{"id":1916,"date":"2021-01-14T10:53:47","date_gmt":"2021-01-14T15:53:47","guid":{"rendered":"https:\/\/seci.wpenginepowered.com\/?p=1916"},"modified":"2021-01-14T10:53:47","modified_gmt":"2021-01-14T15:53:47","slug":"time-to-remove-selected-financial-data-and-quarterly-information","status":"publish","type":"post","link":"https:\/\/seciblog.pli.edu\/index.php\/time-to-remove-selected-financial-data-and-quarterly-information\/","title":{"rendered":"Time to Remove Selected Financial Data and Quarterly Information?"},"content":{"rendered":"

As we discussed in this post<\/a>, on January 11, 2021, \u00a0the SEC\u2019s November 19, 2020 Final Rule, \u201cManagement\u2019s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information<\/a>,\u201d was published in the Federal Register<\/a>.<\/p>\n

The Final Rule will be effective on February 10, 2021.\u00a0 The transition provisions provide a mandatory transition date but also allow voluntary early compliance.\u00a0 Companies must apply the rule for their first fiscal year that ends after August 9, 2021.\u00a0 They may voluntarily apply the new rule, on an S-K item-by-item basis, in any filing made on or after the effective date of February 10, 2021.<\/p>\n

This means that a company that will file its Form 10-K on or after February 10, 2021, has the option to implement some or all of the changes to MD&A (S-K Item 303), selected financial data (S-K Item 301), and quarterly information (S-K Item 302).<\/p>\n

This post explores the relatively simple choices for S-K Item 301 and 302.\u00a0 In coming posts we will explore the MD&A changes in S-K Item 303.<\/p>\n

Selected Financial Data<\/strong><\/p>\n

The change for selected financial data is very simple.<\/p>\n

On page 162, the Final Rule removes the selected financial data requirement from Regulation S-K:<\/p>\n

    \n
  1. Remove and reserve \u00a7 229.301.<\/li>\n<\/ol>\n

    On page 182, the Final Rule makes a corresponding change to the instructions for Form 10-K:<\/p>\n

      \n
    1. Amend Form 10-K (referenced in \u00a7 249.310) by:
      \n\u2026\u2026..<\/li>\n
    2. Removing and reserving Item 6 (\u201cSelected Financial Data\u201d) of Part II.<\/li>\n<\/ol>\n

      Companies have the option to implement this change and omit Item 6 from a Form 10-K filed on or after February 10, 2021.\u00a0 This is independent of the period end of the financial statements in the Form 10-K.<\/p>\n

      The rationale for removing this disclosure is fairly straightforward.\u00a0 In the Final Rule the SEC states:<\/p>\n

      The Commission proposed to eliminate Item 301 in part because of advances in technology since the item\u2019s adoption in 1970 that allow for easy access to the information required by this item on the Commission\u2019s Electronic Data Gathering, Analysis, and Retrieval system (\u201cEDGAR\u201d). \u00a0The 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.<\/p>\n

      With this information readily available from several other sources and the existing requirement to disclose material trends in MD&A, this seems a good time to eliminate this disclosure!<\/p>\n

      Additionally, since Item 6 will no longer exist in Form 10-K after a company\u2019s mandatory transition date, this item will have to be removed after that date.<\/p>\n

      Quarterly Information<\/strong><\/p>\n

      The change for quarterly information on page 162 of the Final Rule is not as simple.\u00a0 The Final Rule provides the following revised language for S-K Item 302:<\/p>\n

      \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 229.302 (Item 302) Supplementary financial information. <\/strong><\/p>\n

      (a) Disclosure of material quarterly changes. When there are one or more retrospective changes<\/strong> to the statements of comprehensive income for any of the quarters within the two most recent fiscal years or any subsequent interim period for which financial statements are included or are required to be included by \u00a7 210.3-01 through 210.3-20 (Article 3 of Regulation S-X) that individually or in the aggregate are material<\/strong>, provide an explanation of the reasons<\/strong> for such material changes and disclose, for each affected quarterly period and the fourth quarter in the affected year, summarized financial information<\/strong> 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.<\/p>\n

      Again, companies have the option to implement this change and omit the quarterly information from a Form 10-K as long as it has not been materially, retrospectively changed.\u00a0 As with the change for selected financial data, this applies to Form 10-Ks filed on or after February 10, 2021, and is independent of the period end of the financial statements in the Form 10-K.\u00a0 Companies may make this change in a Form 10-K for December 31, 2020, as long as the report is filed on or after February 10, 2021.<\/p>\n

      The rationale for this change is discussed in the Final Rule:<\/p>\n

      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.<\/p>\n

      Again, this seems like the right time to implement this change.<\/p>\n

      More about the changes to MD&A in coming posts, and as always, your thoughts and comments are welcome!<\/p>\n","protected":false},"excerpt":{"rendered":"

      As we discussed in this post, on January 11, 2021, \u00a0the SEC\u2019s November 19, 2020 Final Rule, \u201cManagement\u2019s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information,\u201d was published in the Federal Register. The Final Rule will be effective on February 10, 2021.\u00a0 The transition provisions provide a mandatory transition date but also allow … Continue reading Time to Remove Selected Financial Data and Quarterly Information?<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"_wpas_customize_per_network":false},"categories":[143,242],"tags":[],"coauthors":[154],"class_list":["post-1916","post","type-post","status-publish","format-standard","hentry","category-hot-topic","category-reporting"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/posts\/1916","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/comments?post=1916"}],"version-history":[{"count":0,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/posts\/1916\/revisions"}],"wp:attachment":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/media?parent=1916"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/categories?post=1916"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/tags?post=1916"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/coauthors?post=1916"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}