As part of required annual (10K) and quarterly filings (10Q) with the SEC, public companies must include a section titled “Management Discussion and Analysis of Financial Condition and Results of Operations (MD&A)” that typically precedes the financial statements. Although auditors are not required to audit the MD&A section, they must examine and review its contents and presentation for annual and quarterly periods. Currently, the SEC is looking for ways to improve the focus, clarity and navigability of the MD&A.
According to LogixData, the average word count for the Fortune 50 companies 10Ks (MD&A and footnotes sections) for the last three years has been around 17,000. Assuming about 250 words per page, 17,000 words translate into about 68 pages of discussion and analysis of the accounting numbers. The conventional wisdom is that MD&A is useful, but how important are these pages for investment decisions? For more information on the usefulness of MD&A to investors, read PWC’s 2013 survey of U.S. professional investors’ views.

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