How do the market risk disclosures required by Item 305 differ from the information required by MD&A? Is a separate discussion of market risk in MD&A still necessary?
Answer Item 303 requires discussion in MD&A of known events, trends, or uncertainties that are reasonably likely to impact the registrant materially. If a known market risk affected reported trends or financial condition in the period presented, or is reasonably likely to affect materially future reported results or liquidity, discussion of the market risk and its effects is necessary in MD&A. Item 305 requires more information than Item 303 because it requires specific descriptive and quantitative disclosures about losses from market risk sensitive instruments that could result from reasonably possible market changes. For example, a sensitivity analysis responsive to Item 305 presents quantitative information about possible future losses from reasonably possible near-term changes in market rates and prices.
Related Questions
- How do the market risk disclosures required by Item 305 differ from the information required by MD&A? Is a separate discussion of market risk in MD&A still necessary?
- Instruments within a market risk category may be grouped in the tabular disclosures based on common characteristics. What are examples of common characteristics?
- Is meaningful cautionary language required to qualify for the safe harbor for the market risk disclosures?
