It its 2020 MD&A Modernization Rule, the SEC eliminated this separate paragraph addressing the impact of inflation:

(iv)  For the three most recent fiscal years of the registrant or for those fiscal years in which the registrant has been engaged in business, whichever period is shortest, discuss the impact of inflation and changing prices on the registrant’s net sales and revenues and on income from continuing operations.

This disclosure dated back to earlier periods when inflation had been a material issue for many companies.  In 2020, when the rule was adopted, inflation had not been a significant issue for most companies since the 1980s.  The rationale for this change in the Final Rule is based on the assumption that inflation may not be material to “most registrants”:

The purpose of the elimination is to streamline Item 303 by eliminating the specific reference to these topics, which may not be material to most registrants. This change is consistent with the principles-based disclosure framework of Item 303

That said, the principles-based nature of MD&A means that if inflation is a material issue for a company in any period, it should be addressed in MD&A.  This principle is clearly articulated in the Final Rule:

We do not believe that these changes will result in a loss of material information for market participants.   Registrants will still be required to discuss in their MD&A the impact of inflation and changing prices, if material, as is currently required.

In the current environment, the staff has been reminding companies of this requirement in the comment letter process.  Here are two examples.

Results of Operations, page 42

1. 2. Please expand your disclosure to address any known trends, events or uncertainties that have had, or that are reasonably likely to have, a material impact on your cash flows, liquidity, capital resources, cash requirements, financial position, or results of operations, as may be attributable to the inflation risk that you discuss on page 19.

Please clarify the extent to which your revenues and cost of product sales have been or are expected to be impacted by inflation, and discuss any plans that you have to respond to or counter any adverse circumstances.

Guess?, Inc., August 8, 2022

Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 44

1. 1. We note you disclosed that your operating results for 2022 were negatively affected by inflationary cost pressures. Please revise to address the following:

• • • • Disclose any known trends or uncertainties that have had or are reasonably likely to have a material impact on your cash flows, liquidity, capital resources, cash requirements, financial position, or results of operations arising from, related to, or caused by the inflation;
      • Expand to identify the principal factors contributing to the inflationary pressures you have experienced and clarify the resulting impact to the company; and
      • Expand your disclosure to identify specific actions planned or taken, if any, to mitigate inflationary pressures.

FedEx Corporation, September 1, 2022

As always, your thoughts and comments are welcome!