Interpretive Release Commission Guidance on Management's Discussion and Analysis of Financial Condition and Results of Operations 33-10751, 34-88094

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Conformed to Federal Register Version
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 211, 231, and 241
[Release Nos. 33-10751; 34-88094; FR-87]
Commission Guidance on Management’s Discussion and Analysis of Financial Condition
and Results of Operations
AGENCY: Securities and Exchange Commission.
ACTION: Guidance.
SUMMARY: We are providing guidance on key performance indicators and metrics in
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(“MD&A”).
DATES: Effective February 25, 2020.
FOR FURTHER INFORMATION CONTACT: Questions about specific filings should be
directed to staff members responsible for reviewing the documents the company files with the
Commission. For general questions about this release, contact Angie Kim, Special Counsel, at
(202) 551-3430, Office of Rulemaking, Division of Corporation Finance, U.S. Securities and
Exchange Commission, 100 F Street NE, Washington, DC 20549.
SUPPLEMENTARY INFORMATION:
I. 	Guidance on Key Performance Indicators and Metrics
We are providing guidance on disclosure of key performance indicators and metrics in
MD&A (the “Guidance”).1 Item 303(a) of Regulation S-K requires disclosure of information not
1 MD&A is required by Item 303 of Regulation S-K (Management's Discussion & Analysis of Financial Condition
and Results of Operations) [17 CFR 229.303], Item 5 of Form 20-F (Operating and Financial Review and Prospects)
[17 CFR 249.220f], and Item 9 of Form 1-A [17 CFR 239.90].

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specifically referenced in the item that the company believes is necessary to an understanding of
its financial condition, changes in financial condition and results of operations.2 The item also
requires discussion and analysis of other statistical data that in the company’s judgment enhances
a reader’s understanding of MD&A.3
When proposing the current MD&A framework, the Commission noted that “[f]or each
business, there is a limited set of critical variables which presents the pulse of the business.”4
The Commission previously has emphasized that, when preparing MD&A, “companies should
consider whether disclosure of all key variables and other factors that management uses to
manage the business would be material to investors, and therefore required.”5 The Commission
also previously stated that companies should identify and address those key variables and other
While this release refers primarily to Item 303 of Regulation S-K, it also is intended to apply to MD&A drafted
pursuant to Item 5 of Form 20-F and Item 9 of Form 1-A. The disclosure requirements for Item 5 of Form 20-F
(Operating and Financial Review and Prospects) are substantively comparable to the MD&A requirements under
Item 303 of Regulation S-K. See International Disclosure Standards, Release No. 33-7745 (Sept. 28, 1999) [64 FR
53900 (Oct. 5, 1999)], at 53904. The disclosure requirements for Item 9 of Form 1-A are also similar to the MD&A
requirements under Item 303. See Amendments for Small and Additional Issues Exemptions Under the Securities
Act (Regulation A), Release No. 33-9741 (Mar. 25, 2015) [80 FR 21805 (Apr. 20, 2015)], at 21830. Companies,
including foreign private issuers, smaller reporting companies, and issuers relying on Regulation A, should consider
this guidance based on their particular facts and circumstances.
2 Item 303(a) of Regulation S-K [17 CFR 229.303(a)]. Concurrent with this Guidance we are proposing changes to
Item 303. See Management’s Discussion & Analysis, Selected Financial Data, and Supplementary Financial
Information, Release No. 33-10750 (Jan. 30, 2020) (the “Companion Proposing Release”). In the Companion
Proposing Release, we propose adding a new Item 303(a) to state the purposes of MD&A. Current Item 303(a) is
proposed to be Item 303(b).
3 See, e.g., Instruction 1 to Item 303(a) of Regulation S-K [17 CFR 229.303(a)]. In the Companion Proposing
Release, we propose incorporating a portion of the substance of Instruction 1 into proposed Item 303(a).
4 See Proposed Amendments to Annual Report Form; Integration of Securities Act Disclosure Systems, Release No.
33-6176, (Jan. 15, 1980) [45 FR 5972 (Jan. 24, 1980)], at 5979-5980.
5 See Commission Guidance Regarding Management’s Discussion and Analysis of Financial Condition and Results
of Operation, Release No. 33-8350 (Dec. 19, 2003) [68 FR 75056 (Dec. 29, 2003)], at 75060. Information is
material if there is a substantial likelihood that a reasonable investor would consider the information important in
deciding how to vote or make an investment decision. See TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438
(1976) (“TSC Industries”) at 449 (further explaining that information is material if there is a substantial likelihood
that disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered
the “total mix” of information available). The definitions of “material” in Rule 12b-2 of the Exchange Act and Rule
405 of the Securities Act, are consistent with TSC Industries.

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qualitative and quantitative factors that are peculiar to and necessary for an understanding and
evaluation of the individual company.6 Such information could constitute key performance
indicators and other metrics.
Some companies also disclose non-financial and financial metrics when describing the
performance or the status of their business. Those metrics can vary significantly from company
to company and industry to industry, depending on various facts and circumstances. For
example, some of these metrics relate to external or macro-economic matters, some are company
or industry specific, and some are a combination of external and internal information. Some
companies voluntarily disclose specialized, company-specific sales metrics, such as same store
sales or revenue per subscriber. Some companies also voluntarily disclose environmental
metrics, including metrics regarding the observed effect of prior events on their operations.
We remind companies that, when including metrics in their disclosure, they should
consider existing MD&A requirements7 and the need to include such further material
information, if any, as may be necessary in order to make the presentation of the metric, in light
of the circumstances under which it is presented, not misleading.8 In this regard, a company
should first consider the extent to which an existing regulatory disclosure framework applies,
such as Generally Accepted Accounting Standards (“GAAP”)9 or, for “non-GAAP measures,”
6 Id. (quoting Management’s Discussion and Analysis of Financial Condition and Results of Operations; Certain
Investment Company Disclosures, Release No. 33-6835 (May 18, 1989) [54 FR 22427 (May 24, 1989)], which
quotes Management’s Discussion and Analysis of Financial Condition and Results of Operations, Release No. 33-
6349 (Sept. 28, 1981) [not published in the Federal Register]).
7 See footnotes 2 and 3 above and corresponding text. The company should provide a narrative that enables
investors to see a company “through the eyes of management,” so these metrics should not deviate materially from
metrics used to manage operations or make strategic decisions.
8 See Rule 408(a) [17 CFR 230.408(a)] and Rule 12b-20 [17 CFR 240.12b-20].
9 This would include subsets of line items presented on the face or in the footnotes to the financial statements and
ratios or statistical measures calculated using exclusively measures calculated or disclosed pursuant to GAAP. Here,

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Regulation G or Item 10 of Regulation S-K.10 In addition, the company should consider what
additional information may be necessary to provide adequate context for an investor to
understand the metric presented.11 We would generally expect, based on the facts and
circumstances, the following disclosures to accompany the metric:
• 	A clear definition of the metric and how it is calculated;
• 	A statement indicating the reasons why the metric provides useful information to
investors; and
• 	A statement indicating how management uses the metric in managing or monitoring the
performance of the business.
The company should also consider whether there are estimates or assumptions underlying the
metric or its calculation, and whether disclosure of such items is necessary for the metric not to
be materially misleading.
If a company changes the method by which it calculates or presents the metric from one
period to another or otherwise, the company should consider the need to disclose, to the extent
material: (1) the differences in the way the metric is calculated or presented compared to prior
we use the term GAAP to refer to the FASB Accounting Standards Codification or other comprehensive bases of
accounting used in primary financial statements filed with the Commission.
10 See Regulation G [17 CFR 244.100-244.102]. See also Item 10(e) of Regulation S-K. [17 CFR 229.10(e)]. Item
10(e)(4) of Regulation S-K states that, for purposes of Item 10(e), non-GAAP financial measures exclude operating
and other statistical measures; and ratios or statistical measures calculated using exclusively one or both of (i)
financial measures calculated in accordance with GAAP, and (ii) operating measures or other measures that are not
non-GAAP financial measures. The Commission has stated that operating and other statistical measures such as unit
sales, numbers of employees, numbers of subscribers, or numbers of advertisers are not non-GAAP financial
measures. See Conditions for Use of Non-GAAP Financial Measures, Release No. 33-8176 (Jan. 22, 2003) [68 FR
4819 (Jan. 30, 2003)].
11 Examples of metrics to which this Guidance is intended to apply include, but are not limited to: operating margin;
same store sales; sales per square foot; total customers/subscribers; average revenue per user; daily/monthly active
users/usage; active customers; net customer additions; total impressions; number of memberships; traffic growth;
comparable customer transactions increase; voluntary and/or involuntary employee turnover rate; percentage
breakdown of workforce (e.g., active workforce covered under collective bargaining agreements); total energy
consumed; and data security measures (e.g., number of data breaches or number of account holders affected by data
breaches).

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periods, (2) the reasons for such changes, (3) the effects of any such change on the amounts or
other information being disclosed and on amounts or other information previously reported, and
(4) such other differences in methodology and results that would reasonably be expected to be
relevant to an understanding of the company’s performance or prospects. Depending on the
significance of the change(s) in methodology and results, the company should consider whether
it is necessary to recast prior metrics to conform to the current presentation and place the current
disclosure in an appropriate context.
Additionally, we remind companies of the requirement to maintain effective disclosure
controls and procedures.12 Effective controls and procedures are important when disclosing
material key performance indicators or metrics that are derived from the company’s own
information. When key performance indicators and metrics are material to an investment or
voting decision, the company should consider whether it has effective controls and procedures in
place to process information related to the disclosure of such items to ensure consistency as well
as accuracy.13
12 See Rule 13a-15 and Rule 15d-15 [17 CFR 240.13a-15 and 17 CFR 240.15d-15]. Pursuant to Exchange Act
Rules 13a-15 and 15d-15, a company’s principal executive officer and principal financial officer must make
certifications regarding the maintenance and effectiveness of disclosure controls and procedures. These rules define
“disclosure controls and procedures” as those controls and procedures designed to ensure that information required
to be disclosed by the company in the reports that it files or submits under the Exchange Act is (1) “recorded,
processed, summarized and reported, within the time periods specified in the Commission's rules and forms,” and
(2) “accumulated and communicated to the company's management … as appropriate to allow timely decisions
regarding required disclosure.”
13 See id. As we have stated before, a company’s disclosure controls and procedures should not be limited to
disclosure specifically required, but should also ensure timely collection and evaluation of “information potentially
subject to [required] disclosure,” “information that is relevant to an assessment of the need to disclose developments
and risks that pertain to the [company’s] businesses,” and “information that must be evaluated in the context of the
disclosure requirement of Exchange Act Rule 12b-20.” Certification of Disclosure in Companies’ Quarterly and
Annual Reports, Release No. 33-8124 (Aug. 28, 2002) [67 FR 57275 (Sept. 9, 2002)].

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II. 	Codification Update
The “Codification of Financial Reporting Policies” announced in Financial Reporting
Release 1 (April 15, 1982) [47 FR 21028] is updated by adding new Section 501.16, captioned
“Additional Guidance on Key Performance Indicators and Metrics” to the Financial Reporting
Codification and under that caption including the text in Section I of this release.
The Codification is a separate publication of the Commission. It will not be published in
the Federal Register or Code of Federal Regulations.
III. 	Other Matters
Pursuant to the Congressional Review Act,14 the Office of Information and Regulatory
Affairs has designated this guidance as not a “major rule,” as defined by 5 U.S.C. 804(2).
List of Subjects in 17 CFR Parts 211, 231, and 241
Securities.
Amendments to the Code of Federal Regulations.
For the reasons set forth above, the Commission is amending title 17, chapter II, of the
Code of Federal Regulations as set forth below:
PART 211 — INTERPRETATIONS RELATING TO FINANCIAL REPORTING
MATTERS
1. The authority citation for part 211 continues to read as follows:
Authority: 15 U.S.C. 77g, 15 U.S.C. 77s(a),15 U.S.C. 77aa(25) and (26), 15 U.S.C.
78c(b), 17 CFR 78l(b) and 13(b), 17 CFR 78m(b) and 15 U.S.C. 80a-8, 30(e) 15 U.S.C. 80a-
29(e), 15 U.S.C. 80a-30, and 15 U.S.C. 80a-37(a).
14 5 U.S.C. 801 et seq.

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2. The table in subpart A is amended by adding an entry for Release No. 87 at the end of
the table to read as follows:
Subpart A—Financial Reporting Releases
Subject 	Release No. 	Date 	Fed. Reg. Vol. and
page
* * * * * * *
Commission
Guidance on
Management’s
Discussion and
Analysis of Financial
Condition and
Results of Operations
87 	January 30, 2020 	[insert FR citation of
publication]
PART 231 — INTERPRETATIVE RELEASES RELATING TO THE SECURITIES ACT
OF 1933 AND GENERAL RULES AND REGULATIONS THEREUNDER
3. The authority citation for part 231 is added to read as follows:
Authority: 15 U.S.C. 77a et seq.
4. Part 231 is amended by adding an entry for Release No. 33-10751 at the end of the
table to read as follows:
Subject 	Release No. 	Date 	Fed. Reg. Vol. and
page
* * * * * * *

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Commission
Guidance on
Management’s
Discussion and
Analysis of Financial
Condition and
Results of Operations
33-10751 	January 30, 2020 	[insert FR citation of
publication]
PART 241 — INTERPRETATIVE RELEASES RELATING TO THE SECURITIES
EXCHANGE ACT OF 1934 AND GENERAL RULES AND REGULATIONS
THEREUNDER
5. The authority citation for part 241 continues to read as follows:
Authority: 15 U.S.C. 78a et seq.
6. Part 241 is amended by adding an entry for Release No. 34-88094 at the end of the
table to read as follows:
Subject 	Release No. 	Date 	Fed. Reg. Vol. and
page
* * * * * * *
Commission
Guidance on
Management’s
Discussion and
Analysis of Financial
34-88094 	January 30, 2020 	[insert FR citation of
publication]

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Condition and
Results of Operations
By the Commission.
Dated: January 30, 2020.
Eduardo A. Aleman,
Deputy Secretary.