{"id":2013,"date":"2021-06-08T14:01:46","date_gmt":"2021-06-08T18:01:46","guid":{"rendered":"https:\/\/seci.wpenginepowered.com\/?p=2013"},"modified":"2021-06-08T14:01:46","modified_gmt":"2021-06-08T18:01:46","slug":"lets-add-mda-modernization-to-our-summer-to-do-lists","status":"publish","type":"post","link":"https:\/\/seciblog.pli.edu\/index.php\/lets-add-mda-modernization-to-our-summer-to-do-lists\/","title":{"rendered":"Let\u2019s Add MD&#038;A Modernization to Our Summer To-do Lists"},"content":{"rendered":"<p>Now that most of us are through the crunch of year-end and first-quarter reporting, it is time to give some thoughtful consideration to how we will implement the <a href=\"https:\/\/www.sec.gov\/rules\/final\/2020\/33-10890.pdf\">SEC\u2019s November 19, 2020 MD&amp;A<\/a> changes.<\/p>\n<p>As a reminder, this is the rule that modernized and updated several areas in S-K Item 303, including:<\/p>\n<ul>\n<li>Modernizing and moving \u00a0the principal objectives of MD&amp;A to new Item 303(a);<\/li>\n<li>Adding Item 303(b)(1) to modernize, enhance and clarify disclosure requirements for liquidity and capital resources;<\/li>\n<li>Adding Item 303(b)(2) to clarify, modernize and streamline disclosure requirements for results of operations;<\/li>\n<li>Moving critical accounting estimate disclosures to new Item 303(b)(3) and modernizing these disclosure requirements;<\/li>\n<li>Replacing current Item 303(a)(4), Off-balance sheet arrangements, with a more principles-based instruction to discuss such obligations in the broader context of MD&amp;A;<\/li>\n<li>Eliminating current Item 303(a)(5), Tabular disclosure of contractual obligations, as this information is required in a more principles-based, narrative form in the revised liquidity and capital resources disclosure requirements;<\/li>\n<li>Adding an option to the interim period MD&amp;A requirements to include sequential-quarter analysis rather than year-over-year analysis; and<\/li>\n<li>Removing the paragraph addressing the impact of inflation, as such discussion would be required by the overall objective of MD&amp;A.<\/li>\n<\/ul>\n<p>The transition for the new rules provides that companies can <strong>voluntarily adopt the changes on an S-K item-by-item basis after the effective date of February 10, 2021<\/strong>.\u00a0 If a company does not early implement the new rule, the <strong>mandatory transition date is the company\u2019s fiscal year that ends on or after August 9, 2021.\u00a0 <\/strong>For calendar year-end companies the new rules must be implemented for the year ended December 31, 2021.<\/p>\n<p><strong>A Reminder \u2013 Selected Financial Data and Quarterly Information<\/strong><\/p>\n<p>This is the Final Rule that also changed the requirement for the five-year summary and quarterly information disclosures.\u00a0 We explored these changes in <a href=\"https:\/\/seciblog.pli.edu\/?p=1916\">this post from January 14, 2021<\/a>.\u00a0 Removing the five-year summary and only including quarterly information if it has been materially, retrospectively adjusted are changes that are fairly straightforward and easy to implement.\u00a0 An issue to note, if a company decides it wants to keep the five-year summary, there is no longer a Form 10-K Item 6, as it is now \u201creserved.\u201d\u00a0 This means that a company that wants to keep the five-year summary would have to include it somewhere else, likely MD&amp;A.<\/p>\n<p><strong>Transition Planning \u2013 MD&amp;A<\/strong><\/p>\n<p>Implementing the new MD&amp;A rules will require more planning and thought.\u00a0 There are many considerations, ranging from the new liquidity and capital resources requirements to clearer critical accounting estimate disclosures.\u00a0 Additionally, in most organizations, there are several stakeholders in MD&amp;A disclosure who will need to be involved in the implementation.\u00a0 To hopefully help in this process, we are starting a series of blog posts that will explore each MD&amp;A change and discuss the practical issues and challenges in implementation.\u00a0 Each post is designed to help companies who have not implemented these new requirements plan the process and build the team to make these changes.<\/p>\n<p>Perhaps more importantly, the new principles-based MD&amp;A requirements are designed to help companies build a clearer and more informative MD&amp;A.\u00a0 This transition provides an opportunity to make MD&amp;A more informative and helpful for investors.\u00a0 Companies can combine the objective of improving their MD&amp;A with the process of implementing the new S-K Item 303 guidance.<\/p>\n<p><strong>Our next post will explore the changes to the objective of MD&amp;A and discuss how to use this objective as we draft MD&amp;A to make it simpler and easier to follow.<\/strong><\/p>\n<p>In the meantime, to provide an example of a company that went all in and implemented the new rules for their year-ended December 31, 2020, check out <a href=\"https:\/\/d18rn0p25nwr6d.cloudfront.net\/CIK-0000018926\/46a8940d-79c7-4029-afad-245e6e1aff68.pdf\">Lumen Technologies 2020 Form 10-K<\/a>.<\/p>\n<p>To help readers understand why their 2020 Form 10-K looks different, Lumen provided this helpful disclosure at the very beginning of Item 1 about the changes in their 10-K related to new rules.<\/p>\n<p style=\"padding-left: 30px;\"><strong>Changes from Prior Periodic Reports <\/strong><\/p>\n<p style=\"padding-left: 60px;\">In this report we have complied with the disclosures required by the Securities and Exchange Commission (&#8220;SEC&#8221;) release No. 33-10825 &#8220;Modernization of Regulation S-K Items 101, 103, and 105&#8221;, and we have early adopted the changes in disclosure standards included in SEC release No. 33-10890 &#8220;Management&#8217;s Discussion and Analysis, Selected Financial Data, Supplementary Financial Information.&#8221;<\/p>\n<p style=\"padding-left: 30px;\"><strong>Modernization of Regulation S-K Items 101, 103 and 105 <\/strong><\/p>\n<p style=\"padding-left: 60px;\">Effective as of November 9, 2020, the SEC issued Release No. 33-10825, \u201cModernization of Regulation S-K Items 101, 103, and 105.\u201d This release was adopted to modernize the description of business, legal proceedings, and risk factor disclosures that registrants are required to make pursuant to Regulation S-K. Specifically, this release requires registrants to provide disclosures relating to their human capital resources and to restructure their risk factor disclosures. Additionally, the release increases the threshold for disclosure of environmental proceedings to which the government is a party.<\/p>\n<p style=\"padding-left: 60px;\">These changes are required for any annual period subsequent to the effective date of November 9, 2020. As such, we have adopted these changes in this report.<\/p>\n<p style=\"padding-left: 30px;\"><strong>Management\u2019s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information <\/strong><\/p>\n<p style=\"padding-left: 60px;\">In November 2020, the SEC issued Release No. 33-10890, \u201cManagement\u2019s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information\u201d which will become fully effective on August 9, 2021, with voluntary compliance permitted on or after February 10, 2021. This release was adopted to modernize, simplify, and enhance certain financial disclosure requirements in Regulation S-K. Specifically, the SEC eliminated the requirement for selected financial data, only requiring quarterly disclosure when there are retrospective changes affecting comprehensive income, and amending the matters required to be presented under Management\u2019s Discussion and Analysis (\u201cMD&amp;A\u201d) to, among other things, eliminate the requirement of the contractual obligations table.<\/p>\n<p style=\"padding-left: 60px;\">With our early adoption of this release, we have eliminated from this document the items discussed above that are no longer required. Information on our contractual obligations is still disclosed in a narrative within the \u201cManagement\u2019s Discussion and Analysis of Financial Condition and Results of Operations\u201d in Item 7 of Part II of this report.<\/p>\n<p>You will find Lumen\u2019s MD&amp;A on page 34 of their <a href=\"https:\/\/d18rn0p25nwr6d.cloudfront.net\/CIK-0000018926\/46a8940d-79c7-4029-afad-245e6e1aff68.pdf\">Form 10-K<\/a>.<\/p>\n<p>As always, your thoughts and comments are welcome!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Now that most of us are through the crunch of year-end and first-quarter reporting, it is time to give some thoughtful consideration to how we will implement the SEC\u2019s November 19, 2020 MD&amp;A changes. As a reminder, this is the rule that modernized and updated several areas in S-K Item 303, including: Modernizing and moving &hellip; <a href=\"https:\/\/seciblog.pli.edu\/index.php\/lets-add-mda-modernization-to-our-summer-to-do-lists\/\" class=\"more-link\">Continue reading <span class=\"screen-reader-text\">Let\u2019s Add MD&#038;A Modernization to Our Summer To-do Lists<\/span> <span class=\"meta-nav\">&rarr;<\/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":[242],"tags":[],"coauthors":[154],"class_list":["post-2013","post","type-post","status-publish","format-standard","hentry","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\/2013","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=2013"}],"version-history":[{"count":0,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/posts\/2013\/revisions"}],"wp:attachment":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/media?parent=2013"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/categories?post=2013"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/tags?post=2013"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/coauthors?post=2013"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}