To Nareit Member REIT GCs and Senior Lawyers and Accounting Committee Members:

On Nov. 19, 2020, the Securities and Exchange Commission (SEC) adopted amendments to simplify, modernize and enhance Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations and the other financial disclosure requirements of Regulation S-K (MD&A Amendments). The amendments were adopted largely as proposed on Jan. 30, as part of the SEC’s on-going, multi-year Disclosure Effectiveness Initiative. On April 28, Nareit submitted a comment, developed with the assistance of a Nareit member task force, broadly supportive of the proposed MD&A Amendments and offering some suggestions for improving them, which was cited nearly a dozen times in the release accompanying the amendments. Notably, Nareit’s comment endorsed the principles-based approach reflected in the final rule, which “…affords registrants with flexibility to tailor disclosures to the facts and circumstances of material transactions that impact their respective businesses.” Nareit also endorsed other aspects of the proposal and set forth two recommendations, both of which are reflected in the final rule.

The SEC’s release accompanying the MD&A Amendments includes a useful table (p.8) summarizing the changes. These include the following changes, which Nareit had specifically supported in its comment:

  • Eliminating Item 301, which requires disclosure of selected financial data for the last five years.
  • Replacing the Item 302(a) tabular disclosure requirement for two years of tabular quarterly financial data with a principles-based disclosure requirement for material retrospective changes from the period.
  • Eliminating the Item 303(a)(5) requirement for a tabular disclosure of contractual obligations.
  • Providing greater flexibility for Item 303(b), Interim periods, by permitting issuers to compare their most recently completed quarter to either the corresponding quarter of the prior year or to the immediately preceding quarter. Issuers subject to Rule 3-03(b) of Regulation S-X will be afforded the same flexibility.
  • Clarifying Item 303(b)(3)(ii), Results from Operations, by requiring issuers to disclose known events that are “reasonably likely” to cause material change in the relationship between costs and revenues. In it’s release, the SEC acknowledged Nareit’s request, set forth in our Comment, for additional guidance on what the Commission intends by “reasonably likely” in this context. SEC clarified that this change is intended to conform the language in this paragraph to other Item 303 disclosure requirements for known trends and to align Item 303(a)(3)(ii) with the Commission’s previous guidance on forward-looking disclosure.

These amendments will become effective 30 days after they are published in the Federal Register. Public companies are required to comply with the rule beginning with the first fiscal year ending on or after the date that is 210 days after publication in the Federal Register. For calendar year-end companies, mandatory compliance will begin for the 2021 Form 10-K that is filed in 2022. Companies will have the option of applying the amended rules any time after the effective date, so long as they provide disclosure responsive to an amended item in its entirety.


Please do not hesitate to contact Nareit’s Senior Vice President for Regulatory Affairs and Deputy General Counsel Victoria P. Rostow (vrostow@nareit.com); Nareit’s Senior Vice President for Financial Standards Christopher T. Drula (cdrula@nareit.com); or Nareit’s Senior Vice President for Financial Standards George L. Yungmann (gyungmann@nareit.com) with any questions that you may have about this alert, or related questions.