SEC Releases Guidance Regarding MD&A


Washington, D.C., Dec. 19, 2003 — The Securities and Exchange Commissions today issued an interpretive release providing guidance regarding Management's Discussion & Analysis of Financial Condition and Results of Operations, commonly called MD&A, included in reporting companies disclosure documents.

The guidance reminds companies of existing disclosure requirements and provides additional guidance, designed to elicit more informative and transparent MD&A that satisfies the principal objectives of MD&A: (1) to provide a narrative explanation of a company's financial statements that enables investors to see the company through the eyes of management; (2) to enhance the overall financial disclosure and provide the context within which financial information should be analyzed; and (3) to provide information about the quality of, and potential variability of, a company's earnings and cash flow, so that investors can ascertain the likelihood that past performance is indicative of future performance.

Specifically, the guidance issued today emphasizes that MD&A should not be merely a recitation of financial statements in narrative form or an otherwise uninformative series of technical responses to MD&A requirements, neither of which provides the important management perspective called for by MD&A. Instead, the release encourages top-level management involvement in the drafting of MD&A, and provides guidance regarding:

The release does not create new legal requirements, nor does it modify existing legal requirements.

A copy of the release can be found on the Commission's Web site at under "Regulatory Actions / Interpretive Releases."