Accountants' Handbook, Volume One, Financial Accounting and General Topics, 12th Edition

Chapter 6

Management Discussion and Analysis

Sydney K. Garmong, CPA

Crowe Horwath LLP

Brad A. Davidson, CPA

Crowe Horwath LLP

6.1 Overview

(a) Introduction

(b) Brief History

(c) General Guidance on MD&A

(d) Recent Developments

(i) Smaller Reporting Companies

(ii) MD&A Disclosures on Fair Value and Liquidity and Capital Resources

6.2 Current Guidance

(a) Overall Requirements

(b) Critical Accounting Estimates

(c) Non-GAAP Measures

(d) Effect of Newly Issued But Not Yet Effective Accounting Standards

6.3 Related Accounting Literature

(a) Risks and Uncertainties

(b) Nature of Operations

(c) Use of Estimates in the Preparation of Financial Statements

(d) Certain Significant Estimates

(e) Current Vulnerability Due to Certain Concentrations

6.4 External Auditor Involvement

6.1 Overview

(a) Introduction

Management must include, as part of Form 10-K filings, a section entitled “Management Discussion and Analysis of Financial Condition and the Results of Operations” (commonly referred to as Management Discussion & Analysis [MD&A]). The governing regulation is Section 229.303 of Regulation S-K and is referred to as Item 303. As stated in Item 303, the objective of the MD&A is “to provide to investors and other users information relevant to an assessment of the financial condition and results of operations of the registrant as determined by evaluating the amounts and certainty of cash flows from operations and from outside sources.” The MD&A should permit shareholders and users to see and ...