The IMA Financial Reporting Committee (FRC or Committee) issued a comment letter in response to SEC Release No. 33-10750, Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information. This release proposes rule amendments with the objective of simplifying and modernizing disclosure under Regulation S-K.
In its letter, the Committee endorses certain the themes reflected in the release, such as eliminating the repetition of information a reporting entity has disclosed in previous SEC filings, pursuing a management-based approach to disclosure, and preserving existing guidelines on materiality. More specifically, the Committee’s detailed response to the amendments includes the following:
- Support for the elimination of Item 301, Selected Financial Data
- Support for the elimination of Item 302(a), Supplementary Financial Information
- Objection to the amendment of Item 303(b), which may create confusion and unnecessarily broaden MD&A requirements regarding period-to-period changes
- Support for the use of executive summaries through the amendments to Item 303(a)
- A suggestion that the proposed changes regarding capital resources limit disclosure to material cash commitments outside normal annual operations
- Support for the elimination of the current disclosure requirements regarding off-balance sheet arrangements under Item 303(a)(4), primarily because entities now report this information in the notes to the financial statements under U.S. GAAP
- Support for disclosure of critical accounting estimates, with a caveat that any mandatory disclosure should reflect the concept of sensitivity, that the outcome of provided estimates may change as inputs to the estimates develop.
