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Financial Reporting Manual 2020 - Sec financial reporting manual
Erin Reeves McGinnis. To embed, copy and paste the code into your website or blog:. Updates include: New contact information for the Office of the Chief Accountant; Revisions for amendments to Regulation S-X Rules and , and the addition of Rules and , related to disclosures about guarantors and issuers of guaranteed securities and affiliates whose securities are pledged as collateral; Revisions related to ASU , Financial Services — Insurance Topic : Targeted Improvements to the Accounting for Long-Duration Contracts, to clarify the implementation date; Updated EGC revenue threshold based on the inflation-adjusted amount that was announced in ; and Removal of certain information that is not applicable due to the passage of time.
Send Print Report. You may click on the embedded link in the document to return to this page. For questions related to these amendments, please contact the individual s listed on the related rulemaking. Search SEC. Securities and Exchange Commission. Financial Reporting Manual. Updated: December 31, For example: A registrant with a December 31, year end is required under S-X c to update its audited financial statements after February 14, in a registration statement.
The registrant is acquiring a business with a November 30, year end. The acquired business is neither an accelerated filer nor a large accelerated filer. If the registration statement is effective February 1, , the registration statement would require audited financial statements of the registrant for the year ended December 31, and unaudited financial statements for the nine months ended September 30, Age requirements are the same as if the acquiree were the registrant.
Consequently, financial statements of an acquired business need not be updated if the omitted period is less than a complete quarter. However, disclosure of significant events occurring during the omitted interim period may be necessary.
For example: A registrant files a Form 8-K reporting an acquisition of a business that is neither an accelerated filer nor a large accelerated filer which occurred on July The registrant and the acquiree have calendar fiscal year ends.
The staff believes that the age of financial statements in a Form 8-K should be determined by reference to the filing date of the Form 8-K initially reporting consummation of the acquisition.
If no filing is made timely on or prior to the 4th business day following the acquisition date , the age of financial statements required to be filed should be determined by reference to the 4th business day after the consummation of the acquisition. Examples of when previously filed acquiree financial statements will not be deemed "substantially the same" pursuant to this instruction include:.
Example 1: Form S-4 included unaudited financial statements for the three months ended March 31 for a business to be acquired. The business combination was consummated on October 1, and a Form 8-K reporting the acquisition was timely filed.
No financial statements are required in the Form 8-K, unless there were significant subsequent events that would materially affect an investor's understanding of the target company. However, if the business combination had been consummated on November 20, the financial statements would have had to be updated through September Example 2: Form S-4 contained unaudited financial statements of the entity to be acquired for the nine months ended September Updated audited financial statements of the acquired entity are required in a Form 8-K if the business combination is consummated, and the Form 8-K is filed after the 89th day subsequent to December Note that in a registration statement, updated audited financial statements of the acquired entity may be required before the 90th day, if either the acquired business is an accelerated filer or a large accelerated filer or the registrant does not meet the requirements under S-X c.
Example 3 : If a registrant included financial statements of a previously nonpublic smaller reporting company-eligible target in a Form S-4 and those financial statements complied with smaller reporting company reporting requirements instead of S-X reporting requirements for companies other than smaller reporting companies see Section Instruction B. Financial statements that comply with S-X would need to be filed in a Form 8-K if the S-X significance threshold is met.
S-X b 4 and S-X c 4 were not intended to change the age of financial statements, simply the timing of filing them. Example — Analysis: If the age of financial statements were based on the date the Form 8-K reporting the transaction was filed i. Item 9. These financial statements may be provided in the initial Form 8-K or by amendment not later than 71 calendar days after the date that the initial Form 8-K is required.
See Sections While Rule of Regulation S-X provides for the potential omission of certain financial statements or filing of substitution statements, it does not provide the staff the ability to waive the timely filing requirement of Form 8-K. If the financial statements and pro forma financial information required by Form 8-K are not filed within the grace period, then the filing will be considered deficient and, therefore, not filed in a timely manner for purposes of Form S-3 eligibility.
A registrant may be unable to provide the financial statements required by Item 9. Sections The filing requirements in Item 2. In some circumstances, the sum of 4 business days plus 71 calendar days may exceed 75 calendar days. Solely for purposes of evaluating whether financial statements of an acquired business for which the registrant timely filed an Item 2. WKSIs should also not make offerings pursuant to registration statements that became effective during the grace period.
Securities Act registration statements and post-effective amendments should include audited financial statements reporting on the operations of the acquired business for a time span equal to the periods for which audited financial statements are required by S-X and pro forma financial information is required by S-X Article 11 at the effective date.
This accommodation does not apply after this period. After the grace period, registrants should not make offerings pursuant to effective registration statements, or pursuant to Rules and of Regulation D if any purchasers are not accredited investors under Rule a of that Regulation, until the required audited financial statements are filed; provided, however, that the following offerings and sales of securities made pursuant to registration statements that were effective prior to the acquisition may proceed notwithstanding that the financial statements of the acquired business have not been filed:.
During the grace period provided by Item 9. In evaluating requests to conduct secondary offerings i. If the financial statements of an acquired foreign business are prepared on a comprehensive basis other than U. The reconciliation need only comply with Item 17 of Form F and is subject to the updating requirements under Item 8 of Form F. Reconciliation and Form F updating requirements are described at Topic 6. Measuring significance of a foreign business is discussed in Section However, if the target of the tender offer is a public company, financial statements of the target that are filed with the SEC may be incorporated by reference.
A consent of the auditor may be required. If a waiver is granted, an audited statement of assets acquired and liabilities assumed reflecting the purchase basis of accounting as of the acquisition date will be required, as well as Industry Guide 3 data and various additional disclosures. Excludes S-4 Target Companies. Except for acquisitions of certain oil and gas properties discussed in Section In addition, requests to provide abbreviated financial statements for an acquired business identified as a predecessor of the registrant should be directed to CF-OCA prior to filing.
In these circumstances, elimination of specified assets and liabilities not acquired or assumed by the registrant is depicted in pro forma financial statements presenting the effects of the acquisition. For example, the selling entity may retain significant operating assets, or significant operating assets that comprised the seller may be operated by an entity other than the registrant. In these circumstances, financial statements of the larger entity of which the acquired business was a part may not be informative.
In that case, audited financial statements usually should be presented for the acquired component business, excluding the continuing operations retained by the larger entity. Registrants should evaluate their facts and circumstances to determine whether to apply the guidance in Section Carve-out financial statements may be appropriate when the acquired business represents a discrete activity of the selling entity for which assets and liabilities are specifically identifiable and a reasonable basis exists to allocate items that are not specifically identifiable to the acquired business, such as debt and indirect expenses not directly involved in the revenue producing activity.
For example, it may be impracticable to prepare full financial statements in an acquisition of a product line where the acquired product line is not a stand-alone entity; separate, audited financial statements of the product line have never been prepared; and the seller has not maintained the distinct and separate accounts necessary to present the full financial statements of the product line.
Registrants would still need to present the statement of revenues and direct expenses for the periods indicated by S-X and S-X , as applicable. All costs directly associated with producing revenues reflected in the statement, including, but not limited to all related costs of sales and other selling, general and administrative, distribution, marketing, and research and development costs, must be included in the statement.
The statement should include a reasonable allocation of expenses incurred by the seller on behalf of the business sold. The reasons for omitting any historical corporate overhead, interest, or tax expense should be explained in a note to the statements. If the type and historical amounts of these omitted expenses are known or reasonably available on an unaudited basis, they should be disclosed in an unaudited footnote. An explanation of the impracticability of preparing the full financial statements required by Regulation S-X should be provided.
Also, the notes should describe how the financial statements presented are not indicative of the financial condition or results of operations of the acquired business going forward because of the omission of various operating expenses.
Historically, some registrants have requested to adjust the S-X w income test denominator i. Pro Forma Condensed Balance Sheet Guidance - If the historical financial statements of the acquired business are full financial statements see Section Pro Forma Condensed Statement of Comprehensive Income Guidance - The pro forma condensed statement of comprehensive income should comply with the criteria at Section Forward-Looking Information - If the registrant includes forward-looking information, it should clearly be identified as forward-looking rather than as pro forma.
If the forward-looking information is in the form of an S-X forecast, the pro forma condensed statements of comprehensive income may be omitted see Section If the forward-looking information provided is not in the form of an S-X forecast, it should nonetheless disclose how revenues and operating efficiencies may vary given the assumptions underlying the forward-looking information as if the business had been acquired at the beginning of the periods presented. If abbreviated financial statements are provided, significance should be calculated in accordance with Section In some cases involving IPOs, strict application of S-X or S-X can result in provision of financial statements that are clearly not significant.
SAB 80 is an interpretation of S-X for application in initial registration statements of first-time registrants that have been built by the aggregation of discrete businesses that remain substantially intact after acquisition.
First-time registrants that meet the conditions in Section If a registrant chooses to use SAB 80 to measure significance of its acquired and likely to be acquired businesses for purposes of its initial registration statement, it must use SAB 80 for all such acquisitions. As described in Section Audited financial statements required to be filed to satisfy the requirements of SAB 80 should be for continuous periods, with no gap or overlap between pre-acquisition and post-acquisition audited periods.
Financial statements for this combination may be omitted. No updating is required for Act periodic reporting. The registrant acquired the businesses identified in the chart below during and Registrant chose to evaluate the need to include historical financial statements for the businesses it acquired using SAB 80 and appropriately concluded that the following annual and interim period financial statements of the acquired businesses must be included in the IPO Form S-1 at the February 1, effective date:.
Example Analysis - In a subsequent registration statement declared effective June 16, , the following financial statements related to the same entities would be required for the most recent fiscal year and interim period:. It is not used to evaluate significance for acquisitions that occur after the effective date of the initial registration statement.
However, if the provisions of SAB 80 were used in an initial registration statement to obtain relief from the reporting requirements of S-X , the staff would allow that registrant to separately evaluate the significance of each acquisition that occurs after the effective date of the initial registration statement using the pro forma financial statements that were used to evaluate significance under SAB 80 in the initial registration statement.
However, those pro forma financial statements should be adjusted to eliminate:. Once the registrant files audited annual financial statements either in a Securities Act or Exchange Act filing for the fiscal year following the audited fiscal year presented in the initial registration statement on which pro forma financial statements were based, the registrant should measure significance of acquisitions using the audited financial statements of the registrant as required by S-X See Section which describes how to measure aggregate significance for individually insignificant businesses.
See Section for guidance on measuring significance. Historical financial statements of the disposed business are not required in the Item 2. Pro forma financial statements depicting the disposition are required to be included in the Item 2. The 71 calendar day grace period described in Item 9. Also, see related discussion in Section The same financial statement content described above for proxy statements also applies to Schedule 14C Information Statements.
Asset Test - The numerator of the asset test should be the total assets of the disposed business as of the end of its most recently completed fiscal year prior to disposal. Income Test - The numerator of the income test should be the pre-tax income or loss from continuing operations of the disposed business for its most recently completed fiscal year prior to disposal. The denominator of the income test should be the historical pre-tax income or loss from continuing operations of the registrant for its most recently completed fiscal year prior to disposal.
The Form S-4 requirements for target company financial statements vary based on a number of facts and circumstances, as summarized below. The determination of the target company should be based on the legal form of the transaction. The fact that the target company may be the acquiring company for accounting purposes does not change that analysis.
For example, in both a reverse acquisition between two operating companies and the acquisition by a shell company , as defined in Exchange Act Rule 12b-2 and Regulation C, Rule , of an operating company, the target company financial statements for purposes of Form S-4 are those of the legal target, which in these cases is also the accounting acquirer. As described in Sections A non-reporting target that would meet the S-K 10 f requirements to be a smaller reporting company if it were an issuer i.
Similarly, a non-reporting target that would not meet the S-K 10 f requirements to be a smaller reporting company if it were an issuer may not apply the scaled reporting for a smaller reporting company in the Form S-4, but instead must comply with S-X reporting requirements applicable to entities that are not smaller reporting companies, even if the registrant is a smaller reporting company.
The determination of the number of periods for which target company financial statements need be included in the Form S-4 should be made by reference to the requirements of Form S-4, not S-X or S-X See See Item 17 b of Form S In transactions where the registrant is a SPAC, the target's financial statements become those of the registrant upon consummation of the merger. In light of this fact and that the staff considers the transaction to be equivalent to an initial public offering of the target, the staff would expect the financial statements of the target to be audited in accordance with the standards of the PCAOB.
Required to be audited for the periods specified in S-X b 2 or S-X b , as applicable. Latest Fiscal Year Need be audited only if practicable to do so. To determine whether an audit is practicable, consider the feasibility of completing the audit on a timely basis. Fiscal years before the latest fiscal year Need not be audited if they were not previously audited.
If the foreign business is a non-reporting company and its financial statements are prepared on the basis of a comprehensive body of accounting principles other than U. GAAP in accordance with Item 17 of Form F is not required if it is unavailable or not obtainable without unreasonable cost or expense. If a reconciliation is not available, the filing should contain, at a minimum, a narrative description of all material variations in accounting principles, practices, and methods used in preparing the non-U.
GAAP financial statements from those accepted in the U. This guidance also applies to smaller reporting companies. Registrants should consider all relevant facts and circumstances in determining whether the U. GAAP reconciliation is unavailable or not obtainable without unreasonable cost or expense. For example, the staff has objected to the omission of the U. GAAP reconciliation. GAAP reconciliation on the basis of unavailability or unreasonable cost.
S-X , which is premised on the continuity and predictability of cash flows ordinarily associated with leasing real property, applies to the acquisition or probable acquisition of real estate operations.
Examples include office, apartment and industrial buildings as well as shopping centers and malls. S-X rather than S-X is applicable to the acquisition of these types of businesses. Acquired properties subject to triple net leases, whether involving leasing or other activities, should be evaluated under Section When a registrant acquires an equity interest in a pre-existing legal entity such as a partnership, LLC or corporation that only holds real estate under lease and related debt, financial statements of the underlying property meeting the requirements of S-X should be provided instead of S-X financial statements, if the acquisition is significant.
When a registrant acquires an equity interest in a pre-existing legal entity that engages in other activities, such as property management or development, financial statements of that entity meeting the requirements of S-X generally are required if the acquisition is significant. A registrant should consult with CF-OCA to the extent it believes S-X financial statements are more appropriate than S-X financial statements due to the limited degree of operations other than leasing real estate.
For purposes of applying S-X , the staff views an investment in a newly formed partnership or corporation either consolidated or accounted for using the equity method that will acquire properties under lease simultaneous with or soon after its formation as, in substance, the acquisition of properties by the registrant. In these circumstances, the staff will require S-X financial statements of the underlying property being acquired instead of S-X financial statements of the newly formed entity.
This assumes that the new entity has no other activities besides leasing real property. The following table summarizes general financial statement requirements in Act registration statements with respect to the acquisition of real estate operations. Refer to the sections below the summary for details in applying these requirements:.
D Undertakings. The filing of a Rule prospectus is not a transactional filing. S-X financial statements must be provided for:. A registrant including a WKSI must either provide these financial statements in the registration statement or, if permitted by the form, in a previously filed Form 8-K that is incorporated by reference into the registration statement. For registration and proxy statements, the day rule in S-X b 4 does not apply to S-X financial statements.
However, see Section The purchase of real estate by companies engaged in real estate activities is not considered to be an acquisition in the ordinary course of business. Compare the registrant's investment in the property to the registrant's total assets at the latest audited fiscal year end filed with the SEC except as noted in Section for individually insignificant acquisitions and Section for REIT formation transactions.
Typically, this information is furnished under Item 2. With regard to forward-looking information, a quantitative reconciliation is only required to the extent available without unreasonable efforts. If all of the information necessary is not available without unreasonable efforts, the registrant must identify the information that is unavailable and disclose probable significance. To the extent material, a statement disclosing the additional purposes, if any, for which management uses the non-GAAP measure.
Excluding charges or liabilities that required, or will require, cash settlement, or would have required cash settlement absent an ability to settle in another manner, from non-GAAP liquidity measures.
Adjusting a non-GAAP performance measure to eliminate or smooth items identified as non-recurring, infrequent, or unusual, when 1 the nature of the charge or gain is reasonably likely to recur within 2 years or 2 there was a similar charge or gain within the prior 2 years. Presenting non-GAAP financial measures on the face of any pro forma information required to be disclosed by Article Regulation G will not apply to disclosures made by or on behalf of the FPI notwithstanding the existence of one or more of the following circumstances:.
However, a non-GAAP measure that would otherwise be prohibited under S-K 10 e 1 ii will be permitted in a filing if the measure is:. The exemption from the prohibitions under S-K 10 e 1 ii does not cover situations where the measure is merely not prohibited by the foreign standard setter; it only applies where the standard-setter affirmatively acts to require or permit the measure.
Note that these measures are still subject to the remaining requirements of S-K 10 e. Back to Table of Contents. Search SEC. Securities and Exchange Commission. Finance Reporting Manual. Exchange Act Section 12 b Companies seeking to register a security for trading on a national securities exchange must register the class of securities under Section 12 b of the Exchange Act.
Registration Statement Forms A company already reporting under Section 13 or 15 d may register a class of securities under Section 12 of the Exchange Act by filing a Form 8-A.
Section 12 b Form 8-A filed in connection with a Act registration statement Automatically on the latest of: the date the company files the Form 8-A the date the staff receives certification from the exchange; or the date the Act registration statement goes effective.
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