

See id.

In the release proposing Item 303(a)(4), the Commission recognized that parts of the proposed off-balance sheet arrangements disclosure requirements might overlap with disclosure presented in the footnotes to the financial statements.
189

The Commission stated, however, that the proposed rules were designed to provide more comprehensive information and analysis in MD&A than the disclosure that U.S. GAAP required in footnotes to financial statements.
190

189

See Disclosure in Management's Discussion and Analysis About Off-Balance Sheet Arrangements, Contractual Obligations and Contingent Liabilities and Commitments,
Release No. 33-8144 (Nov. 4, 2002) 67 FR 68054 (Nov. 8, 2002), at n.72.

190

See id.

Since the adoption of Item 303(a)(4), as described further in the Proposing Release,
191

the FASB has issued additional requirements that have caused U.S. GAAP to further overlap with the item.
192

In the Commission staff's experience, this overlap often leads to registrants providing cross-references to the relevant notes to their financial statements or providing disclosure that is duplicative of information in the notes in response to Item 303(a)(4).

191

See
Proposing Release at Section II.C.6.

192
In June 2009, the FASB Issued SFAS No. 166,
Accounting for Transfers of Financial Assets an amendment of FASB Statement No. 140,
which requires enhanced disclosures about transfers of financial assets and a transferor's continuing involvement with transfers of financial assets accounted for as sales. Also in June 2009, the FASB issued SFAS No. 167,
Amendments to FASB Interpretation No. 46(R),
which requires enhanced disclosures about an enterprise's involvement in a variable interest entity, including unconsolidated entities. SFAS No. 166 and 167 have been codified as ASC Topics 860 (Transfers and Servicing) and 810 (Consolidation), respectively.
See also
Section II.D.1.b and
see infra
note 344 for a discussion of IFRS requirements that overlap with Item 5.E of Form 20-F.

As a result, and consistent with the other proposed amendments intended to promote the principles-based nature of MD&A, the Commission proposed that the current more prescriptive off-balance sheet arrangement definition and related disclosure requirement in Item 303(a)(4) be replaced with a new

Instruction to Item 303(b). This proposed instruction would require registrants to discuss commitments or obligations, including contingent obligations, arising from arrangements with unconsolidated entities or persons that have, or are reasonably likely to have, a material current or future effect on a registrant's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements, or capital resources.
193

This proposed instruction was intended to build on the current requirement in Item 303(a)(2) that specifically requires consideration of off-balance sheet financing arrangements as part of the capital resources discussion.
194

193

See
Proposing Release at Section II.C.6.

194

See
Item 303(a)(2)(ii) of Regulation S-K [17 CFR 302(a)(2)(ii)].

b. Comments

Many commenters supported the proposal to replace Item 303(a)(4) with a principles-based instruction.
195

One of these commenters further recommended modifying the proposal to allow registrants discretion to make this disclosure under a separate caption within the capital resources section.
196

Another commenter stated that if there are concerns about specific matters that are not addressed under U.S. GAAP, these concerns should be addressed by the FASB.
197

One commenter recommended reiterating that the amendment is not intended to broaden or narrow the scope of off-balance sheet arrangements disclosure requirements in MD&A, but rather, it is intended to incorporate this disclosure in a more holistic, principles-based discussion.
198

195

See, e.g.,
letters from EEI & AGA; FedEx; FEI; SIFMA; IMA; E&Y; Medtronic; Chamber; and Society.

196

See
letter from EEI & AGA.

197

See
letter from IMA.

198

See
letter from Society.

Several commenters expressed concern with the proposal.
199

One commenter cautioned that the proposed amendments may result in the loss of discussion of the nature and business purpose of off-balance sheet arrangements and any known event, demand, commitment, trend, or uncertainty that will result, or is likely to result, in a material change in the availability of the off-balance sheet arrangement.
200

Another commenter stated that the separate section for off-balance sheet arrangements remains important because the overlapping information required to be disclosed in the financial statements is dispersed.
201

One commenter stated that the proposed amendments would allow management to hide off-balance sheet arrangements.
202

Additionall

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2020-26090. Public record. Not legal advice.