Bass, Berry & Sims attorneys Kevin Douglas and Taylor Wirth outlined some key considerations for public companies in preparing Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) section in SEC disclosure documents. The article also examines how the Fixing America’s Surface Transportation Act (the FAST Act) and rules related to Inline XBRL could impact MD&A preparation during the 2020 proxy season. With these new developments, the authors recommend that “public companies should keep the SEC’s objectives in mind to enhance their communications to key stakeholders. Accordingly, public companies should consider updating the MD&A to organize and present such disclosure in a more investor-friendly manner.”
In the article, Kevin and Taylor outline the following 12 key tips when drafting MD&As:
- Layered disclosure and executive summary.
- Other readability techniques.
- Item 303 requirement to disclose material trends.
- Impact of trends disclosure on future periodic reports.
- Location of trends disclosure.
- Interaction between MD&A disclosure and risk-factors disclosure.
- Quantification of factors impacting performance.
- Non-GAAP financial measures.
- Review the earnings-release disclosure package for consistency.
- Post-period events.
- Disclosures by peer companies.
- Critical accounting policies and estimates.
The article, “MD&A: Drafting Today and Thinking About Tomorrow,” was published in Vol. 2020, Edition 1 of Dimensions (a publication of Toppan Merrill). The article is based on content originally published on the firm’s Securities Law Exchange blog in June 2019.