Which of the following is true regarding management’s 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, also known as the C-suite, present an analysis of the company’s performance with qualitative and quantitative measures.

Key Takeaways

• Management discussion and analysis (MD&A) is a section within a company’s annual report or quarterly filing where executives analyze the company’s performance.
• The section can also include a discussion of compliance, risks, and future plans, such as goals and new projects.
• The MD&A section is not audited and represents the thoughts and opinions of management.

Management Discussion And Analysis (MD&A)

Understanding theManagement Discussion and Analysis (MD&A)

In the management discussion and analysis (MD&A) section of the annual report, management provides commentary on financial statements, systems and controls, compliance with laws and regulations, and actions it has planned or has taken to address any challenges the company is facing. Management also discusses the upcoming year by outlining future goals and approaches to new projects. The MD&A is an important source of information for analysts and investors who want to review 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 oversees public companies’ compliance with U.S. securities laws and ensures investors are given adequate information about companies they invest in. The SEC mandates 14 items 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 promulgating accounting standards for public companies in the United States. FASB outlines 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 verify a company’s financial statements, such as its balance sheet, income statements, and statement of cash flows. Auditors perform test work to determine if the financial statements are materially correct, but these certified public accountants (CPAs) do not audit the MD&A section. The MD&A represents the thoughts and opinions of management and provides a forecast of future operations. Therefore, these statements can’t typically be authenticated.

The MD&A section is not audited and includes the opinions of management.

That said, the MD&A section must meet certain standards. According to FASB, “MD&A should provide a balanced presentation that includes both positive and negative information about the topics discussed.” Even if management is giving its opinion on the state of its business, competition, and risks, these statements must be based on fact, and there must be an attempt to paint a balanced picture of the company’s future prospects.

Example of Management Discussion and Analysis (MD&A)

Consider Apple, which included a nine-page MD&A section in its fiscal 2019 annual report, also known as a 10-K filing. In this section, management highlighted product sales, segment performance, margins, and accounting pronouncements, among other things. Apple’s management also discussed specific risks to its business, such as interest rates and foreign currency risk.

70.Which of the following is true regarding Management's Discussion and Analysis(MD&A)?A)MD&A is not considered part of Required Supplementary Information (RSI).B)MD&A takes the place of footnotes.C)MD&A should present an analysis of significant variations between the originaland final budget.D)All of the above are true.

Chapter 2 Overview of Financial Reporting for State and LocalGovernmentsAnswer: C

71.Under GASB rules for the financial reporting entity:

72.Which of the following is included in Required Supplementary Information (RSI)?

73.Which of the following istrueregarding the government-wide financial statements?

74.Which of the following is true regarding the government-wide Statement of Net Position?A)The government-wide Statement of Net Position reflects capital assets, net ofaccumulated depreciation, for both governmental and business-type activities.B)The government-wide Statement of Net Position must be prepared in a classifiedformat; that is, both assets and liabilities must be separated between current andlong-term categories.C)The government-wide Statement of Net Position includes all resources entrustedto the government; including governmental, proprietary, and fiduciary.

Chapter 2 Overview of Financial Reporting for State and LocalGovernmentsD)A reporting entity (primary government plus component units) total column isrequired.Answer: A

Which of the following is an objective of management Discussion and analysis MD&A )?

Why the MD&A is so important to investors?

What makes a good MD&A?

What are the advantages of management Discussion and analysis MD&A?