Management Discussion and Analysis - MD&A

What Is Management Discussion and Analysis - MD&A?

Management discussion and analysis (MD&A) is a section of a public company's annual report or quarterly filing. The MD&A addresses the company's performance. In this section, the company's management and executives, otherwise called the C-suite, present an analysis of the company's performance with qualitative and quantitative measures.

Grasping the Management Discussion and Analysis (MD&A)

In the management discussion and analysis (MD&A) section of the annual report, management gives commentary on financial statements, systems and controls, compliance with laws and regulations, and actions it has arranged or has taken to address any challenges the company is facing. Management additionally discusses the upcoming year by framing future objectives and approaches to new projects. The MD&A is an important source of data for analysts and investors who need to survey the company's financial fundamentals and management performance.

The MD&A is just one of many sections required by the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) to be included in a public company's annual report to shareholders. A company that issues stock or bonds to the public at large must register its offerings with the SEC, which regulates public companies' compliance with U.S. securities laws and guarantees investors are given adequate data about companies they invest in. The SEC orders 14 things to be included in the 10-K report. The MD&A section is Item #7.

The FASB is a nonprofit, private regulatory organization, which the SEC has designated as the body responsible for proclaiming accounting standards for public companies in the United States. FASB frames its requirements for the MD&A section of filings.

Requirements for the Management Discussion and Analysis (MD&A)

Securities law dictates that companies must hire an independent auditor to check a company's financial statements, such as its balance sheet, income statements, and statement of cash flows. Auditors perform test work to decide whether the financial statements are really correct, however these certified public accountants (CPAs) don't audit the MD&A section. The MD&A addresses the contemplations and assessments of management and gives a forecast of future operations. Subsequently, these statements can't typically be authenticated.

The MD&A section isn't audited and includes the assessments of management.

All things considered, the MD&A section must satisfy certain guidelines. According to FASB, "MD&A ought to give a balanced show that includes both positive and negative data about the topics discussed." Even on the off chance that management is offering its perspective on the state of its business, competition, and risks, these statements must be founded on fact, and there must be an endeavor to illustrate the company's future prospects.

Illustration of Management Discussion and Analysis (MD&A)

Consider Apple, which included a nine-page MD&A section in its fiscal 2019 annual report, otherwise called a 10-K filing. In this section, management featured product sales, segment performance, edges, and accounting pronouncements, in addition to other things. Apple's management likewise discussed specific risks to its business, such as interest rates and foreign currency risk.

Features

• Management discussion and analysis (MD&A) is a section inside a company's annual report or quarterly filing where executives investigate the company's performance.
• The MD&A section isn't audited and addresses the considerations and assessments of management.
• The section can likewise include a discussion of compliance, risks, and likely arrangements, such as objectives and new projects.