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Public Company Financial Executive Briefing
ADDITIONAL MD&A DISCLOSURE GUIDANCE CONCERNING LIQUIDITY
By Jim Pitrat, CPA - Practice Leader, Assurance & Advisory Practice
EXECUTIVE SUMMARY:
In Release No. 33-9144, the SEC provides additional guidance
regarding disclosure in MD&A of liquidity and capital resources,
including disclosure of a capital or leverage ratio. The Guidance s
intended to increase reader understanding of the liquidity risks of the
issuer.
SUMMARY OF THE SEC GUIDANCE
The SEC has provided the following guidance as it relates to liquidity
disclosures in the MD&A:
In identifying trends, demands, commitments, events, and
uncertainties, consideration should be given to
1. Difficulties accessing debt markets,
2. Reliance on commercial paper or other short-term financing
arrangements,
3. Maturity mismatches between borrowing sources and the assets
funding such sources,
4. Changes in terms requested by counterparties,
5. Changes in the valuation of collateral, and
6. Counterparty risk.
If the financial statements themselves do not adequately convey the
entity’s financing arrangements during the period or the impact of
such arrangements, additional narrative to address things such as
the following may be required:
• Significant differences between end-of-period borrowings and
amounts borrowed during the period, and
• Repurchase agreements accounted for as sales and
• other types of short-term financings not otherwise captured in
period-end balance sheets.
Disclosure may be required in respect of repurchase transactions,
securities lending transactions, or other transfers of financial assets
carrying a repurchase obligation that have been accounted for as
sales:
Consider whether the transaction is reasonably likely to result in the
use of a material amount of cash or other liquid assets.
FOR FURTHER INFORMATION, PLEASE CONTACT ONE OF THE FOLLOWING:
Jim Pitrat:  Harmeet Singh:  Gale Moore:
JPitrat@singerlewak.com  HSingh@singerlewak.com  GMoore@singerlewak.com
310.477.3924 408.294.3924
Practice Leader Business Combinations Subject Matter Expert  Business Combinations Subject Matter Expert
Assurance & Advisory Los Angeles, Silicon Valley  Orange County, San Diego
TUESDAY, October 5, 2010
Consider discussions describing cash management and risk
management policie important to an assessment of financial
condition.
An entity that maintains a portfolio of cash and other investments
representing a material source of liquidity should disclose information
concerning the nature and composition of such portfolio (including a
description of the assets held and any related market risk, settlement
risk, or other exposure).
The SEC has provided the following guidance as it relates to Leverage
Ratios disclosures in the MD&A:
If a capital or leverage ratio is disclosed in a filing with the
Commission and:
• There is no regulatory requirement prescribing its calculation, or
• It has been calculated using a methodology different from its
prescribed form
The issuer must determine whether the ratio represents a financial
or non-financial measure (and whether it falls within the scope of the
requirements for disclosure of a non-GAAP financial measure).
In any case, a clear explanation is required of the manner in which the
ratio has been calculated and of the reason the ratio is considered
useful to an understanding of financial condition.
The SEC has provided the following guidance as it relates Contractual
Obligations disclosures in the MD&A:
• The contractual obligations table should present a snapshot of
cash requirements arising from contractual payment obligations.
• The presentation should reflect categories of obligations that are
meaningful in light of the entity’s capital structure and operations.
• Changes in presentation from one period to the next should be
highlighted and explained
• the inclusion and allocation of specific amounts should be
resolved in a manner consistent with the table’s purpose to
promote an understanding of the tabular data, should be provided.
  
 
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