[Federal Register Volume 83, Number 193 (Thursday, October 4, 2018)]
[Rules and Regulations]
[Pages 50148-50234]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-18142]



[[Page 50147]]

Vol. 83

Thursday,

No. 193

October 4, 2018

Part II





Securities and Exchange Commission





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17 CFR Parts 210, 229, 230, et al.





Disclosure Update and Simplification; Rules

Federal Register / Vol. 83 , No. 193 / Thursday, October 4, 2018 / 
Rules and Regulations

[[Page 50148]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 210, 229, 230, 239, 240, 249, and 274

[Release No. 33-10532; 34-83875; IC-33203; File No. S7-15-16]
RIN 3235-AL82


Disclosure Update and Simplification

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: We are adopting amendments to certain of our disclosure 
requirements that have become redundant, duplicative, overlapping, 
outdated, or superseded, in light of other Commission disclosure 
requirements, U.S. Generally Accepted Accounting Principles (``U.S. 
GAAP''), or changes in the information environment. We are also 
referring certain Commission disclosure requirements that overlap with, 
but require information incremental to, U.S. GAAP to the Financial 
Accounting Standards Board (``FASB'') for potential incorporation into 
U.S. GAAP. The amendments are intended to facilitate the disclosure of 
information to investors and simplify compliance without significantly 
altering the total mix of information provided to investors. These 
amendments are part of an initiative by the Division of Corporation 
Finance to review disclosure requirements applicable to issuers to 
consider ways to improve the requirements for the benefit of investors 
and issuers. We are also adopting these amendments as part of our 
efforts to implement title LXXII of the Fixing America's Surface 
Transportation Act.

DATES: Effective on November 5, 2018.

FOR FURTHER INFORMATION CONTACT: Ryan Milne, Associate Chief 
Accountant, at (202) 551-3400, Division of Corporation Finance; Alison 
Staloch, Chief Accountant, at (202) 551-6918, Division of Investment 
Management; Tim White, Senior Special Counsel, at (202) 551-5777, 
Division of Trading and Markets; Harriet Orol, Branch Chief, at (212) 
336-9080, Office of Credit Ratings; Securities and Exchange Commission, 
100 F Street NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission is adopting amendments to, or 
referring to the FASB:

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                    Commission reference                                    CFR citation (17 CFR)
----------------------------------------------------------------------------------------------------------------
Regulation S-X \1\:
  Rule 1-02................................................  Sec.   210.1-02.
  Rule 2-01................................................  Sec.   210.2-01.
  Rule 2-02................................................  Sec.   210.2-02.
  Rule 3-01................................................  Sec.   210.3-01.
  Rule 3-02................................................  Sec.   210.3-02.
  Rule 3-03................................................  Sec.   210.3-03.
  Rule 3-04................................................  Sec.   210.3-04.
  Rule 3-05................................................  Sec.   210.3-05.
  Rule 3-12................................................  Sec.   210.3-12.
  Rule 3-14................................................  Sec.   210.3-14.
  Rule 3-15................................................  Sec.   210.3-15.
  Rule 3-17................................................  Sec.   210.3-17.
  Rule 3-20................................................  Sec.   210.3-20.
  Rule 3A-01...............................................  Sec.   210.3A-01.
  Rule 3A-02...............................................  Sec.   210.3A-02.
  Rule 3A-03...............................................  Sec.   210.3A-03.
  Rule 3A-04...............................................  Sec.   210.3A-04.
  Rule 4-01................................................  Sec.   210.4-01.
  Rule 4-07................................................  Sec.   210.4-07.
  Rule 4-08................................................  Sec.   210.4-08.
  Rule 4-10................................................  Sec.   210.4-10.
  Rule 5-02................................................  Sec.   210.5-02.
  Rule 5-03................................................  Sec.   210.5-03.
  Rule 5-04................................................  Sec.   210.5-04.
  Rule 6-03................................................  Sec.   210.6-03.
  Rule 6-04................................................  Sec.   210.6-04.
  Rule 6-07................................................  Sec.   210.6-07.
  Rule 6-09................................................  Sec.   210.6-09.
  Rule 6A-04...............................................  Sec.   210.6A-04.
  Rule 6A-05...............................................  Sec.   210.6A-05.
  Rule 7-03................................................  Sec.   210.7-03.
  Rule 7-04................................................  Sec.   210.7-04.
  Rule 7-05................................................  Sec.   210.7-05.
  Rule 8-01................................................  Sec.   210.8-01.
  Rule 8-02................................................  Sec.   210.8-02.
  Rule 8-03................................................  Sec.   210.8-03.
  Rule 8-04................................................  Sec.   210.8-04.
  Rule 8-05................................................  Sec.   210.8-05.
  Rule 8-06................................................  Sec.   210.8-06.
  Rule 9-03................................................  Sec.   210.9-03.
  Rule 9-04................................................  Sec.   210.9-04.
  Rule 9-05................................................  Sec.   210.9-05.
  Rule 9-06................................................  Sec.   210.9-06.
  Rule 10-01...............................................  Sec.   210.10-01.
  Rule 11-02...............................................  Sec.   210.11-02.
  Rule 11-03...............................................  Sec.   210.11-03.
  Rule 12-16...............................................  Sec.   210.12-16.
  Rule 12-17...............................................  Sec.   210.12-17.

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  Rule 12-18...............................................  Sec.   210.12-18.
  Rule 12-21...............................................  Sec.   210.12-21.
  Rule 12-22...............................................  Sec.   210.12-22.
  Rule 12-23...............................................  Sec.   210.12-23.
  Rule 12-24...............................................  Sec.   210.12-24.
  Rule 12-27...............................................  Sec.   210.12-27.
  Rule 12-28...............................................  Sec.   210.12-28.
  Rule 12-29...............................................  Sec.   210.12-29.
Regulation S-K \2\:
  Item 10..................................................  Sec.   229.10.
  Item 101.................................................  Sec.   229.101.
  Item 201.................................................  Sec.   229.201.
  Item 302.................................................  Sec.   229.302.
  Item 303.................................................  Sec.   229.303.
  Item 406.................................................  Sec.   229.406.
  Item 503.................................................  Sec.   229.503.
  Item 504.................................................  Sec.   229.504.
  Item 508.................................................  Sec.   229.508.
  Item 512.................................................  Sec.   229.512.
  Item 601.................................................  Sec.   229.601.
Regulation M-A \3\:
  Item 1010................................................  Sec.   229.1010.
Regulation AB \4\:
  Item 1118................................................  Sec.   229.1118.
Securities Act of 1933 (Securities Act) \5\:
  Rule 158.................................................  Sec.   230.158.
  Rule 405.................................................  Sec.   230.405.
  Rule 436.................................................  Sec.   230.436.
  Form S-1.................................................  Sec.   239.11.
  Form S-3.................................................  Sec.   239.13.
  Form S-11................................................  Sec.   239.18.
  Form S-4.................................................  Sec.   239.25.
  Form F-1.................................................  Sec.   239.31.
  Form F-3.................................................  Sec.   239.33.
  Form F-4.................................................  Sec.   239.34.
  Form F-6.................................................  Sec.   239.36.
  Form F-7.................................................  Sec.   239.37.
  Form F-8.................................................  Sec.   239.38.
  Form F-10................................................  Sec.   239.40.
  Form F-80................................................  Sec.   239.41.
  Form SF-1................................................  Sec.   239.44.
  Form SF-3................................................  Sec.   239.45.
  Form 1-A.................................................  Sec.   239.90.
  Form 1-K.................................................  Sec.   239.91.
  Form 1-SA................................................  Sec.   239.92.
Securities Exchange Act of 1934 (Exchange Act) \6\:
  Rule 3a51-1..............................................  Sec.   240.3a51-1.
  Rule 10A-1...............................................  Sec.   240.10A-1.
  Rule 12b-2...............................................  Sec.   240.12b-2.
  Rule 12g-3...............................................  Sec.   240.12g-3.
  Rule 13a-10..............................................  Sec.   240.13a-10.
  Rule 13b2-2..............................................  Sec.   240.13b2-2.
  Rule 15c3-1g.............................................  Sec.   240. 15c3-1g.
  Rule 15d-2...............................................  Sec.   240.15d-2.
  Rule 15d-10..............................................  Sec.   240.15d-10.
  Rule 17a-5...............................................  Sec.   240.17a-5.
  Rule 17a-12..............................................  Sec.   240.17a-12.
  Rule 17g-3...............................................  Sec.   240.17g-3.
  Rule 17h-1T..............................................  Sec.   240.17h-1T.
  Form 10..................................................  Sec.   249.210.
  Form 20-F................................................  Sec.   249.220f.
  Form 40-F................................................  Sec.   249.240f.
  Form 10-K................................................  Sec.   249.310.
  Form 11-K................................................  Sec.   249.311.
  Form 10-D................................................  Sec.   249.312.
  Form X-17A-5.............................................  Sec.   249.617.
Investment Company Act of 1940 (Investment Company Act)
 \7\:
  Form N-8B-2..............................................  Sec.   274.12.
Securities Act and Investment Company Act:
  Form N-5.................................................  Sec.   239.24 and 274.5.
  Form N-1A................................................  Sec.   239.15A and 274.11A.
  Form N-2.................................................  Sec.   239.14 and 274.11a-1.
  Form N-3.................................................  Sec.   239.17a and 274.11b.

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  Form N-4.................................................  Sec.   239.17b and 274.11c.
  Form N-6.................................................  Sec.   239.17c and 274.11d.
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I. Introduction and Background
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    \1\ 17 CFR 210.10 through 210.12-29.
    \2\ 17 CFR 229.10 through 229.1208.
    \3\ 17 CFR 229.1000 through 229.1016.
    \4\ 17 CFR 229.1100 through 229.1125.
    \5\ 15 U.S.C. 77a et seq.
    \6\ 15 U.S.C. 78a et seq.
    \7\ 15 U.S.C. 80a et seq.
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    A. Scope of Amendments
    1. Issuers With Offerings Registered Under the Securities Act 
and Classes of Securities Registered Under the Exchange Act
    2. Issuers Offering Securities Under Regulation A
    3. Issuers Regulated Under the Investment Company Act
    4. Other Entities
    B. Comments on Objective and Scope of the Proposing Release
    C. FASB-Related Considerations
    1. Role of the FASB
    2. Interaction of Commission Disclosure Requirements and U.S. 
GAAP
    3. Current FASB Projects Concerning the Application of U.S. GAAP
    D. Disclosure Location Considerations
II. Redundant or Duplicative Requirements
    A. Background
    B. Redundant or Duplicative Disclosure Requirements With U.S. 
GAAP
    1. Foreign Currencies
    2. Other
    C. Redundant or Duplicative Disclosure Requirements With Other 
Commission Requirements
    1. Proposed Amendments
    2. Comments on Proposed Amendments
    3. Final Amendments
III. Overlapping Requirements
    A. Background
    B. Overlapping Requirements--Proposed Deletions
    1. Overlapping Disclosure Requirements With U.S. GAAP
    2. Other Overlapping Disclosure Requirements
    3. Overlapping Disclosure Requirements With Both U.S. GAAP and 
Other Commission Disclosure Requirements
    C. Overlapping Requirements--Proposed Integrations
    1. Foreign Currency Restrictions
    2. Restrictions on Dividends and Related Items
    3. Geographic Areas
    D. Overlapping Requirements--FASB Referrals
    1. Discount on Shares
    2. Income Tax Disclosures
    3. Major Customers
    4. Legal Proceedings
    5. Other
IV. Outdated Requirements
    A. Background
    B. Disclosure Requirements Outdated Due to Passage of Time
    C. Disclosure Requirements Outdated Due to Changes in the 
Regulatory, Business, or Technological Environment
    1. Market Price Disclosure
    2. Other
V. Superseded Requirements
    A. Background
    B. Disclosure Requirements Superseded by U.S. GAAP
    1. Gains or Loss on Sale of Properties by REITS
    2. Consolidation
    3. Development Stage Companies
    4. Insurance Companies
    5. Extraordinary Items
    6. Other
    C. Disclosure Requirements Superseded by Other Commission 
Requirements
    1. Auditing Standards
    2. Other
    D. Non-Existent or Incorrect References and Typographical Errors
VI. Other Matters
VII. Economic Analysis
    A. Baseline and Affected Parties
    B. Anticipated Benefits and Costs
    1. Redundant or Duplicative Requirements
    2. Overlapping Requirements
    3. Outdated Requirements
    4. Superseded Requirements
    C. Anticipated Effects on Efficiency, Competition, and Capital 
Formation
    D. Alternatives
VIII. Paperwork Reduction Act
    A. Background
    B. Summary of the Final Amendments
    C. Summary of Comment Letters and Revisions to Proposals
    D. Burden and Cost Estimates
    1. Forms 10, 10-K, 10-Q, 20-F, and 1-SA
    2. Forms S-1, S-3, S-4, S-11, SF-1, SF-3, F-1, F-3, F-4, and 1-A
IX. Final Regulatory Flexibility Act Analysis
    A. Need for, and Objectives of, the Amendments
    B. Significant Issues Raised by Public Comments
    C. Small Entities Subject to the Amendments
    D. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements
    E. Agency Action To Minimize Effect on Small Entities
X. Statutory Authority

I. Introduction and Background

    On July 13, 2016, the Commission proposed amendments to certain 
disclosure requirements that have become redundant, duplicative, 
overlapping, outdated, or superseded, in light of other Commission 
disclosure requirements, U.S. GAAP, International Financial Reporting 
Standards (``IFRS''), or changes in the information environment.\8\ The 
Commission also solicited comments on a number of disclosure 
requirements that overlap with, but require information incremental to, 
U.S. GAAP \9\ to determine whether to retain, modify, eliminate, or 
refer them to the FASB for potential incorporation into U.S. GAAP.\10\ 
Today we are adopting most of the proposed amendments substantially as 
proposed. In some cases, based on input from commenters, we are making 
modifications to the proposed amendments, and in other cases, we are 
not adopting the proposed amendments. In a few instances, we are 
adopting additional changes to our rules to make technical corrections 
and similar amendments identified in connection with this rulemaking. 
We believe the amendments will facilitate the disclosure of information 
to investors and simplify compliance without significantly altering the 
total mix of information provided to investors.\11\ We also believe 
that by eliminating redundant, duplicative, overlapping, outdated, or 
superseded disclosure requirements we may improve investors' ability to 
make investment decisions more efficiently and reduce issuer compliance 
costs, which may encourage capital formation. These amendments are a 
result of the staff's ongoing evaluation of our disclosure requirements 
\12\ and also are part of our efforts to implement title LXXII, section 
72002(2) of the Fixing America's

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Surface Transportation Act \13\ (the ``FAST Act'').
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    \8\ See Disclosure Update and Simplification Release No. 33-
10110 (July 13, 2016) [81 FR 51607 (Aug. 4, 2016)] (``Proposing 
Release'').
    \9\ In this release, we refer to such requirements as 
``incremental'' Commission disclosure requirements.
    \10\ We refer to the proposed amendments and this additional 
comment solicitation collectively as ``proposals.''
    \11\ The Supreme Court has held that a fact is material if there 
is ``a substantial likelihood that the disclosure of the omitted 
fact would have been viewed by the reasonable investor as having 
significantly altered the `total mix' of information made 
available.'' See TSC Industries, Inc. v. Northway, Inc., 426 U.S. 
438 (1976).
    \12\ The staff, under its Disclosure Effectiveness Initiative, 
is reviewing the disclosure requirements in Regulation S-K and 
Regulation S-X and is considering ways to improve the disclosure 
regime for the benefit of both companies and investors. The goal is 
to comprehensively review the requirements and make recommendations 
on how to update them to facilitate timely, material disclosure by 
companies and investors' access to that information.
    \13\ Public Law 114-94.
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    The staff will review these amendments, including any impact on 
disclosure and capital formation, not later than five years after the 
effective date of the amendments, and report to the Commission.

A. Scope of Amendments

    The amendments affect a variety of entities we regulate. Throughout 
this release, we refer to the affected entities as issuers. The 
requirements discussed may apply to entities other than issuers of 
securities or to subsets of such issuers and, thus, each requirement 
should be referenced for its specific scope. Entities other than 
issuers may include, for example, significant acquirees for which 
financial statements are required under Rule 3-05 of Regulation S-X, 
significant equity method investments for which financial statements 
are required under 17 CFR 210.3-09 (``Rule 3-09'' of Regulation S-X), 
broker-dealers, investment advisers, and nationally recognized 
statistical rating organizations (``NRSROs'').
1. Issuers With Offerings Registered Under the Securities Act and 
Classes of Securities Registered Under the Exchange Act
    The final rule amendments affect different categories of issuers 
differently. Our references to domestic issuers encompass large 
accelerated filers,\14\ accelerated filers,\15\ and non-accelerated 
filers,\16\ as well as emerging growth companies \17\ (``EGCs'') and 
smaller reporting companies \18\ (``SRCs''). In this release, we have 
highlighted the Commission disclosure requirements that affect SRCs 
differently from non-SRCs. Our references to foreign private issuers 
\19\ include issuers that may be large accelerated filers, accelerated 
filers, or non-accelerated filers, as well as EGCs.\20\ Specifically:
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    \14\ Under Exchange Act Rule 12b-2 [17 CFR 240.12b-2], a large 
accelerated filer is an issuer with an aggregate worldwide market 
value of voting and non-voting common equity held by its non-
affiliates of $700 million or more, as of the last business day of 
its most recently completed second fiscal quarter. In addition, the 
issuer needs to have been subject to reporting requirements for at 
least twelve calendar months, have filed at least one annual report, 
and not be eligible to use the requirements for smaller reporting 
companies for its annual and quarterly reports.
    \15\ Under Exchange Act Rule 12b-2, an accelerated filer is an 
issuer with an aggregate worldwide market value of voting and non-
voting common equity held by its non-affiliates of $75 million or 
more, but less than $700 million, as of the last business day of its 
most recently completed second fiscal quarter. In addition, the 
issuer needs to have been subject to reporting requirements for at 
least twelve calendar months, have filed at least one annual report, 
and not be eligible to use the requirements for smaller reporting 
companies for its annual and quarterly reports.
    \16\ Although the term ``non-accelerated filer'' is not defined 
in Commission rules, we use it throughout this release to refer to a 
reporting company that does not meet the definition of either an 
``accelerated filer'' or a ``large accelerated filer'' under 
Exchange Act Rule 12b-2.
    \17\ An EGC is an issuer with less than $1.07 billion in total 
annual gross revenues during its most recently completed fiscal 
year. If an issuer qualifies as an EGC on the first day of its 
fiscal year, it maintains that status until the earliest of (1) the 
last day of the fiscal year of the issuer during which it has total 
annual gross revenues of $1.07 billion or more; (2) the last day of 
its fiscal year following the fifth anniversary of the first sale of 
its common equity securities pursuant to an effective registration 
statement; (3) the date on which the issuer has, during the previous 
3-year period, issued more than $1.07 billion in non-convertible 
debt; or (4) the date on which the issuer is deemed to be a ``large 
accelerated filer'' (as defined in Exchange Act Rule 12b-2). See 
Rule 405 of Regulation C under the Securities Act and Rule 12b-2 of 
the Exchange Act.
    \18\ An SRC is an issuer that had a public float of less than 
$75 million as of the last business day of its most recently 
completed second fiscal quarter or had annual revenues of less than 
$50 million during the most recently completed fiscal year for which 
audited financial statements are available. See Rule 405 of 
Regulation C, Rule 12b-2 of the Exchange Act, and Item 10(f) of 
Regulation S-K.
    On June 28, 2018, the Commission adopted amendments to the SRC 
definition. Under the amended rules, a company with a public float 
of less than $250 million will qualify as a SRC. A company with no 
public float or with a public float of less than $700 million will 
qualify as a SRC if it had annual revenues of less than $100 million 
during its most recently completed fiscal year. See Amendments to 
Smaller Reporting Company Definition, Release No. 33-10513 (Jun. 28, 
2018) [83 FR 31992 (July 10, 2018)]. The rules will be effective 
September 10, 2018.
    \19\ See Rule 405 of Regulation C and Exchange Act Rule 3b-4(c) 
[17 CFR 240.3b-4(c)]. A foreign private issuer is any foreign issuer 
other than a foreign government, except for an issuer that has more 
than 50 percent of its outstanding voting securities held of record 
by U.S. residents and any of the following: a majority of its 
officers or directors are citizens or residents of the United 
States; more than 50 percent of its assets are located in the United 
States; or its business is principally administered in the United 
States.
    \20\ Foreign private issuers may only use the scaled rules 
available to SRCs if they file on domestic forms under U.S. GAAP. 
See Rule 8-01 of Regulation S-X. The amendments affect these SRCs in 
the same ways as domestic SRC issuers.
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    <bullet> Amendments involving Regulation S-K relate to domestic 
issuers \21\ and foreign private issuers that elect to file on forms 
used by domestic issuers.
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    \21\ Domestic issuers include foreign issuers that do not meet 
the definition of foreign private issuer.
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    <bullet> Amendments involving Regulation S-X generally relate to 
domestic issuers and foreign private issuers that report under U.S. 
GAAP or a comprehensive body of accounting principles other than U.S. 
GAAP or IFRS \22\ with a reconciliation to U.S. GAAP.\23\
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    \22\ Throughout this release, we refer to a comprehensive body 
of accounting principles other than U.S. GAAP or IFRS as ``Another 
Comprehensive Body of Accounting Principles.''
    \23\ Foreign private issuers that report under IFRS must comply 
with the IFRS requirements for the form and content of financial 
statements, rather than with the specific presentation and 
disclosure provisions in Articles 3A, 4, 5, 6, 6A, 7, 8, 9, 10, and 
certain parts of Article 3 of Regulation S-X. Where an amendment to 
Regulation S-X also affects foreign private issuers that report 
under IFRS, we discuss both U.S. GAAP and IFRS.
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    <bullet> Amendments involving Commission forms relate to either 
domestic issuers or foreign private issuers, depending on the form 
under discussion. For example, the amendments to the ``F'' series of 
forms \24\ only affect foreign private issuers.
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    \24\ For example, these forms include Forms F-1, F-3, F-4, and 
20-F.
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Some of the amendments also affect asset-backed issuers.\25\
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    \25\ ``Asset-backed issuer'' is defined in Item 1101(b) of 
Regulation AB [17 CFR 229.1101(b)]. See the amendments regarding: 
(1) Invitations for competitive bids discussed in Section III.B.2, 
(2) available information discussed in Section IV.C.2, (3) matters 
submitted to a vote of security holders discussed in Section V.C.2, 
and (4) incorrect references in General Instruction J(1)(e) to Form 
10-K discussed in Section V.D.
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2. Issuers Offering Securities Under Regulation A
    Some of the amendments affect Regulation A issuers, as follows: 
\26\
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    \26\ See Rules 251-263 of Regulation A [17 CFR 230.251-230.263]. 
Regulation A is an exemption from Securities Act registration for 
offerings by issuers that comply with the requirements of the 
exemption. A Tier 1 offering under Regulation A limits the sum of 
the aggregate offering price and the aggregate sales within 12 
months before the start of the offering to $20 million, while a Tier 
2 offering limits that sum to $50 million. Rule 251(a)(1) and (2) of 
Regulation A.
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    <bullet> Amendments involving Regulation S-K affect Regulation A 
issuers that provide narrative disclosure that follows Part I of Form 
S-1 or Part I of Form S-11 in Part II of Form 1-A.
    <bullet> Amendments involving Rule 4-10, Rule 8-04, Rule 8-05, and 
Rule 8-06 of Regulation S-X affect all Regulation A issuers. Amendments 
involving Rule 8-03(a) of Regulation S-X affect Regulation A issuers 
that report under U.S. GAAP. Amendments involving the remaining rules 
in 17 CFR 210.8-01 through 210.8-08 (``Article 8'' of Regulation S-X) 
affect only Regulation A issuers in a Tier 2 offering that report under 
U.S. GAAP. No other amendments involving Regulation S-X affect 
Regulation A issuers.
    <bullet> Amendments involving Regulation A forms may affect issuers 
that report

[[Page 50152]]

under U.S. GAAP or Canadian issuers that report under IFRS.\27\
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    \27\ Only U.S. and Canadian issuers may rely on Regulation A and 
use Form 1-A. See Rule 251(b)(1) of Regulation A [17 CFR 
230.251(b)(1)]. U.S. issuers must report under U.S. GAAP. Canadian 
issuers may report under U.S. GAAP or IFRS. See paragraph (a)(2) of 
Part F/S of Form 1-A, Item 7(b) of Form 1-K, and Item 3 of Form 1-
SA.
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    In this release, we have highlighted the Commission disclosure 
requirements that affect Regulation A issuers.\28\
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    \28\ Statements about the effect of an amendment on Regulation A 
issuers throughout this release reflect that the form and content 
requirements in Regulation S-X do not apply to Canadian Regulation A 
issuers that report under IFRS. Please refer to Section V.C.2.
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3. Issuers Regulated Under the Investment Company Act
    Certain amendments are applicable to issuers regulated under the 
Investment Company Act, as follows:
    <bullet> Amendments involving Regulation S-K affect business 
development companies to which the regulation applies.
    <bullet> Amendments involving Regulation S-X affect investment 
companies to which the regulation applies.
    <bullet> Amendments involving Investment Company Act forms may 
affect investment companies, depending on the form in question.
4. Other Entities
    Certain amendments also are applicable to registered broker-
dealers, investment advisers, and NRSROs.

B. Comments on Objective and Scope of the Proposing Release

    Many commenters were generally supportive of the objective of the 
release.\29\ These commenters indicated that the proposed amendments 
would improve the effectiveness and usefulness of the information 
presented to investors while also decreasing the costs of preparing 
that information, which would also benefit investors. Some of these 
commenters also identified additional redundancies and overlapping 
disclosures that the Commission should address.\30\ In addition, some 
commenters recommended that the Commission establish a process to 
address future redundant, overlapping, outdated, or superseded 
disclosures.\31\
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    \29\ See, e.g. letters from Center for Audit Quality (Oct. 3, 
2016) (``CAQ''); CFA Institute (Dec. 7, 2016) (``CFA''); Financial 
Executives International (Oct. 27, 2016) (``FEI''); Shearman & 
Sterling LLP (Dec. 1, 2016) (``Shearman''); and U.S. Chamber of 
Commerce (Oct. 27, 2016) (``USCC'').
    \30\ See, e.g. letters from CAQ and Ernst & Young LLP (Oct. 31, 
2016) (``E&Y'').
    \31\ See, e.g. letters from CAQ; CFA; Corporate Governance 
Coalition for Investor Value (Oct. 27, 2016) (``CGCIV''); FEI; and 
USCC.
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    Some commenters objected to the overall objective and scope of the 
release to the extent it could result in the elimination of any 
currently required disclosures.\32\ These commenters stated that 
investors want more (not less) disclosures and provided examples, such 
as environmental, social, and governance disclosures.\33\ Some 
commenters also expressed concern that, due to the proposed amendments' 
reliance on U.S. GAAP, and considering the FASB's standard-setting 
projects related to disclosure framework and materiality, information 
that is material under the current disclosure framework would no longer 
be provided to investors.\34\
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    \32\ See, e.g. letters from American Federation of Labor and 
Congress of Industrial Organizations (Oct. 31, 2016) and Americans 
for Financial Reform (``AFL-CIO and AFR''); Financial Accountability 
and Corporate Transparency Coalition (Oct. 3, 2016) (``FACT 
Coalition''); Public Citizen (Oct. 18, 2016) (``Public Citizen''); 
and Robert E. Rutkowski (Nov. 7, 2016) (``Rutkowski'').
    \33\ Id.
    \34\ See, e.g. letters from AFL-CIO and AFR; California Public 
Employees' Retirement System (Nov. 2, 2016) (``CalPERS''); and 
Public Citizen. See also discussion in Section I.D below.
---------------------------------------------------------------------------

    Several commenters also expressed concern about the timing of the 
proposal.\35\ For example, some commenters were concerned that there 
was not sufficient time for the staff to consider the comments received 
on the Commission's earlier concept release on disclosures required by 
Regulation S-K \36\ in determining its proposals because those comments 
were due the same month the proposal was issued.\37\ Other commenters 
were concerned that the 60-day comment period specified in the 
Proposing Release did not provide an adequate amount of time to fully 
consider and provide thoughtful, comprehensive comments.\38\ In 
response to these comments, the Commission extended the comment period 
by 30 days.\39\ We also note that the topics discussed in the 
Regulation S-K Concept Release were generally broader in scope than the 
relatively more discrete changes set forth in the Proposing Release.
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    \35\ See, e.g. letters from AFL-CIO and AFR; Domini Social 
Investments LLC (Nov. 1, 2016) (``Domini''); and Public Citizen.
    \36\ See Business and Financial Disclosure Required by 
Regulation S-K, Release No. 33-10064 (Apr. 13, 2016) (``Regulation 
S-K Concept Release'') [81 FR 23915 (Apr. 22, 2016)]
    \37\ See, e.g. letters from AFL-CIO and AFR and FACT Coalition.
    \38\ See, e.g. letters from American Gas Association (Aug. 24, 
2016) and Center for Audit Quality (Aug. 4, 2016).
    \39\ See Extension of Comment Period for Disclosure Update and 
Simplification, Release No. 33-10220 (September 23, 2016) [81 FR 
66898 (Sept. 29, 2016)]
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C. FASB-Related Considerations

1. Role of the FASB
    The federal securities laws set forth the Commission's broad 
authority and responsibility to prescribe the methods to be followed in 
the preparation of accounts and the form and content of financial 
statements to be filed under those laws,\40\ as well as its 
responsibility to ensure that investors are furnished with other 
information necessary for investment decisions.\41\ To assist it in 
meeting this responsibility, the Commission historically has looked to 
private-sector standard-setting bodies to develop accounting principles 
and standards.\42\ At the time of the FASB's formation in 1973, the 
Commission reexamined its policy and formally recognized pronouncements 
of the FASB that establish and amend accounting principles and 
standards as ``authoritative'' in the absence of any contrary 
determination by the Commission.\43\ The Commission concluded at that 
time that the expertise and resources that the private sector could 
offer to the process of setting accounting standards would be 
beneficial to investors.
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    \40\ See, e.g., Sections 7 [15 U.S.C. 77g], 19(a) [15 U.S.C. 
77s(a)] and Schedule A, Items (25) and (26) of the Securities Act 
[15 U.S.C. 77aa(25) and (26)]; Sections 3(b) [15 U.S.C. 78c(b)], 
12(b) [17 CFR 78l(b)] and 13(b) [17 CFR 78m(b)] of the Exchange Act; 
and Sections 8 [15 U.S.C. 80a-8], 30(e) [15 U.S.C. 80a-29(e)], 31[15 
U.S.C. 80a-30], and 38(a) [15 U.S.C. 80a-37(a)] of the Investment 
Company Act.
    \41\ See Policy Statement: Reaffirming the Status of the FASB as 
a Designated Private-Sector Standard Setter, Release No. 33-8221 
(Apr. 25, 2003) [68 FR 23333 May 1, 2003], (``2003 FASB Policy 
Statement'').
    \42\ Id.
    \43\ See Accounting Series Release No. 150 (Dec. 20, 1973).
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    The Sarbanes-Oxley Act of 2002 \44\ (``Sarbanes-Oxley Act'') 
established criteria that must be met in order for the work product of 
an accounting standard-setting body to be recognized as ``generally 
accepted'' for purposes of the federal securities laws.\45\ In 
accordance with these criteria, the Commission has designated the FASB 
as the private-sector accounting standard setter for U.S. financial 
reporting purposes.\46\ As the designated private-

[[Page 50153]]

sector accounting standard setter in the United States, the FASB seeks 
to undertake a transparent, public standard-setting process.\47\ As 
required under the securities laws, including the Sarbanes-Oxley Act, 
the Commission monitors the FASB's ongoing compliance with the 
expectations and views expressed in the 2003 FASB Policy Statement.\48\
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    \44\ Public Law 107-204, 116 Stat. 745 (2002)
    \45\ See section 19 of the Securities Act [15 U.S.C. 77s].
    \46\ Section 108 of the Sarbanes-Oxley Act amended section 19 of 
the Securities Act to provide that the Commission ``may recognize, 
as `generally accepted' for purposes of the securities laws, any 
accounting principles established by a standard setting body that 
met certain criteria.'' The Commission has determined that the FASB 
satisfies the criteria in section 19 and, accordingly, the FASB's 
financial accounting and reporting standards are recognized as 
``generally accepted'' for purposes of the federal securities laws. 
See 2003 FASB Policy Statement.
    \47\ See http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1351027215692. See also pages 2 and 5 of the FASB 
Rules of Procedures, available at http://www.fasb.org/cs/ContentServer?c=Document_C&pagename=FASB%2FDocument_C%2FDocumentPage&cid=1176162391050.
    \48\ The 2003 FASB Policy Statement describes the Commission's 
three key expectations for the FASB. First, the FASB shall consider, 
in adopting accounting principles, the extent to which international 
convergence on high quality accounting standards is necessary or 
appropriate in the public interest and for the protection of 
investors, including consideration of moving towards greater 
reliance on principles-based accounting standards whenever it is 
reasonable to do so. Second, the FASB shall take reasonable steps to 
continue to improve the timeliness with which it completes its 
projects, while satisfying appropriate public notice and comment 
requirements. Last, the FASB shall continue to be objective in its 
decision-making and to weigh carefully the views of its constituents 
and the expected benefits and perceived costs of each standard.
    See https://www.sec.gov/rules/policy/33-8221.htm.
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2. Interaction of Commission Disclosure Requirements and U.S. GAAP
a. Overview
    Although the FASB functions as the designated private-sector 
accounting standard setter in the United States, some Commission rules 
contain accounting and disclosure requirements. In some cases, these 
Commission requirements mandate disclosures that the FASB later added 
to U.S. GAAP.\49\ Other Commission disclosure requirements have been 
superseded by U.S. GAAP.\50\ From time to time, the Commission has 
reviewed and amended its disclosure requirements to eliminate rules 
that became redundant, duplicative, or overlapping as the FASB updated 
U.S. GAAP.\51\ In keeping with this historical practice, many of the 
amendments we are adopting revise or eliminate Commission disclosure 
requirements related to information that is addressed by more recently 
updated U.S. GAAP requirements.
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    \49\ See, e.g., Rule 4-08(h) of Regulation S-X, parts of which 
were subsequently incorporated into U.S. GAAP.
    \50\ See, e.g., Rule 10-01(a)(7) of Regulation S-X, which refers 
to the disclosures required by ASC 915 on development stage 
entities, which the FASB has since eliminated.
    \51\ See, e.g., General Revision of Regulation S-X, Release No. 
33-6233 (Sept. 2, 1980) [45 FR 63660 (Sept. 25, 1980)], Phase One 
Recommendations of Task Force on Disclosure Simplification Release 
No. 33-7300 (May 31, 1996) [61 FR 30397 (June 14, 1996)], and 
Technical Amendments to Rules, Forms, Schedules, and Codification of 
Financial Reporting Policies, Release No. 33-9026, (Apr. 15, 2009) 
[74 FR 18612 (Apr. 23, 2009)].
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    A number of Commission disclosure requirements require information 
that is incremental to U.S. GAAP rather than being duplicative or 
overlapping. In the Proposing Release, the Commission solicited comment 
on certain of these incremental Commission disclosure requirements to 
determine whether to retain, modify, eliminate, or refer them to the 
FASB for potential incorporation into U.S. GAAP.
b. Comments on Interaction of Commission Disclosure Requirements and 
U.S. GAAP
    Several commenters generally supported the referral of certain 
Commission disclosure requirements to the FASB for potential 
incorporation into U.S. GAAP.\52\ These commenters were supportive of a 
disclosure regime that can be consistently applied to all issuers and 
indicated that it is beneficial to limit the sources of financial 
disclosure requirements. In expressing support for a consistently 
applied disclosure regime, some of these commenters also indicated that 
having different financial reporting requirements \53\ based on the 
size of the issuer may eliminate information that is material to 
investors and may make preparation of financial statements as well as 
analysis of various issuers' financial statements more difficult.\54\
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    \52\ See, e.g. letters from CAQ; CFA; Crowe Horwath LLP (Oct. 
28, 2016); Grant Thornton LLP (Nov. 1, 2016) (``Grant''); and KPMG 
LLP (Oct. 19, 2016) (``KPMG'').
    \53\ For example, Rules 8-03(b)(5) and 10-01(b)(7) of Regulation 
S-X both require disclosure of the effect of changes in reporting 
entities on net income and per share amounts in interim periods. 
However, Rule 10-01(b)(7) incrementally requires, for non-SRCs, 
disclosure of the effect on retained earnings.
    \54\ See letters from CAQ; CFA; Grant; and KPMG.
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    Some commenters expressed concern about placing more reliance on 
U.S. GAAP disclosure requirements without more formal Commission input 
or approval in the FASB standard-setting process.\55\ One commenter 
expressed concern about relying on the FASB to develop or require 
financial disclosures that might be considered appropriate for issuers 
but not other entities that apply U.S. GAAP.\56\ This commenter stated 
that such an approach could result in ``unnecessarily costly'' 
disclosure by entities that are not issuers.
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    \55\ See letters from American Bankers Association (Sept. 15, 
2016) (``ABA''); California State Teachers' Retirement System (Nov. 
18, 2016) (``CalSTRS;''); R.G. Associates, Inc. (Nov. 2, 2016) 
(``R.G. Associates''); and Stephen P. Percoco. (Nov. 7, 2016).
    \56\ See letter from ABA. The FASB scopes financial accounting 
and reporting for companies by (1) public business entities (PBEs); 
(2) not-for-profit entities; and (3) all other entities. The 
definition of PBEs encompasses an entity that ``(a) is required by 
the U.S. Securities and Exchange Commission (SEC) to file or furnish 
financial statements, or does file or furnish financial statements 
(including voluntary filers), with the SEC (including other entities 
whose financial statements or financial information are required to 
be or are included in a filing).'' This definition is broader than 
entities with a class of securities registered under the Exchange 
Act. For example, a privately-owned entity meets the definition of a 
PBE if it is acquired by a registrant and its financial statements 
are required under Rule 3-05 of Regulation S-X. See FASB's 
Accounting Standards Update 2013-12, Definition of a Public Business 
Entity.
---------------------------------------------------------------------------

c. Final Amendments
    We have determined to retain these incremental requirements and 
refer some of them to the FASB for its consideration of whether to 
incorporate such disclosure requirements into U.S. GAAP \57\ as part of 
its standard-setting process.\58\ The discussions in this Section, as 
well as Sections II.B, III.B, and III.D, constitute our referral to the 
FASB.\59\
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    \57\ See further discussion in Sections II and III below.
    \58\ The FASB's Rules of Procedure sets forth procedures 
followed by the FASB in establishing and improving standards of 
financial accounting and reporting for nongovernmental entities, 
including procedures related to the issuance of such standards and 
other communications. See http://fasb.org/cs/ContentServer?c=Document_C&cid=1176162391050&d=&pagename=FASB%2FDocument_C%2FDocumentPage.
    The International Accounting Standards Board (``IASB''), which 
is subject to oversight by the IFRS Foundation, is responsible for 
IFRS and establishes its own standard-setting agenda. The staff 
monitors and participates in the IASB's standard setting activities. 
In connection with such participation, staff will seek to discuss 
this rulemaking with the IASB's staff. For further information, see 
http://www.ifrs.org/About-us/Pages/IFRS-Foundation-and-IASB.aspx.
    \59\ See Section II.B of the 2003 FASB Policy Statement.
---------------------------------------------------------------------------

    Any incorporation of these incremental Commission disclosure 
requirements into U.S. GAAP could potentially affect all entities that 
prepare financial statements under U.S. GAAP, including those outside 
the scope of our regulatory authority. Because U.S. GAAP historically 
has scaled disclosure requirements only by public business entities 
versus other entities, and not by issuer status, incorporation into 
U.S. GAAP could result in the application of some of these requirements 
to SRCs and issuers relying on Regulation A or Regulation Crowdfunding.
    By April 4, 2020, we request that the FASB complete its process to 
determine whether the referred disclosure items will be added to its 
agenda of projects

[[Page 50154]]

for potential standard-setting.\60\ The FASB will determine whether 
and, if so, how to respond to our referrals.\61\ In the meantime, we 
are retaining these disclosure requirements as suggested by commenters. 
Any future consideration of amendments to these disclosure requirements 
will take into account the outcome of the standard-setting activities 
undertaken by the FASB, if any, in response to the referrals we are 
making.
---------------------------------------------------------------------------

    \60\ We recognize that the FASB will need to expend time and 
resources to consider the referrals we are making in this release, 
in addition to carrying out its other standard-setting activities. 
We believe that 18 months should provide sufficient time for the 
FASB to appropriately consider these referrals without imposing 
undue constraints on the FASB's current standard-setting agenda. Any 
impact to the FASB's current operations, as a result of the 
referrals described in this release, including any potential change 
to its annual budget and related accounting support fee paid for by 
issuers, could depend on how much overlap there is with existing 
FASB projects and how the FASB allocates its resources. See Section 
109(e) of the Sarbanes-Oxley Act.
    \61\ See supra note 59.
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3. Current FASB Projects Concerning the Application of U.S. GAAP
    The FASB updates U.S. GAAP from time to time through its standard-
setting projects. In the Proposing Release, the Commission invited 
commenters to consider two projects on the FASB's agenda when 
evaluating the proposals and providing feedback. In one project, the 
FASB proposed changes to U.S. GAAP \62\ to describe how entities would 
assess whether disclosures are material \63\ and included a proposal to 
revise U.S. GAAP to include a reference to materiality as a legal 
concept.\64\ In another project, the FASB undertook to evaluate 
disclosure requirements for interim reporting.\65\ In that project, the 
FASB has reached a tentative decision that disclosures about matters 
required to be provided in annual financial statements should be 
updated in the interim report if there is a substantial likelihood that 
the updated information would be viewed by a reasonable investor as 
significantly altering the total mix of information available to the 
investor.\66\
---------------------------------------------------------------------------

    \62\ FASB Exposure Draft, Notes to Financial Statements (Topic 
235): Assessing Whether Disclosures Are Material (Sept. 24, 2015), 
available at: http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176166402325&acceptedDisclaimer=true.
    \63\ In 2014, the IASB amended IFRS to clarify that an entity 
does not have to disclose information required by IFRS if that 
information would not be material. See Disclosure Initiative 
(Amendments to IAS 1).
    \64\ Commenters on the FASB's standard-setting project have 
expressed a range of views on the proposed amendments and their 
potential impact on the volume of financial disclosures. The comment 
letters are available at: http://www.fasb.org/jsp/FASB/CommentLetter_C/CommentLetterPage&cid=1218220137090&project_id=2015-310.
    \65\ See Project Update for Disclosure Framework: Disclosures-
Interim Reporting, available at: http://fasb.org/jsp/FASB/FASBContent_C/ProjectUpdatePage&cid=1176164227056.
    See also Minutes from FASB Board Meeting (May 29, 2014), 
available at: http://www.fasb.org/jsp/FASB/FASBContent_C/ProjectUpdatePage&cid=1176164227056.
    \66\ See Minutes from FASB Board Meeting (May 29, 2014), 
available at: http://www.fasb.org/jsp/FASB/FASBContent_C/ProjectUpdatePage&cid=1176164227056.
---------------------------------------------------------------------------

    These FASB projects were, and the interim reporting project 
remains, subject to public comment and FASB deliberation and could 
impact those disclosure requirements we have decided to eliminate or 
revise on the basis that U.S. GAAP requires the same or similar 
disclosure. In particular, for Commission rules that contain a 
specified disclosure threshold, investors may receive less information 
if the disclosure requirement is incorporated into U.S. GAAP and the 
issuer determines that the information is not material. Throughout the 
Proposing Release, the Commission identified disclosure requirements 
that contemplate a disclosure threshold in some manner, for example, 
through the use of terms such as ``material'' or ``significant'' or 
through the use of bright line disclosure thresholds.
    Several commenters expressed concern about the interaction between 
the current FASB projects and the proposed amendments.\67\ Prior to the 
FASB's decision on materiality discussed below, some commenters 
submitted comment letters opposing reliance on U.S. GAAP as a basis to 
eliminate redundant or overlapping disclosure requirements, citing the 
FASB's potential change in its definition of materiality as the main 
reason for this opposition. One of these commenters also expressed 
concern that the FASB's materiality project could remove the phrase 
``an entity shall at a minimum provide'' from several of the U.S. GAAP 
disclosure requirements referenced in the Proposing Release.\68\ Other 
commenters stated that the FASB's disclosure framework projects \69\ 
would not have a significant effect on the proposed amendments, 
provided that definitions of materiality applied by the Commission and 
the FASB remain consistent.\70\ Several commenters were supportive of 
interim disclosure requirements and supported the FASB's tentative 
decision.\71\
---------------------------------------------------------------------------

    \67\ See, e.g. letters from AFL-CIO and AFR; CalPERS; Domini; 
and Public Citizen.
    \68\ See letter from CalPERS.
    \69\ The current topic-specific FASB disclosure framework 
projects include the interim reporting project and four disclosure 
areas that are relevant to the amendments. These disclosure areas 
are: Fair value measurement, defined benefit plans, income taxes, 
and inventory.
    \70\ See, e.g. letters from CAQ; E&Y; and KPMG.
    \71\ See letters from CAQ; CFA; KPMG; and PricewaterhouseCoopers 
LLP (Nov. 1, 2016) (``PwC'').
---------------------------------------------------------------------------

    After the end of the comment period for the Proposing Release, the 
FASB concluded deliberations on a number of matters. For instance, in 
March 2018, the FASB decided not to amend U.S. GAAP to include a 
definition of materiality and also not to amend the disclosure sections 
currently in U.S. GAAP.\72\ The FASB also made decisions related to 
FASB Concepts Statement No. 8. The FASB Concepts Statements are not 
U.S. GAAP; rather, the FASB Concepts Statements collectively compose 
the FASB's Conceptual Framework, which sets forth general principles to 
aid the FASB in identifying factors to be considered when setting 
disclosure requirements for individual accounting standards and 
evaluating existing disclosure requirements.\73\ Among the decisions 
from March, the FASB will revise the concept of materiality included in 
the Conceptual Framework to clarify that the definition that was 
previously contained in FASB Concepts Statement No. 2,\74\ which is 
also the definition quoted in SEC Staff Accounting Bulletin No. 99,\75\ 
is the definition to be used by the FASB when it considers and 
formulates its standard setting projects. We believe these decisions by 
the FASB have clarified that the concept of materiality has not changed 
from the historical view of how an issuer applies materiality to the 
financial statements.
---------------------------------------------------------------------------

    \72\ See summary of decisions reached at the FASB Board Meeting 
(Mar. 21, 2018), available at: https://www.fasb.org/jsp/FASB/FASBContent_C/ProjectUpdateExpandPage&cid=1176170687841.
    \73\ See Project Update for Disclosure Framework: Board's 
Decision Process, available at: http://fasb.org/jsp/FASB/FASBContent_C/ProjectUpdatePage&cid=1176163077030.
    \74\ Statement of Financial Accounting Concepts No. 2, 
Qualitative Characteristics of Accounting Information.
    \75\ See SEC Staff Accounting Bulletin: No. 99--Materiality, 
which is available at: https://www.sec.gov/interps/account/sab99.htm.
---------------------------------------------------------------------------

    We believe the FASB's decision not to amend U.S. GAAP to include a 
definition of materiality, as well as the decisions related to FASB 
Concepts Statement No. 8, substantially address the concerns expressed 
by commenters about the impact of the current FASB standard-setting 
projects. As a result of these decisions, we believe there will not be 
changes to how an issuer applies the concept of materiality to its 
financial statements, including the related notes. We are therefore 
eliminating certain of

[[Page 50155]]

our disclosure requirements, as proposed, on the basis that U.S. GAAP 
requires the same or similar disclosures.\76\ In addition, issuers 
remain liable for their disclosures, including the omission of any 
information required to make the disclosures not misleading.\77\ 
Issuers should continue to consider both quantitative and qualitative 
factors in assessing materiality for the accounting and disclosure of 
an item, and also should continue to consider whether they have made 
critical accounting estimates and assumptions for which disclosure 
should be provided in MD&A.\78\ Further, U.S. GAAP requires a 
description of an issuer's significant accounting policies.\79\
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    \76\ See Sections II.B., III.B., and V.B. below.
    \77\ Exchange Act Rule 12b-20 [17 CFR 240.12b-20].
    \78\ See Commission Guidance Regarding Management's Discussion 
and Analysis of Financial Condition and Results of Operations, 
Release No. 33-8350 (Dec. 19, 2003) [68 FR 75056 (Dec. 29, 2003)] 
(``2003 MD&A Release'').
    \79\ ASC 235-10-50 requires identification and description of 
the accounting principles followed by an issuer and the methods of 
applying those principles that materially affect the determination 
of financial position, cash flows, or results of operations.
---------------------------------------------------------------------------

D. Disclosure Location Considerations

a. Overview
    In some cases, our amendments result in the relocation of 
disclosures within a filing,\80\ with the following consequences:
---------------------------------------------------------------------------

    \80\ For example, as discussed in Section III.B.2, our 
amendments eliminate the disclosures about an issuer's status as a 
real estate investment trust (``REIT'') in the audited notes to the 
financial statements, in reliance on required disclosures within the 
same filing, but outside the audited financial statements. See also 
Section III.C.1 of the Proposing Release, supra note 1, at 51616.
---------------------------------------------------------------------------

    <bullet> Prominence Considerations--the current location of some 
disclosures may provide a certain level of prominence and/or context to 
other disclosures located with them. The relocation of these 
disclosures may change the prominence and/or context of both the 
relocated disclosures and the remaining disclosures. We refer to these 
consequences collectively as ``Disclosure Location--Prominence 
Considerations.''
    <bullet> Financial Statement Considerations--the amendments related 
to some topics result in the relocation of disclosures from outside to 
inside the financial statements, subjecting this information to annual 
audit and/or interim review, internal control over financial reporting 
(``ICFR''), and XBRL tagging requirements, as applicable. The safe 
harbor under the Private Securities Litigation Reform Act of 1995 
(``PSLRA'') would not be available for such disclosures.\81\ 
Conversely, relocation of disclosures from inside to outside the 
financial statements would have the opposite effect--namely, this 
information would not be subject to annual audit and/or interim review, 
ICFR, and XBRL tagging requirements, as applicable, while the safe 
harbor under the PSLRA would be available. These topics would also be 
subject to Disclosure Location--Prominence Considerations. We refer to 
these consequences collectively as ``Disclosure Location--Financial 
Statement Considerations.''
---------------------------------------------------------------------------

    \81\ Public Law 104-67, 109 Stat. 737 (1995).
---------------------------------------------------------------------------

    <bullet> Bright Line Disclosure Threshold Considerations--some 
overlapping requirements, while similar, are not redundant or 
duplicative because one set of requirements includes a bright line 
disclosure threshold, while the other set of requirements does not.\82\ 
Where a requirement contains a bright line disclosure threshold, 
matters involving amounts below that threshold are not required to be 
disclosed. With the exception of disclosure requirements about major 
customers, the Commission disclosure requirements we discuss contain 
bright line disclosure thresholds, while the corresponding U.S. GAAP 
requirements do not. For these topics, the elimination of the bright 
line threshold would potentially change the disclosure provided to 
investors. We refer to these considerations collectively as ``Bright 
Line Disclosure Threshold Considerations.''
---------------------------------------------------------------------------

    \82\ For example, Regulation S-K requires, as discussed in 
Section III.D.5, disclosure of the amount of revenue from products 
and services that account for 10 percent or more of consolidated 
revenue. See also Section III.E.13 of the Proposing Release, supra 
note 1, at 51632. The corresponding U.S. GAAP requirements do not 
contain such bright line disclosure thresholds.
---------------------------------------------------------------------------

b. Comments on Disclosure Location Considerations
    Some commenters indicated that, due to the emergence of electronic 
data analysis and search tools, investors and other users are generally 
placing less emphasis on disclosure location.\83\ Views were mixed on 
relocating disclosures into the financial statements. Some commenters 
stated that they prefer most financial disclosures to be within the 
financial statements given the audit requirement and ICFR,\84\ while 
others opposed relocation for these same reasons.\85\ Numerous 
commenters also expressed concern about moving disclosures that contain 
forward-looking information into the financial statements. These 
commenters noted that such relocation would introduce liability 
concerns for registrants because the safe harbor under PSLRA would no 
longer apply and could create potential verification and auditability 
issues for auditors.\86\ Other commenters also expressed concern that 
it could result in loss of information that may currently be provided 
by registrants voluntarily.\87\
---------------------------------------------------------------------------

    \83\ See, e.g. letters from CAQ and Davis Polk & Wardwell LLP 
(Nov. 2, 2016) (``Davis'').
    \84\ See, e.g. letters from Council of Institutional Investors 
(Sept. 22, 2016) (``CII'') and The Ohio Society of CPAs (Nov. 2, 
2016).
    \85\ See, e.g. letters from CGCIV and Edison Electric Institute 
and American Gas Association (November 2, 2016) (``EEI and AGA''); 
and USCC.
    \86\ See, e.g. letters from CAQ; Davis; EEI and AGA; and FEI.
    \87\ See, e.g. letters from CalPERS; FEI; and R.G. Associates.
---------------------------------------------------------------------------

    Some commenters opposed eliminating any bright line thresholds in 
Commission disclosure requirements because the thresholds establish a 
baseline of disclosure for all registrants in certain areas.\88\ These 
commenters expressed concern about using a materiality standard for 
disclosure because it may reduce the information made available to 
investors or diminish comparability of registrants. Other commenters 
were supportive of eliminating the bright line thresholds, especially 
the thresholds discussed in the Proposing Release, and generally 
supported a more principles-based disclosure framework.\89\ These 
commenters also indicated that materiality is a better disclosure 
standard because certain of the existing bright line thresholds result 
in disclosure that, in their view, is immaterial to investors and 
costly to provide.
---------------------------------------------------------------------------

    \88\ See, e.g. letters from AFL-CIO and AFR; CalPERS; CFA; 
Public Citizen; and R.G. Associates.
    \89\ See, e.g. letters from CAQ; CGCIV; The Clearing House 
Association L.L.C. (Oct. 28, 2016) (``Clearing House''); Davis; FEI; 
and USCC.
---------------------------------------------------------------------------

c. Final Amendments
    We are adopting the majority of the proposed amendments that were 
identified with Disclosure Location--Prominence Considerations or 
Financial Statement Considerations because (a) commenters were 
supportive of the amendment and did not express concern with the 
relocation of the disclosure; or (b) the overlapping U.S. GAAP 
disclosure requirements, identified in the Proposing Release, are 
already subject to audit and ICFR requirements.\90\ We also are 
amending

[[Page 50156]]

one disclosure requirement identified with Bright Line Disclosure 
Thresholds Considerations relating to restrictions on dividends as 
proposed.\91\ We are not adopting other proposed amendments due to 
concern about the relocation of the disclosure and possible loss of 
forward-looking and voluntary information. In addition, we are 
referring some of the disclosure requirements with Disclosure Location 
or Bright Line Disclosure Threshold Considerations to the FASB for 
potential incorporation into U.S. GAAP.
---------------------------------------------------------------------------

    \90\ The proposed amendments that give rise to Disclosure 
Location Prominence or Financial Statement Considerations include 
those discussed in the following sections of the Proposing Release: 
Section III.B.2 REIT Disclosures--Status as a REIT; Section 
III.B.3.f Insurance Companies--Reinsurance Transactions, Interim 
Financial Statements--Material Events Subsequent to the End of the 
Most Recent Fiscal Year; Section III.B.3.c Segments; Section 
III.B.3.d Geographic Areas; Section III.B.3.e Seasonality; Section 
III.B.1.c Research and Development Activities; Section III.B.1.d 
Warrants, Rights, and Convertible Instruments; Section III.C.2 
Restrictions on Dividends and Related Items; Section III.C.3 
Geographic Areas; Section III.D.3 Major Customers; Section III.D.5 
Products and Services; and Section V.B.2 Dividends Per Share in 
Interim Financial Statements. We are not adopting any requirements 
to disclose forward-looking information in a registrant's financial 
statements.
    \91\ See discussion in Section III.C.2 below.
---------------------------------------------------------------------------

II. Redundant or Duplicative Requirements

A. Background

    In the Proposing Release, the Commission identified a number of 
disclosure requirements that require substantially similar disclosures 
as U.S. GAAP, IFRS, or other Commission disclosure requirements. The 
Commission proposed to eliminate these redundant or duplicative 
Commission disclosure requirements to simplify issuer compliance 
efforts in light of the obligation to provide substantially the same 
information to investors under other requirements.

B. Redundant or Duplicative Disclosure Requirements With U.S. GAAP

1. Foreign Currencies
    Rule 3-20 of Regulation S-X describes the currency requirements for 
financial statements of foreign private issuers. The third sentence of 
Rule 3-20(d) of Regulation S-X provides the definition of ``the 
currency of an operation's primary economic environment'' and ``a 
hyperinflationary environment.'' The Commission proposed to eliminate 
these definitions because U.S. GAAP provides substantially the same 
definitions.\92\
---------------------------------------------------------------------------

    \92\ ASC 830-10-45-2, ASC 830-10-45-12, and ASC 830-10-55-10.
---------------------------------------------------------------------------

    While most commenters \93\ supported the elimination, two 
commenters \94\ recommended that the Commission retain these 
provisions. These commenters indicated that while the definitions are 
the same in the Commission disclosure requirement and U.S. GAAP, the 
definition in U.S. GAAP \95\ can be interpreted to apply only to a 
subsidiary, division, branch or joint venture of the issuer rather than 
the issuer itself, whereas Rule 3-20(d) applies to both the issuer and 
each of its material operations.\96\
---------------------------------------------------------------------------

    \93\ See letters from Davis; Deloitte; & Touche LLP (Oct. 5, 
2016) (``Deloitte''); E&Y; EEI and AGA; Grant; KPMG; and R.G. 
Associates.
    \94\ See letters from CAQ and PwC.
    \95\ ASC 830-10-45-2, ASC 830-10-45-12, and ASC 830-10-55-10.
    \96\ First sentence of Rule 3-20(d) of Regulation S-X.
---------------------------------------------------------------------------

    After further consideration and in light of concerns raised about 
whether Rule 3-20(d) and U.S. GAAP are duplicative, we are retaining 
the definitions in the current rule and referring the issue to the FASB 
for potential clarification in U.S. GAAP.
2. Other
    The Commission proposed to eliminate a number of other requirements 
that are substantially redundant or duplicative of U.S. GAAP 
disclosures. The table below describes each of these requirements and 
identifies the corresponding U.S. GAAP requirement.\97\ For the 
Commission disclosure requirements proposed for elimination that apply 
to foreign private issuers that report using IFRS, we identify the 
corresponding IFRS requirement.\98\
---------------------------------------------------------------------------

    \97\ These proposed amendments are discussed in further detail 
in Section II.B of the Proposing Release.
    \98\ See supra note 23.

------------------------------------------------------------------------
                                 Description of
    Commission disclosure          commission
  requirement proposed for         disclosure        Corresponding U.S.
         elimination          requirement proposed    GAAP requirement
                                 for elimination
------------------------------------------------------------------------
                              Consolidation
------------------------------------------------------------------------
All except fourth sentence    Permits               ASC 810-10-45-
 of Rule 3A-02(b)(1) of        consolidation of an   12.\99\
 Regulation S-X.               entity's financial
                               statements for its
                               fiscal period if
                               the period does not
                               differ from that of
                               the issuer by more
                               than 93 days and
                               requires
                               recognition by
                               disclosure or
                               otherwise of
                               material
                               intervening events.
First sentence of Rule 3A-    Requires              ASC 810-10-15-10.
 02(d) of Regulation S-X.      consideration of
                               the propriety of
                               consolidation under
                               certain
                               restrictions.\100\
Last two sentences of first   Requires disclosure   ASC 235-10-50-1 and
 paragraph of Rule 3A-02 of    of the accounting     ASC 810-10-50-1.
 Regulation S-X and 3A-03(a)   policies followed
 of Regulation S-X.            in consolidation or
                               combination.\101\
First sentence of Rule 3A-04  Requires elimination  ASC 323-10-35-5a and
 of Regulation S-X.            of intercompany       ASC 810-10-45-1
                               transactions.         through 45-9.
------------------------------------------------------------------------
                               Obligations
------------------------------------------------------------------------
Reference to issuances in     Requires disclosure   ASC 855-10-50-2 and
 Rule 4-08(f) of Regulation    of significant        855-10-55-2a.
 S-X.                          changes \102\ in
                               amounts of debt
                               issued subsequent
                               to the latest
                               balance sheet date.
------------------------------------------------------------------------
                         Income Tax Disclosures
------------------------------------------------------------------------
First sentence of Rule 4-     Requires an income    ASC 740-10-50-12.
 08(h)(2) of Regulation S-X.   tax rate
                               reconciliation.

[[Page 50157]]

 
Fourth sentence of Rule 4-    Permits the income    ASC 740-10-50-12
 08(h)(2) of Regulation S-X.   tax rate
                               reconciliation to
                               be presented in
                               either percentages
                               or dollars.
------------------------------------------------------------------------
              Warrants, Rights, and Convertible Instruments
------------------------------------------------------------------------
Rule 4-08(i) of Regulation S- Requires disclosure   Non-compensatory
 X.                            of the title and      \104\ warrants or
                               amount of             rights: ASC 505-10-
                               securities subject    50-3 and ASC 815-40-
                               to warrants or        50-5.
                               rights, the          Compensatory
                               exercise price, and   warrants or rights:
                               the exercise          ASC 505-10-50-3,
                               period.\103\          ASC 718-10-50-1,
                                                     and ASC 718-10-50-
                                                     2.
------------------------------------------------------------------------
                             Related Parties
------------------------------------------------------------------------
Reference to identification   Requires              ASC 850-10-50-1.
 of related party              identification of
 transactions in Rule 4-       related party
 08(k)(1) of Regulation S-X.   transactions.
------------------------------------------------------------------------
                              Contingencies
------------------------------------------------------------------------
References to ``material      Require disclosure    ASC 270-10-50-6.
 contingencies'' in Rule 8-    of material
 03(b)(2),\105\ the second     contingencies in
 sentence of Rule 10-          interim financial
 01(a)(5) of Regulation S-X,   statements,
 and the entire last           notwithstanding
 sentence of Rule 10-          disclosure in the
 01(a)(5) of Regulation S-     annual financial
 X.\106\                       statements.
------------------------------------------------------------------------
                           Earnings per Share
------------------------------------------------------------------------
Reference to ``earnings per   Requires              ASC 270-10-50-1b.
 share'' in first sentence     presentation of
 of Rule 10-01(b)(2) of        earnings per share
 Regulation S-X.               on the face of an
                               interim income
                               statement.
------------------------------------------------------------------------
Item 601(b)(11) of            Require disclosure    ASC 260-10-50-1a,
 Regulation S-K \107\ and      of the computation    Rule 10-01(b)(2) of
 Instruction 6 to              of earnings per       Regulation S-X, and
 ``Instructions as to          share in annual       IAS 33, paragraph
 Exhibits'' of Form 20-F.      filings.              70.\108\
------------------------------------------------------------------------
                           Insurance Companies
------------------------------------------------------------------------
Last sentence of Rule 7-      Requires a            ASC 944-80-50-1a.
 03(a)(11) of Regulation S-X.  description of the
                               activities being
                               reported in the
                               separate
                               accounts.\109\
Rule 7-04.3(c) of Regulation  Requires disclosure   ASC 235-10-50-1 and
 S-X.                          of the method         ASC 320-10-50-9b.
                               followed in
                               determining the
                               cost of investments
                               sold.\110\
------------------------------------------------------------------------
                         Bank Holding Companies
------------------------------------------------------------------------
Rule 9-03.6(a) of Regulation  Requires disclosure   ASC 320-10-50-1B,
 S-X.                          of the carrying and   ASC 320-10-50-2,
                               market values of      ASC 320-10-50-5,
                               (1) securities of     and ASC 942-320-50-
                               the U.S. Treasury     2.
                               and other U.S.
                               Government agencies
                               and corporations,
                               (2) securities of
                               states of the U.S.
                               and political
                               subdivisions, and
                               (3) other
                               securities.
Rule 9-03.7(d) of Regulation  Requires disclosure   ASC 310-10-50-
 S-X.                          of changes in the     11B(c).
                               allowance for loan
                               losses.
First part of Rule 9-         Requires disclosure   ASC 235-10-50-1 and
 04.13(h) of Regulation S-X.   of the method         ASC 320-10-50-9b.
                               followed in
                               determining the
                               cost of investment
                               securities sold.
------------------------------------------------------------------------
                    Changes in Accounting Principles
------------------------------------------------------------------------
Requirement to disclose       Requires disclosure   ASC 250-10-45-12 to
 reason for change in          of the reasons for    16, ASC 250-10-50-
 accounting principle in       making material       1a, and ASC 270-10-
 Rule 8-03(b)(5) \111\ and     accounting changes    50-1g.
 Rule 10-01(b)(6) \112\ of     in an interim
 Regulation S-X.               period.
------------------------------------------------------------------------
                           Interim Adjustments
------------------------------------------------------------------------
Third sentence of Rule 3-     Provide examples of   ASC 270-10-45-10.
 03(d) and third sentence of   adjustments in
 Rule 10-01(b)(8) of           order for interim
 Regulation S-X.               financial
                               statements to be
                               fairly stated.
------------------------------------------------------------------------
        Interim Financial Statements--Common Control Transactions
------------------------------------------------------------------------
Part of first sentence of     Requires that common  ASC 805-50-45-1 to
 Rule 10-01(b)(3) of           control               5.
 Regulation S-X.               transactions be
                               reflected in
                               current and prior
                               comparative
                               period's interim
                               financial
                               statements.
------------------------------------------------------------------------

[[Page 50158]]

 
               Interim Financial Statements--Dispositions
------------------------------------------------------------------------
Rule 10-01(b)(5) of           Requires disclosure   ASC 205-20-50-5B,
 Regulation S-X.               of the effect of      ASC 205-20-50-5C,
                               discontinued          ASC 260-10-45-3,
                               operations on         and ASC 270-10-50-
                               interim revenues,     7.
                               net income, and
                               earnings per share
                               for all periods
                               presented.
------------------------------------------------------------------------

    Commenters generally supported these proposed amendments due to the 
redundant or duplicative nature of the Commission disclosure 
requirements with U.S. GAAP and IFRS, \113\ and no commenter 
specifically opposed the amendments. We are adopting all of the 
amendments described in the table above as proposed.
---------------------------------------------------------------------------

    \99\ ASC 810-10-45-12 uses the phrase ``about three months'' 
instead of 93 days.
    \100\ Rule 3A-02(d) requires due consideration of the propriety 
of consolidation in the presence of political, economic, or currency 
restrictions. ASC 810-10-15-10 states that subsidiaries shall not be 
consolidated in the presence of foreign exchange restrictions, 
controls, or other governmentally imposed uncertainties so severe 
that they cast significant doubt on the parent's ability to control 
the subsidiary.
    \101\ Rule 3A-02 states that the accounting policy disclosure 
should also include the circumstances associated with any departure 
from the normal practice of consolidating majority owned 
subsidiaries and not consolidating entities that are not majority 
owned. ASC 235-10-50-1 states that the accounting disclosure shall 
encompass important judgments about the appropriateness of 
accounting principles and unusual or innovative applications of U.S. 
GAAP.
    \102\ ASC 855-10-50-2 requires disclosure of events subsequent 
to the balance sheet date that are of such a nature that non-
disclosure would render the financial statements misleading. ASC 
855-10-55-55-2a provides that the sale of a bond subsequent to the 
balance sheet date is an example of such a subsequent event.
    \103\ For compensatory warrants or rights, U.S. GAAP requires 
disclosure of the nature and terms of such arrangements, the number 
and weighted-average exercise price, and the weighted-average 
contractual term.
    \104\ Compensatory warrants and rights are those issued to an 
employee, non-employee or other entity for supply of goods or 
services for the issuer's benefit, whereas non-compensatory warrants 
and rights are those issued for all other reasons.
    \105\ This rule specifically applies to SRCs and Regulation A 
issuers in a Tier 2 offering that report under U.S. GAAP.
    \106\ This rule specifically applies to companies other than 
SRCs (``non-SRCs'').
    \107\ We also proposed conforming revisions to delete references 
to Item 601(b)(11) of Regulation S-K in the Exhibit Table and in 
Rule 10-01(b)(2) of Regulation S-X.
    \108\ IAS 33, paragraph 70, is the IFRS requirement that 
corresponds to the Commission disclosure requirement in Instruction 
6 to ``Instructions as to Exhibits'' of Form 20-F.
    \109\ ASC 944-80-50-1a requires disclosure of the nature of the 
contracts reported in separate accounts.
    \110\ ASC 320-10-50-9b refers to the ``cost of a security 
sold.''
    \111\ This rule specifically applies to SRCs and Regulation A 
issuers in a Tier 2 offering that report under U.S. GAAP.
    \112\ This rule specifically applies to non-SRCs.
    \113\ See, e.g. letters from CAQ; Davis; EEI & AGA; and R.G. 
Associates.
---------------------------------------------------------------------------

C. Redundant or Duplicative Disclosure Requirements With Other 
Commission Requirements

1. Proposed Amendments
    In the Proposing Release, the Commission identified disclosure 
requirements that are redundant or duplicative of other Commission 
requirements. In most of these cases, the rule or item proposed to be 
eliminated is a reference to another Commission requirement and 
elimination would not affect compliance with the underlying 
requirement. The table below describes each proposed amendment.
---------------------------------------------------------------------------

    \114\ 17 CFR 210.3A-01 through 210.3A-04.
    \115\ We also proposed conforming revisions to delete the 
reference to Item 601(b)(19) of Regulation S-K in the Exhibit Table.
    \116\ 17 CFR 249.308a.
    \117\ We also proposed to amend the Exhibit Table within Item 
601 of Regulation S-K to clarify that Item 601(b)(13) applies to 
Form 10-Q.

------------------------------------------------------------------------
                                 Description of
    Commission disclosure          commission        Corresponding other
  requirement proposed for         disclosure            commission
         elimination          requirement proposed       disclosure
                                 for elimination         requirement
------------------------------------------------------------------------
                            Foreign Currency
------------------------------------------------------------------------
Last sentence of Rule 3-      States that foreign   Item 17(c)(2) of
 20(d) of Regulation S-X.      private issuers       Form 20-F.
                               must comply with     Also Item 4 of Form
                               Item 17(c)(2) of      F-1, General
                               Form 20-F, which      Instructions I.B of
                               requires disclosure   Form F-3, and Items
                               and quantification    11, 12, and 13 of
                               of departures from    Form F-4, which
                               the methodology of    indirectly refer to
                               Rule 3-20 if their    Item 17 of Form 20-
                               financial             F.
                               statements are
                               prepared on a basis
                               other than U.S.
                               GAAP or IFRS.
------------------------------------------------------------------------
                              Consolidation
------------------------------------------------------------------------
Rule 4-08(a) of Regulation S- Requires compliance   Article 3A itself
 X.                            with Article          requires
                               3A.\114\              compliance. The
                                                     requirement is
                                                     repeated in Rule 4-
                                                     08(a).
Rule 3A-01 of Regulation S-X  States subject        The same information
                               matter of Article     is set forth in the
                               3A.                   title of Article
                                                     3A.
------------------------------------------------------------------------
                  Report Furnished to Security Holders
------------------------------------------------------------------------
Item 601(b)(19) of            Provides specific     General Instruction
 Regulation S-K. \115\         instructions to       D(3) to Form 10-Q,
                               address the           which refers to
                               incorporation by      Item 601(b)(13) of
                               reference into Form   Regulation S-
                               10-Q \116\ of         K.\117\
                               information that is
                               separately made
                               available to
                               security holders.
------------------------------------------------------------------------


[[Page 50159]]

2. Comments on Proposed Amendments
    Commenters generally supported these proposed amendments.\118\ One 
commenter recommended retaining the last sentence of Rule 3-20(d) of 
Regulation S-X without providing further explanation.\119\
---------------------------------------------------------------------------

    \118\ See letters from Davis; Deloitte; E&Y; EEI and AGA; Grant; 
KPMG; and R.G. Associates.
    \119\ See letter from PwC. The last sentence of Rule 3-20(d) 
states that ``Departures from the methodology presented in this 
paragraph shall be quantified pursuant to Item 17(c)(2) of Form 20-
F.''
---------------------------------------------------------------------------

3. Final Amendments
    We are adopting the other amendments as proposed, with one 
exception. After additional analysis, we are not adopting the proposed 
elimination of the last sentence in Rule 3-20(d) because it relates to 
a small population of issuers (i.e. foreign private issuers that do not 
apply either U.S. GAAP or IFRS) and to avoid any unintended 
consequences in light of a commenter's recommendation. Additionally, 
the amendments eliminate a redundant requirement in Instruction 3 to 
Item 504 of Regulation S-K that was identified subsequent to the 
proposal.\120\
---------------------------------------------------------------------------

    \120\ The requirement to disclose the sources of any material 
amounts of other funds needed to accomplish the specific purpose is 
stated twice within the instruction.
---------------------------------------------------------------------------

III. Overlapping Requirements

A. Background

    In the Proposing Release, the Commission identified disclosure 
requirements that are related to, but not the same as, U.S. GAAP, IFRS, 
or other Commission disclosure requirements, which we refer to in this 
release as overlapping requirements. The Commission proposed the 
following related to these requirements:
    <bullet> Delete disclosure requirements that: (1) Require 
disclosures that convey reasonably similar information to or are 
encompassed by the disclosures that result from compliance with the 
overlapping U.S. GAAP, IFRS, or Commission disclosure requirements; or 
(2) require disclosures incremental to the overlapping U.S. GAAP, IFRS, 
or Commission disclosure requirements and may no longer be useful to 
investors.
    <bullet> Integrate Commission disclosure requirements that overlap 
with, but require information incremental to, other Commission 
disclosure requirements.
    The Commission also solicited comment on certain Commission 
disclosure requirements that overlap with, but require information 
incremental to, U.S. GAAP to determine whether to retain, modify, 
eliminate, or refer them to the FASB for potential incorporation into 
U.S. GAAP.

B. Overlapping Requirements--Proposed Deletions

1. Overlapping Disclosure Requirements With U.S. GAAP

    The Proposing Release identified several disclosure requirements 
that the Commission believed to be overlapping with U.S. GAAP.

a. Repurchase and Reverse Repurchase Agreements \121\
---------------------------------------------------------------------------

    \121\ See the related discussion in Section III.D.5.
---------------------------------------------------------------------------

(1) Proposed Amendments

    Since the requirements in Regulation S-X governing repurchase and 
reverse repurchase agreements were adopted in 1986, the FASB has 
amended the U.S. GAAP requirements for the accounting and disclosures 
for repurchase agreements and similar transactions,\122\ which has 
resulted in overlapping disclosure requirements. We discuss these 
overlapping requirements and the proposed amendments below.
---------------------------------------------------------------------------

    \122\ See Accounting Standards Update (``ASU'') No. 2014-11, 
Transfers and Servicing (Topic 860): Repurchase-to-Maturity 
Transactions, Repurchase Financings, and Disclosures.
---------------------------------------------------------------------------

(a) Balance Sheet Presentation
    Regulation S-X \123\ and U.S. GAAP \124\ both require separate 
presentation of repurchase liabilities associated with repurchase 
agreements on the face of the balance sheet.\125\ Regulation S-X, 
unlike U.S. GAAP, sets forth a 10 percent threshold for separate 
presentation.\126\ The Commission proposed to delete the requirement 
for separate presentation in Rule 4-08(m)(1)(i) and the related 10 
percent threshold and noted the Bright Line Disclosure Threshold 
Considerations. The Commission also proposed to retain the requirement 
to include accrued interest payables in the separately presented 
liability amounts.
---------------------------------------------------------------------------

    \123\ See Rule 4-08(m)(1)(i) of Regulation S-X.
    \124\ See ASC 860-30-45-2.
    \125\ Regulation S-X requires separate presentation of 
repurchase liabilities incurred pursuant to repurchase agreements. 
U.S. GAAP is broader in that it includes other transactions with 
similar characteristics--specifically, ``transactions in which cash 
is obtained in exchange for financial assets with an obligation for 
an opposite exchange later,'' such as dollar rolls (an agreement to 
sell and repurchase similar but not identical securities) and 
securities lending transactions. See ASC 860-30-15-3.
    \126\ Specifically, Regulation S-X requires separate 
presentation if the carrying amount (or market value, if higher than 
the carrying amount or if there is no carrying amount) of the 
securities or other assets sold under repurchase agreements, in the 
aggregate, exceeds 10 percent of total assets.
---------------------------------------------------------------------------

(b) Disaggregated Disclosures
    While Regulation S-X \127\ and U.S. GAAP \128\ both require 
disaggregated disclosures about repurchase agreements, they differ in 
the form and content of the disaggregated disclosures. First, 
Regulation S-X and U.S. GAAP both require disaggregated disclosures of 
repurchase liabilities by class of collateral and maturity interval. 
U.S. GAAP permits an entity to determine the appropriate level of 
disaggregation and classes of collateral to be presented on the basis 
of the nature, characteristics, and risks of the collateral pledged, 
whereas Regulation S-X provides a few illustrative examples of classes. 
Regulation S-X also specifies maturity intervals (e.g., overnight, up 
to 30 days), whereas U.S. GAAP permits judgment to determine an 
appropriate range of maturity intervals. Further, Rule 4-08(m)(1)(ii) 
of Regulation S-X requires the disaggregated disclosure to be combined 
in the form of a single table. Although U.S. GAAP is silent about the 
form of disclosure, its sole example of an approach to comply with its 
requirements is a single table that includes both classes of collateral 
as well as maturity intervals similar to those required by Regulation 
S-X.\129\ Overall, U.S. GAAP permits more judgment to determine the 
classes to be presented, the range of maturity intervals, and the form 
of disclosure than Regulation S-X.\130\
---------------------------------------------------------------------------

    \127\ See Rule 4-08(m)(1)(ii) of Regulation S-X.
    \128\ See ASC 860-30-50-7.
    \129\ See ASC 860-30-55-4.
    \130\ Id.
---------------------------------------------------------------------------

    Second, Regulation S-X specifies tabular disclosure of the carrying 
amount of associated assets sold under repurchase agreements 
disaggregated by class of asset sold and maturity interval (e.g., 
overnight, up to 30 days) of the repurchase agreement.\131\ Instead of 
a tabular format, U.S. GAAP requires separate presentation on the 
transferor's balance sheet of the carrying amount of assets that the 
transferee has the right to sell or repledge.\132\ U.S. GAAP also 
requires disclosure in the notes to the financial statements of the 
carrying amount and balance sheet classification of both the assets 
pledged as collateral that the transferee does not have the right to 
sell or repledge and the associated liabilities, along with 
quantitative information about the relationship(s) between them.\133\
---------------------------------------------------------------------------

    \131\ See Rules 4-08(m)(1)(ii)(A)(i) and 4-08(m)(1)(ii)(B) of 
Regulation S-X.
    \132\ See ASC 860-30-25-5a.
    \133\ See ASC 860-30-50-1A.b.1 and 2.

---------------------------------------------------------------------------

[[Page 50160]]

    The Commission proposed to delete the identified Regulation S-X 
requirements because the disclosures that result from compliance with 
U.S. GAAP, and the accompanying disclosure objectives and aggregation 
principles, convey reasonably similar information as the disclosures 
required by Regulation S-X.\134\
---------------------------------------------------------------------------

    \134\ U.S. GAAP requires that its minimum disclosure 
requirements about transactions such as repurchase agreements be 
supplemented as necessary to meet certain disclosures objectives 
(e.g., providing investors with an understanding of how transfers of 
financial assets affect an issuer's financial statements) and 
aggregation principles (e.g., presentation in a manner that clearly 
and fully explains the transferor's risk exposure related to the 
transferred financial assets and any restrictions on the assets of 
the entity). See ASC 860-10-50.
---------------------------------------------------------------------------

    Third, Regulation S-X requires disaggregated disclosures of the 
market value of assets sold under repurchase agreements for which 
unrealized changes in market value are reported in income.\135\ 
Although the FASB deliberated adding a requirement to U.S. GAAP to 
disclose the market value of these assets, it ultimately decided 
against doing so due to operability concerns.\136\
---------------------------------------------------------------------------

    \135\ See Rules 4-08(m)(1)(ii)(A)(i) and 4-08(m)(1)(ii)(B) of 
Regulation S-X. These rules, however, do not require disclosure of 
the carrying amount and market value of securities and other assets 
for which unrealized changes in market value are reported in current 
income or which have been obtained under reverse repurchase 
agreements. This scope is narrower than that for the U.S. GAAP 
requirement to separately present carrying amounts, which applies to 
all assets sold under repurchase agreements.
    \136\ See Minutes from FASB Board Meeting (Mar. 12, 2014), 
available at: http://www.fasb.org/jsp/FASB/Document_C/DocumentPage&cid=1176163899372. See also Accounting Standards Update 
(``ASU'') No. 2014-11, Transfers and Servicing (Topic 860): 
Repurchase-to-Maturity Transactions, Repurchase Financings, and 
Disclosures.
---------------------------------------------------------------------------

    Based on the foregoing, the Commission proposed to delete Rule 4-
08(m)(1)(ii), with the exception of the requirement in Rule 4-
08(m)(1)(ii)(A)(ii) to disclose the interest rate on repurchase 
liabilities, which the Commission would retain. Regulation S-X, unlike 
U.S. GAAP, sets forth a 10 percent threshold for the disaggregated 
disclosures;\137\ therefore, the proposed amendments give rise to 
Bright Line Disclosure Threshold Considerations.
---------------------------------------------------------------------------

    \137\ Specifically, Regulation S-X requires the tabular 
disclosures if the aggregate carrying amount (or market value, if 
higher than the carrying amount) of the securities or other assets 
sold under repurchase agreements exceeds 10 percent of total assets. 
The amount of securities or other assets sold under repurchase 
agreements excludes securities and other assets for which unrealized 
changes in market value are reported in current income or have been 
obtained under reverse repurchase agreements.
---------------------------------------------------------------------------

(c) Collateral Policy
    The Commission proposed to delete the requirement in Regulation S-X 
\138\ to disclose an issuer's policy with regard to taking possession 
of assets purchased under reverse repurchase agreements because U.S. 
GAAP requires disclosure of the issuer's policy for requiring 
collateral or other security.\139\ Although U.S. GAAP is not as 
specific as Regulation S-X about taking possession of collateral, the 
Commission believed Regulation S-X requires disclosures that are 
encompassed by the disclosures that result from compliance with U.S. 
GAAP.
---------------------------------------------------------------------------

    \138\ See Rule 4-08(m)(2)(i)(B)(1) of Regulation S-X.
    \139\ See ASC 860-30-50-1Aa.
---------------------------------------------------------------------------

    Regulation S-X, unlike U.S. GAAP, requires these disclosures when 
the aggregate carrying amount of reverse repurchase agreements exceeds 
10 percent of total assets. As such, the proposed amendment gives rise 
to Bright Line Disclosure Threshold Considerations.
(2) Comments on Proposed Amendments
    Commenters were split on the proposals related to the requirements 
for repurchase and reverse repurchase agreements. A number of 
commenters expressed support for the proposed amendments except for the 
elimination of the collateral policy disclosure requirement.\140\ These 
commenters agreed that the U.S. GAAP disclosures provide reasonably 
similar information for the balance sheet presentation and 
disaggregated disclosure requirements. Certain commenters were not 
supportive of the deletion of the collateral policy disclosure 
requirements \141\ and recommended referring the requirement to the 
FASB for potential incorporation into U.S. GAAP.\142\ These commenters 
stated that the disclosure provides useful information to understanding 
the credit risk associated with the transactions in which the issuer 
does not take possession of the collateral.
---------------------------------------------------------------------------

    \140\ See letters from CAQ; Clearing House; Deloitte; E&Y; and 
KPMG.
    \141\ See Rule 4-08(m)(2)(i)(B)(1) of Regulation S-X.
    \142\ See letters from CAQ; Grant; and PwC.
---------------------------------------------------------------------------

    Several other commenters opposed the proposed amendments, 
expressing concern that the amendments would eliminate disclosures that 
are material to investors and other users of the financial 
statements.\143\ For example, one of the commenters stated that the 
information required by Rule 4-08(m)(1)(ii) is essential to 
understanding an issuers' liabilities in the repo market.\144\ Another 
commenter indicated that it cannot support the proposed revisions to 
repurchase and reverse repurchase agreements disclosure requirements at 
this time, given the importance of these disclosures, the relative 
newness of the changes to the U.S. GAAP requirements, and the existence 
of differences in the form and content of the respective 
requirements.\145\ One commenter also indicated that it believes 
repurchase and reverse repurchase agreements should be discussed in SEC 
filings more than just in the financial statement footnotes because 
they are complex financial instruments that can have a dramatic impact 
on the financing and liquidity of financial institutions and other 
businesses.\146\
---------------------------------------------------------------------------

    \143\ See, e.g. letters from As You Sow, Bellamy Woods LLC, 
Brighton Shores LLC, CSC LLC, Essential Information, Greenpeace, 
Howard's End LLC, Institute for Policy Studies--Global Economy 
Project, Interfaith Center on Corporate Responsibility, NF Trust, 
OpenTheGovernment, Public Citizen, Rolyan Fund, Sunlight Foundation 
and Zevin Asset Management, LLC (Oct. 31, 2016) (``As You Sow, et 
al.''); CalPERS; and CII.
    \144\ See letter from Zevin Asset Management, LLC (Nov. 2, 2016) 
(``Zevin'').
    \145\ See letter from CII.
    \146\ See letter from Elise J. Bean (Oct. 3, 2016) (``Bean'').
---------------------------------------------------------------------------

    Additionally, while one commenter explicitly supported the 
elimination of the 10 percent threshold in Rule 4-08(m)(1)(ii),\147\ 
other commenters expressed concerns, indicating that the removal could 
result in less disclosure of information that is material to 
investors.\148\
---------------------------------------------------------------------------

    \147\ See letter from Clearing House.
    \148\ See letters from As You Sow, et al. and Public Citizen.
---------------------------------------------------------------------------

(3) Final Amendments
    In light of the comments about the importance of the information, 
we are retaining the Regulation S-X disclosure requirements related to 
repurchase and reverse repurchase agreements and referring these 
requirements to the FASB for potential incorporation into U.S. GAAP.
b. Derivative Accounting Policies
(1) Proposed Amendments
    Regulation S-X \149\ and U.S. GAAP \150\ both require disclosure in 
the notes to the financial statements of accounting policies for 
certain derivative instruments. Regulation S-X applies to: (1) 
Derivative financial instruments, as

[[Page 50161]]

defined under U.S. GAAP, and (2) derivative commodity instruments such 
as commodity futures, swaps, and options that are permitted to be 
settled in cash or with another financial instrument, to the extent 
such instruments are not within the definition of derivative financial 
instruments. For both types of instruments, Regulation S-X requires, 
where material, disclosure of the accounting policies; the criteria 
required to be met for each accounting method used; the accounting 
method used if those criteria are not met; the method used to account 
for terminations of derivatives designated as hedges or derivatives 
used to affect the terms, fair values, or cash flows of a designated 
item; the method used to account for derivatives when the designated 
item matures, is sold, is extinguished, or is terminated; and how the 
derivative instruments are reported in the financial statements.
---------------------------------------------------------------------------

    \149\ See Rule 4-08(n) of Regulation S-X and Note 2(b) to Rule 
8-01 of Regulation S-X. Rule 4-08(n) applies to non-SRCs and Note 
2(b) to Rule 8-01 applies to SRCs and Regulation A issuers in a Tier 
2 offering that report under U.S. GAAP.
    \150\ See ASC 815-10-50.
---------------------------------------------------------------------------

    U.S. GAAP requires disclosure of accounting principles and methods 
that materially affect the financial statements, including those 
involving a selection from existing acceptable alternatives, and 
important judgments about the appropriateness of the principles.\151\ 
In the Proposing Release, the Commission stated that it believes these 
U.S. GAAP principles call for reasonably similar information as the 
corresponding requirements in Regulation S-X, as they require 
disclosure of the accounting method applied to each aspect of a 
material derivative transaction from inception to termination.
---------------------------------------------------------------------------

    \151\ See ASC 235-10-50-1 and ASC 235-10-50-3.
---------------------------------------------------------------------------

    In addition, for derivative financial instruments, as defined under 
U.S. GAAP, U.S. GAAP requires disclosure of how and why the issuer uses 
derivative instruments, how the derivative instruments and related 
hedged items are accounted for, and how they affect the financial 
statements.\152\ Although Regulation S-X is more detailed than U.S. 
GAAP, the specificity in Regulation S-X stemmed, in part, from the 
absence of a comprehensive accounting model for derivatives when the 
Commission adopted these disclosure requirements.\153\ Since that time, 
the FASB has adopted an accounting model for derivative financial 
instruments, as defined under U.S. GAAP.\154\ Because U.S. GAAP has a 
comprehensive accounting model for contracts that meet the definition 
of a derivative financial instrument, the Commission stated in the 
Proposing Release that it believes that the additional specific 
disclosure requirements in Rule 4-08(n) are no longer applicable.
---------------------------------------------------------------------------

    \152\ See ASC 815-10-50.
    \153\ See Disclosure of Accounting Policies for Derivative 
Financial Instruments and Derivative Commodity Instruments, and 
Disclosure of Quantitative and Qualitative Information about Market 
Risk Inherent in Derivative Financial Instruments, Other Financial 
Instruments and Derivative Commodity Instruments, Release No. 33-
7386, (Jan. 31, 1997) [62 FR 6044 (Feb. 10, 1997)]. In this adopting 
release, the Commission stated that in the absence of comprehensive 
accounting literature, registrants have developed accounting 
practices for options and complex derivatives by analogy to the 
limited amount of literature that does exist. The Commission also 
noted that those analogies are complicated because, under existing 
accounting literature, there are at least three distinctively 
different methods of accounting for derivatives (e.g. fair value 
accounting, deferral accounting, and accrual accounting). The 
Commission further observed that the underlying concepts and 
criteria used in determining the applicability of those accounting 
methods is not consistent.
    \154\ See SFAS No. 133, Accounting for Derivative Instruments 
and Hedging Activities, codified in ASC 815.
---------------------------------------------------------------------------

    Based on the foregoing, the Commission proposed to delete Rule 4-
08(n) and Note 2(b) to Rule 8-01.
(2) Comments on Proposed Amendments
    While several commenters \155\ supported the proposed deletion of 
the Regulation S-X requirements related to derivative accounting 
policies, two commenters \156\ expressed concern. One of these 
commenters,\157\ while supportive of deleting the disclosure 
requirements, indicated that U.S. GAAP does not provide clear guidance 
on how to measure written options that do not meet the definition of a 
derivative financial instrument under U.S. GAAP.\158\ For this reason, 
this commenter recommended referring this issue to the FASB for 
potential incorporation into U.S. GAAP. The other commenter stated that 
the Commission should increase instead of decrease disclosures related 
to derivatives.\159\
---------------------------------------------------------------------------

    \155\ See letters from CAQ; Deloitte; E&Y; Grant; and PwC.
    \156\ See letters from Bean and KPMG.
    \157\ See letter from KPMG.
    \158\ ASC 815-10-35-1 requires all derivative instruments to be 
measured subsequently at fair value and written options that do not 
qualify for equity classification have been measured at fair value 
in the financial statements. See ASC 815-10-S99-4. The commenter 
stated the disclosure requirement in Rule 4-08(n) has been applied 
by analogy to measure these options at fair value. Rule 4-08(n) is 
not measurement guidance.
    \159\ See letter from Bean.
---------------------------------------------------------------------------

(3) Final Amendments
    We are eliminating most of the requirements in Rule 4-08(n) as 
proposed. However, after additional consideration, we are not 
eliminating the requirement to disclose where in the statement of cash 
flows the effect of derivative financial instruments is reported.\160\ 
U.S. GAAP does not have a similar disclosure requirement.\161\ We also 
are referring the statement of cash flows disclosure requirement to the 
FASB for potential incorporation into U.S. GAAP. We continue to believe 
that the U.S. GAAP disclosure requirements and related principles \162\ 
call for information that is reasonably similar to the information 
called for by the disclosure requirements in Regulation S-X and that 
some of the additional disclosure requirements in Rule 4-08(n) are no 
longer applicable. Finally, we are sharing the comment letters that 
request review of the disclosures for derivatives and accounting for 
written options with the FASB because these considerations are beyond 
the scope of this rulemaking.\163\
---------------------------------------------------------------------------

    \160\ Because we are no longer eliminating all of 4-08(n), we 
are retaining Note 2(b) to Rule 8-01.
    \161\ ASC 815 and ASC 230.
    \162\ See ASC 235-10-50-1, ASC 235-10-50-3, and ASC 815-10-50.
    \163\ The FASB, in its role of establishing and maintaining U.S. 
GAAP, continuously monitors the financial reporting environment and 
objectively considers all stakeholder views on accounting and 
reporting issues in order to evaluate the effectiveness of U.S. GAAP 
in providing investors with decision useful information and to 
determine whether changes to U.S. GAAP are needed. The items raised 
by commenters here is an external source of data available for the 
FASB's consideration when evaluating potential improvements to U.S. 
GAAP.
---------------------------------------------------------------------------

c. Research and Development Activities
(1) Proposed Amendments
    Regulation S-K requires disclosures, if material, of the amount 
spent on research and development activities for all years 
presented.\164\ The Commission proposed to delete this requirement 
because, although Regulation S-K uses terms that differ from U.S. 
GAAP,\165\ U.S. GAAP requires reasonably similar disclosures.
---------------------------------------------------------------------------

    \164\ See Item 101(c)(1)(xi) of Regulation S-K for non-SRCs and 
Item 101(h)(4)(x) of Regulation S-K for SRCs. Item 101(c)(1)(xi) 
only requires this disclosure by non-SRCs if material.
    \165\ See ASC 730-10-50-1 and ASC 730-20-50-1.
---------------------------------------------------------------------------

    First, Regulation S-K refers to the ``amount spent,'' while U.S. 
GAAP refers to ``costs charged to expense'' or ``costs incurred.'' The 
Commission release adopting this requirement used the term ``expense'' 
when discussing this requirement.\166\
---------------------------------------------------------------------------

    \166\ See Adoption of Disclosure Regulation and Amendments of 
Disclosure Forms and Rules, Release No. 33-5893 (Dec. 23, 1977) [42 
FR 65554 (Dec. 30, 1977)] (``Regulation S-K Adopting Release'').
---------------------------------------------------------------------------

    Regulation S-K also uses the term ``company-sponsored,'' but U.S. 
GAAP

[[Page 50162]]

does not. However, the Regulation S-K Adopting Release specified that 
the amount of company-sponsored research and development expenses to be 
disclosed should be determined in accordance with U.S. GAAP, suggesting 
no difference in scope was intended.\167\
---------------------------------------------------------------------------

    \167\ Id.
---------------------------------------------------------------------------

    In addition, Regulation S-K refers to ``customer-sponsored'' 
research and development activities, while U.S. GAAP refers to 
``research and development performed on behalf of others.'' Because 
U.S. GAAP refers to all other parties, which is broader than customers, 
the disclosures required by U.S. GAAP would encompass those required by 
Regulation S-K.
    Further, Item 101(c)(1)(xi) only refers to customer-sponsored 
``research activities'' rather than research and development 
activities. However, we do not believe this difference is substantive 
because Item 101(h)(4)(x) refers to ``research and development 
activities'' and it was intended to ``parallel'' Item 
101(c)(1)(xi).\168\
---------------------------------------------------------------------------

    \168\ See Small Business Initiatives, Release No. 33-6949, (Jul. 
30, 1992) [57 FR 36442 (Aug. 13, 1992)].
---------------------------------------------------------------------------

    Similarly, Item 5.C of Form 20-F requires foreign private issuers 
to describe their research and development policies, where significant, 
and disclose the amount spent on company-sponsored research and 
development activities. The Commission proposed to delete the 
requirement to disclose the amount spent, as foreign private issuers 
are already required to disclose the amount of research and development 
expenses in the notes to the financial statements.\169\ In certain 
circumstances, IFRS requires that amounts spent on development be 
capitalized as an intangible asset, instead of expensed, and also 
disclosed.\170\ While Commission disclosure requirements use terms 
different from IFRS, the Commission stated in the Proposing Release 
that it believes IFRS results in reasonably similar disclosures for the 
same reasons discussed above with regards to differences in terminology 
between Commission disclosure requirements and U.S. GAAP.
---------------------------------------------------------------------------

    \169\ Paragraph 126 of IAS 38, Intangible Assets, requires 
foreign private issuers that report under IFRS to disclose the 
aggregate amount of research and development expenses in the notes 
to their financial statements. Foreign private issuers that report 
under U.S. GAAP or Another Comprehensive Body of Accounting 
Principles with a reconciliation to U.S. GAAP are also required to 
disclose the amount of research and development expenses in the 
notes to their financial statements.
    \170\ See paragraphs 57 and 118 of IAS 38, Intangible Assets for 
the criteria to be used when determining whether to capitalize 
development expenditures, including internal costs, and the related 
disclosures. The capitalized amounts are amortized and reflected as 
amortization expense on the income statement.
---------------------------------------------------------------------------

    Form 1-A also requires Regulation A issuers to disclose, if 
material, the amount spent on research and development activities for 
all years presented.\171\ As this requirement is based on the 
requirement in Regulation S-K, Regulation A issuers that report under 
either U.S. GAAP or IFRS provide substantially the same information in 
the notes to their financial statements, as described above.
---------------------------------------------------------------------------

    \171\ Item 7(a)(1)(iii) of Form 1-A.
---------------------------------------------------------------------------

    Accordingly, the Commission proposed to delete Item 101(c)(1)(xi) 
of Regulation S-K and Item 101(h)(4)(x) of Regulation S-K, Item 5.C of 
Form 20-F, and Item 7(a)(1)(iii) of Form 1-A. The Proposing Release 
noted Disclosure Location--Prominence Considerations, because these 
disclosures are located in the business description section of the 
filing, while the corresponding U.S. GAAP and IFRS disclosures are in 
the notes to the financial statements.
(2) Comments on Proposed Amendments
    Most commenters were supportive of the proposed amendments.\172\ 
Additionally, a commenter recommended that the Commission consider 
feedback from preparers and users, including feedback provided in 
response to the S-K Concept Release, that issuers may be less willing 
to voluntarily supplement the required disclosures in the notes to the 
financial statements with forward-looking information because note 
disclosures are not subject to the safe harbor under the PSLRA. This 
commenter indicated some registrants do voluntarily provide qualitative 
disclosures about research and development activities and the loss of 
this information may be material to a user's understanding of the 
registrant's financial statements.\173\ Another commenter recommended 
also rescinding the requirement to disclose a description of a foreign 
private issuer's research and development policies for the last three 
years in Item 5.C of Form 20-F or clarifying whether this disclosure 
requirement relates to accounting policies or research and development 
activities.\174\
---------------------------------------------------------------------------

    \172\ See letters from CAQ; Deloitte; E&Y; Grant; KPMG; and PwC.
    \173\ See letter from KPMG.
    \174\ See letter from E&Y.
---------------------------------------------------------------------------

    One commenter did not support the deletion of Item 101(c)(1)(xi) 
and Item 101(h)(4)(x) of Regulation S-K, indicating that these 
disclosures, along with other disclosures required by Item 101, are 
necessary in assessing and understanding a company's ability to create 
long-term value for shareholders.\175\
---------------------------------------------------------------------------

    \175\ See letter from CalSTRS.
---------------------------------------------------------------------------

(3) Final Amendments
    We are adopting the amendments as proposed. We do not believe 
eliminating these requirements regarding amounts spent on research and 
development activities will affect the assessment and understanding of 
a company's ability to create long-term value for shareholders, as this 
information will remain in the notes to the financial statements. In 
addition, disclosure of trend information related to research and 
development activities and expenses, where material, is required by 
Item 303 of Regulation S-K,\176\ and we expect registrants to continue 
to provide such disclosures as necessary. Further, the proposed 
amendments do not preclude registrants from continuing to provide 
voluntary disclosures as part of the description of their business or 
elsewhere outside the financial statements.
---------------------------------------------------------------------------

    \176\ For example, Item 303(a)(3)(ii) of Regulation S-K requires 
a description of ``any known trends or uncertainties that have had 
or that the registrant reasonably expects will have a material 
favorable or unfavorable impact on net sales or revenues or income 
from continuing operations. If the registrant knows of events that 
will cause a material change in the relationship between costs and 
revenues (such as known future increases in costs of labor or 
materials or price increases or inventory adjustments), the change 
in the relationship shall be disclosed.''
---------------------------------------------------------------------------

    We are not eliminating the requirement to disclose a description of 
a foreign private issuer's research and development policies for the 
last three years, as one commenter suggested. This requirement was 
initially adopted as part of the description of business disclosure, 
and it is intended to cover research and development activity rather 
than an accounting policy.\177\
---------------------------------------------------------------------------

    \177\ See Adoption of Foreign Issuer Integrated Disclosure 
System, Release No. 34-19258 (Nov. 19, 1982) [47 FR 54764 (Dec. 6, 
1982)]; Foreign Private Issuers, Release No. 34-14128 (Nov. 2, 1977) 
[42 FR 58684 (Nov. 10, 1977)].
---------------------------------------------------------------------------

d. Warrants, Rights, and Convertible Instruments
(1) Proposed Amendments
    Item 201(a)(2)(i) of Regulation S-K requires disclosure on Form S-1 
or Form 10 of the amount of common equity subject to outstanding 
options, warrants, or convertible securities, when the class of common 
equity has no established United States public trading market. U.S. 
GAAP more broadly requires disclosure of the terms of significant 
contracts to issue additional shares, the number of shares authorized

[[Page 50163]]

for certain equity awards,\178\ and, in the calculation of diluted 
earnings per share, the weighted-average incremental shares that would 
be issued from the assumed exercise or conversion of options, warrants, 
and convertible securities.\179\ As such, the Commission proposed to 
delete Item 201(a)(2)(i) of Regulation S-K.
---------------------------------------------------------------------------

    \178\ ASC 470-20-50, ASC 505-10-50-3, ASC 505-50-50-1, ASC 718-
10-50-1, ASC 718-10-50-2, and ASC 815-40-50-5.
    \179\ ASC 260-10-50. U.S. GAAP also requires disclosure of 
amounts not included in the calculation of diluted earnings per 
share because exercise or conversion of the securities would have 
had an antidilutive effect in the period. In aggregate, these 
amounts may be similar to, but not the same as, those required by 
Item 201(a)(2)(i) of Regulation S-K, as U.S. GAAP determines the 
incremental shares as a weighted average based on the period 
outstanding during the year and assumes that cash received from the 
assumed exercise or conversion is used to repurchase outstanding 
shares.
---------------------------------------------------------------------------

    The Proposing Release explained that the proposed amendments give 
rise to Disclosure Location--Prominence Considerations because Item 
201(a)(2)(i) disclosures are located with related information about the 
potential dilution of equity for which there is no established United 
States public trading market, while the U.S. GAAP disclosures are in 
the notes to the financial statements.
(2) Comments on Proposed Amendments
    Most commenters were supportive of the proposed amendments.\180\ 
One commenter opposed the amendments, stating that these requirements 
should not be eliminated because U.S. GAAP does not explicitly require 
the same information and the disclosure requirements in Regulation S-K 
are more ``straightforward.'' \181\
---------------------------------------------------------------------------

    \180\ See letters from CAQ; Deloitte; E&Y; Grant; KPMG; and PwC.
    \181\ See letter from Bean.
---------------------------------------------------------------------------

(3) Final Amendments
    We are eliminating Item 201(a)(2)(i) of Regulation S-K as proposed. 
We believe U.S. GAAP elicits reasonably similar information to that 
required by the disclosure requirement in Regulation S-K, and in some 
cases, would elicit information for a broader array of potentially 
dilutive arrangements. For example, disclosure of the existence of 
contingently issuable shares is not an explicit requirement in Item 
201(a)(2)(i), though it is explicitly contemplated by the U.S. GAAP 
requirement.\182\
---------------------------------------------------------------------------

    \182\ See ASC 260-10-50.
---------------------------------------------------------------------------

e. Equity Compensation Plans
(1) Proposed Amendments
    Regulation S-K prescribes the form and content for the disclosure 
of existing equity compensation plans where equity securities are 
authorized for issuance.\183\ This information is currently required in 
Part III of Form 10-K, Item 11 of Form S-1, Item 9 of Form 10, and Item 
10 of Schedule 14A.\184\ In 2004, the FASB issued SFAS No. 123 (revised 
2004), Share-Based Payment (``SFAS No. 123R''), which resulted in 
disclosures that overlap with Item 201(d).\185\
---------------------------------------------------------------------------

    \183\ See Item 201(d) of Regulation S-K.
    \184\ Item 1 of Schedule 14C [17 CFR 240.14c-101] also requires 
inclusion of the information that would have been provided in a 
Schedule 14A if proxies were being solicited even though consents 
are not being solicited by the information statement.
    \185\ See ASC 718-10-50-1 to 4. Additionally, ASC 505-50-50-1 
requires similar disclosure when share based payments are made to 
non-employees.
---------------------------------------------------------------------------

    Regulation S-K incrementally requires: (1) For options, warrants, 
or rights assumed in a business combination, disclosure of the number 
of securities to be issued upon exercise and the weighted-average 
exercise price,\186\ and (2) disclosure of any formula for calculating 
the number of securities available for issuance under the plan.\187\ 
Item 201(d) further provides instructions about the aggregation of 
equity compensation plan disclosures. Although these requirements are 
not explicitly contained in U.S. GAAP, the Commission stated in the 
Proposing Release that it believes the U.S. GAAP requirement to provide 
disclosures to enable investors to understand the nature and terms of 
equity compensation arrangements and the potential effects of those 
arrangements on shareholders \188\ would result in reasonably similar 
disclosures.
---------------------------------------------------------------------------

    \186\ See Instruction 5 to Item 201(d).
    \187\ See Instruction 8 to Item 201(d).
    \188\ ASC 718-10-50-1a.
---------------------------------------------------------------------------

    Regulation S-K also incrementally requires disaggregation of 
information between equity compensation plans approved by security 
holders and those not approved by security holders. The Commission 
adopted these requirements in 2001 \189\ before the major national 
securities exchanges required listed issuers to have, with limited 
exceptions, shareholder approved plans.\190\ Because the exchanges 
\191\ on which the majority of domestic issuers, representing 
substantially all domestic issuer market capitalization, are listed now 
have such requirements, the Commission stated in the Proposing Release 
that it believed disaggregation of the disclosures about the plans in 
this manner is no longer useful to investors.\192\
---------------------------------------------------------------------------

    \189\ See Disclosure of Equity Compensation Plan Information, 
Release No. 33-8048 (Dec. 21, 2001) [67 FR 232 (Jan. 2, 2002)].
    \190\ For example, the New York Stock Exchange (``NYSE'') 
listing standard does not require shareholder approval of employment 
inducement awards, certain grants, plans, and amendments in the 
context of mergers and acquisitions, and certain other specific 
types of plans. See Self-Regulatory Organizations; New York Stock 
Exchange, Inc. and National Association of Securities Dealers, Inc.; 
Order Approving NYSE and Nasdaq Proposed Rule Changes and Nasdaq 
Amendment No. 1 and Notice of Filing and Order Granting Accelerated 
Approval to NYSE Amendments No. 1 and 2 and Nasdaq Amendments No. 2 
and 3 Thereto Relating to Equity Compensation Plans, Release No. 34-
48108 (June 30, 2003) [68 FR 39995 (Jul. 3, 2003)]. See also New 
York Stock Exchange, Listed Company Manual Sec.  303A.08; Nasdaq 
Listing Rule 5635(c) and IM-5635-1; American Stock Exchange 
Rulemaking Re: Shareholder Approval of Stock Option Plans and Other 
Equity Compensation Arrangements, Release No. 34-48610 (Oct. 9, 
2003) [68 FR 59650 (Oct. 16, 2003)]; and NYSE MKT Company Guide 
Sec.  711.
    \191\ These exchanges are the NYSE, NYSE MKT, and Nasdaq.
    \192\ One commenter on the Disclosure Effectiveness Initiative 
recommended that Item 201(d)(3), which requires the material 
features of non-shareholder approved equity compensation plans, be 
deleted, noting that such plans are either not material or covered 
by other disclosure requirements. See letter from Disclosure 
Effectiveness Working Group of the Federal Regulation of Securities 
Committee and the Law & Accounting Committee of the American Bar 
Association (``ABA Committee'') (Mar. 6, 2015), available at https://www.sec.gov/comments/disclosure-effectiveness/disclosureeffectiveness.shtml.
---------------------------------------------------------------------------

    Based on the foregoing, the Commission proposed to delete Item 
201(d) and the references to it in Part III of Form 10-K and Item 10(c) 
of Schedule 14A. These proposed amendments would not affect the 
disclosures related to new plans or modifications of existing plans 
subject to shareholder action.\193\ Because disclosures required by 
Item 201(d) are located with related information about the issuer's 
common equity and related stockholder matters, while the corresponding 
disclosures are in the notes to the financial statements, the proposed 
amendments give rise to Disclosure Location--Prominence Considerations. 
In particular, as a result of the proposed amendments, Item 201(d) 
disclosures would no longer be provided in Schedule 14A \194\ alongside 
information on equity compensation plans subject to security holder 
action. Instead, investors would obtain that information from the notes 
to the financial statements in the separate

[[Page 50164]]

Form 10-K filing. With the proposed amendments, issuers may also be 
less willing to voluntarily supplement the required disclosures in the 
notes to the financial statements with forward-looking information 
because note disclosures are not subject to the safe harbor under the 
PSLRA.
---------------------------------------------------------------------------

    \193\ See Items 10(a), 10(b), and the Instructions to 10(c) of 
Schedule 14A.
    \194\ The proposed amendment to delete the Item 201(d) 
requirements from Schedule 14A would result in such information 
being omitted from information statements filed on Schedule 14C 
disclosing adoption of an equity compensation plan when shareholder 
consents are not being solicited.
---------------------------------------------------------------------------

(2) Comments on Proposed Amendments
    Some commenters \195\ supported the proposed amendments, but a 
number of commenters \196\ opposed eliminating certain Item 201(d) 
disclosure requirements. Some commenters expressed concern that the 
proposed amendments would eliminate the requirement to disclose the 
number of shares available for future issuance,\197\ which they stated 
is material to shareholders.\198\ Other commenters \199\ opposed 
deleting the requirement to disclose the formula for calculating the 
number of securities available for issuance under the equity 
compensation plan.\200\ These commenters indicated that such disclosure 
is not likely to occur without further clarification of how the general 
disclosure principle in U.S. GAAP applies to the calculation, and 
recommended we refer this item to the FASB for potential incorporation 
into U.S. GAAP. Additionally, some commenters opposed the deletion of 
the disaggregation disclosure requirement.\201\
---------------------------------------------------------------------------

    \195\ See letters from E&Y; FedEx Corporation (Nov. 2, 2016) 
(``FedEx''); Grant; and KPMG.
    \196\ See, e.g. letters from AFL-CIO and AFR; CalSTRS; CalPERS; 
CAQ; and Public Citizen.
    \197\ See Instruction 5 of Item 201(d) of Regulation S-K.
    \198\ See, e.g. letter from AFL-CIO and AFR.
    \199\ See letters from CAQ; Deloitte; and PwC.
    \200\ See Instruction 8 of Item 201(d) of Regulation S-K.
    \201\ See letters from As You Sow, et al. and Public Citizen.
---------------------------------------------------------------------------

(3) Final Amendments
    After further consideration, we are retaining the equity 
compensation plans disclosure requirements and are referring them to 
the FASB for potential incorporation into U.S. GAAP. We recognize the 
concerns expressed by commenters that U.S. GAAP does not explicitly 
require certain information, such as the formula for calculating the 
number of securities available for issuance under the plan. This 
information may be material to investors in making informed decisions 
about the scope of an issuer's equity compensation program and the 
potential dilutive effect, both economically and in voting power, of 
awards authorized for issuance under all equity compensation plans.
f. Ratio of Earnings to Fixed Charges
(1) Proposed Amendments
    Regulation S-K requires issuers that register debt securities to 
disclose the historical and pro forma ratios of earnings to fixed 
charges.\202\ Regulation S-K also requires issuers that register 
preference equity securities to disclose the historical and pro forma 
ratio of combined fixed charges and preference dividends to earnings 
(collectively, ``ratio of earnings to fixed charges'').\203\ Regulation 
S-K further requires the filing of an exhibit setting forth the 
computation of any ratio of earnings to fixed charges.\204\ Similarly, 
Instruction 7 to ``Instructions as to Exhibits'' of Form 20-F requires 
foreign private issuers to disclose how any ratio of earnings to fixed 
charges presented in the filing was calculated. U.S. GAAP and IFRS 
require disclosure of many of the components commonly used in this 
ratio (e.g., income, interest expense, lease expense), as well as 
information from which other ratios that convey reasonably similar 
information about an issuer's ability to meet its financial obligations 
may be computed.
---------------------------------------------------------------------------

    \202\ See Item 503(d) and Item 1010(a)(3) of Regulation M-A. 
These requirements only apply to non-SRCs. See Item 503(e) and Item 
601(c) of Regulation S-K.
    \203\ Id.
    \204\ Item 601(b)(12).
---------------------------------------------------------------------------

    A variety of analytical tools are available today to investors that 
may accomplish a similar objective as the ratio of earnings to fixed 
charges. This ratio measures the issuer's ability to service fixed 
financing expenses--specifically, interest expense, including 
management's approximation of the portion of lease expense that 
represents interest expense, and preference dividend requirements--from 
earnings. Other ratios that accomplish similar objectives include other 
variations of the ratio of earnings to fixed charges,\205\ the interest 
coverage ratio,\206\ and the debt-service coverage ratio,\207\ which 
can be calculated based on information readily available in the 
financial statements. Certain components commonly used in the ratio of 
earnings to fixed charges, such as the portion of lease expense that 
represents interest \208\ and the amortization of capitalized interest, 
are not readily available elsewhere. Despite this, the requirement to 
disclose the ratio of earnings to fixed charges, as opposed to the 
various components (e.g., income, interest expense, lease expense) of 
this ratio that investors may use as desired, may place undue emphasis 
on this particular measure.
---------------------------------------------------------------------------

    \205\ Other variations of the ratio of earnings to fixed charges 
include alternative earnings measures such as earnings before 
interest and taxes and alternative fixed charges measures such as 
total lease payments and one-third of lease payments (to approximate 
the interest component in lease payments).
    \206\ The interest coverage ratio is often calculated as 
earnings before interest and taxes divided by interest payments.
    \207\ The debt-service coverage ratio is often calculated as 
operating income divided by total debt service.
    \208\ In January 2016, the IASB issued IFRS 16, Leases, which is 
effective on January 1, 2019, with early application permitted in 
certain circumstances. Under IFRS 16, interest expense will be 
recognized for all leases with a term of more than 12 months, unless 
the underlying asset is of low value. In February 2016, the FASB 
issued ASU No. 2016-02, Leases (Topic 842) (``ASU No. 2016-02''), 
which is effective for fiscal years beginning after December 15, 
2018, with early application permitted. Under ASU No. 2016-02, 
leases with a term of more than 12 months will be classified into 
one of two types, with one type requiring recognition of an interest 
expense component (a finance lease) and the other type requiring 
recognition of lease expense without separate recognition of 
interest expense (an operating lease). Like IFRS 16, interest 
expense will not be recognized on leases with a term less than 12 
months. Interested parties may still need to estimate the portion of 
lease expense that is viewed to represent interest for operating 
leases in order to determine the components of the ratio of earnings 
to fixed charges, which will be facilitated by disclosure of the 
weighted-average discount rate for operating leases required by ASU 
No. 2016-02.
---------------------------------------------------------------------------

    Moreover, while debt agreements may contain fixed charge coverage 
covenants,\209\ debt investors often negotiate contractual agreements 
with issuers to obtain financial information to meet their needs,\210\ 
which may be more relevant and useful than a

[[Page 50165]]

prescribed disclosure of a ratio of earnings to fixed charges. 
Companies are also required to discuss the material impacts of these 
covenants to the extent that they are reasonably likely to limit the 
company's ability to undertake additional financing or are reasonably 
likely to be breached.\211\
---------------------------------------------------------------------------

    \209\ See Gerald T. Nowak P.C., Negotiating the High-Yield 
Indenture, (Feb. 17, 2009), available at http://www.pli.edu/emktg/toolbox/HighYield_Indenture13.pdf (noting that a typical high-yield 
credit agreement might require the debtor to maintain a certain 
level of revenue or a certain ratio of earnings to fixed charges). 
See also Li, Ningzhoung, Performance Measures in Earnings-Based 
Financial Covenants in Debt Contracts, LONDON BUS. SCH. (2011) 
available at http://www.olin.wustl.edu/docs/Faculty/Performance_measures_in_earnings_based_financial_covenants.pdf 
(noting that fixed charge coverage covenants are common in loan 
documents).
    \210\ One commenter on the Disclosure Effectiveness Initiative 
stated: ``Many of [the financial metrics debt investors use to 
evaluate an issuer's financial position and liquidity] are reflected 
in the measures of performance or liquidity that are defined in the 
issuers' debt instruments. For investors in such instruments, a 
metric that is tied to a contractually defined covenant test is more 
useful than the SEC-mandated disclosure. Importantly, our experience 
is that market participants in unregistered debt offerings--initial 
purchasers as well as institutional investors--do not generally 
request or require that the SEC-prescribed ratio of earnings to 
fixed charges be included in the offering document; instead, issuers 
disclose one or more interest coverage ratios or similar financial 
metrics that are calculated with reference to the instruments 
governing the securities being offered.'' See letter from ABA 
Committee (Mar. 6, 2015), available at https://www.sec.gov/comments/disclosure-effectiveness/disclosureeffectiveness-32.pdf.
    \211\ See 2003 MD&A Release.
---------------------------------------------------------------------------

    Based on these considerations, the Commission proposed to remove 
the requirement to disclose the ratio of earning to fixed charges by 
deleting Item 503(d) and Item 601(b)(12).\212\ The Commission also 
proposed to delete Instruction 7 to ``Instructions as to Exhibits'' of 
Form 20-F.
---------------------------------------------------------------------------

    \212\ The Commission additionally proposed conforming revisions 
to Item 503(e), Item 601(c), the Exhibit Table in Item 601, Item 
1010(a)(3), Item 1010(b)(2), Item 1010(c)(4), Item 3 of Form S-1, 
Item 3 of Form S-3, Item 3 of Form S-4, Item 3 of Form S-11, Item 3 
of Form F-1, Item 3 of Form F-3, and Item 3 of Form F-4.
---------------------------------------------------------------------------

(2) Comments on Proposed Amendments
    Commenters were supportive of the proposed amendments.\213\ One of 
these commenters indicated that, in its experience, the ratio of 
earnings to fixed charges is generally not used by investors or other 
users of financial statements, and debt covenant financial requirements 
may already be disclosed where material \214\ and vary significantly 
from company to company.\215\ Another commenter, while supportive of 
the proposed amendments, recommended that the Commission obtain 
feedback from investors about the continued utility of the pro forma 
ratio disclosure, as information on a pro forma basis may not be as 
readily available.\216\
---------------------------------------------------------------------------

    \213\ See, e.g. letters from CAQ; CGCIV; National Association of 
Real Estate Investments Trusts (Oct. 28, 2016) (``NAREIT''); and 
Shearman and USCC.
    \214\ For example, the 2003 MD&A release (https://www.sec.gov/rules/interp/33-8350.htm) states that if covenants limit, or are 
reasonably likely to limit, a company's ability to undertake 
financing to a material extent, the company is required to discuss 
the covenants in question and the consequences of the limitation to 
the company's financial condition and operating performance.
    \215\ See letter from FedEx.
    \216\ See letter from Deloitte.
---------------------------------------------------------------------------

(3) Final Amendments
    We are adopting the amendments as proposed, including the 
elimination of the pro forma ratio. Although one commenter suggested 
that pro forma information may be less readily available, we note that 
information about the offering's effect on fixed charges, such as the 
interest rate, maturities, and amount of proceeds used to discharge 
indebtedness, is currently required by Item 504 of Regulation S-K.\217\
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    \217\ Item 504 of Regulation S-K requires disclosure of the 
principal purposes for which the net proceeds to the registrant from 
the securities to be offered are intended to be used and the 
approximate amount intended to be used for each such purpose. In 
addition, Instruction 4 of Item 504 of Regulation S-K requires 
disclosure of the interest rate and maturity of such indebtedness, 
if any material part of the proceeds is to be used to discharge 
indebtedness.
---------------------------------------------------------------------------

g. Other
(1) Proposed Amendments
    The table below describes each of the remaining disclosure 
requirements that are overlapping with U.S. GAAP and the proposed 
amendments.\218\
---------------------------------------------------------------------------

    \218\ These proposed amendments are discussed in further detail 
in Section III.C of the Proposing Release.
    \219\ See, e.g., ASC 505-10-45.
    \220\ As described in the Proposing Release, REITs are not 
subject to entity-level taxation on the amounts distributed to their 
investors. Rather, their investors are liable for taxes on these 
distributions, depending on the character of the dividends (i.e., 
ordinary income, capital gains, or return of capital) the REIT 
distributes to them. Because the amount of undistributed gains or 
losses required by Rule 3-15(a)(2) of Regulation S-X is not 
presented on a tax basis, this disclosure does not provide investors 
with insight into the tax implications of the REIT's distributions.
    \221\ See ASC 810-10-45-12.
    \222\ See ASC 810-10-45-13.
    \223\ See ASC 946-20-50-11.
    \224\ Similar to REITs, registered investment companies are 
generally structured such that they are not subject to entity-level 
taxation on the amounts distributed to their investors.
    \225\ See ASC 944-40-50.
    \226\ See ASC 250-10-50-1 and ASC 270-10-50-1g.

------------------------------------------------------------------------
                                    Commission
             Topic                  disclosure      Proposed amendments
                                  requirement(s)
------------------------------------------------------------------------
REIT Disclosures--              Rule 3-15(a)(2)    Delete as U.S. GAAP
 Undistributed Gains or Losses   of Regulation S-   \219\ also sets
 on the Sale of Properties.      X.                 forth presentation
                                                    of components of
                                                    stockholders' equity
                                                    and the incremental
                                                    requirement to
                                                    separately present
                                                    undistributed gain/
                                                    loss on the sale of
                                                    properties on a book
                                                    basis is not useful
                                                    to investors because
                                                    of the unique tax
                                                    status of
                                                    REITs.\220\
Consolidation--Difference in    Rule 3A-02(b)(1)   Delete as U.S. GAAP
 Fiscal Periods.                 of Regulation S-   \221\ requires
                                 X.                 similar
                                                    presentations. The
                                                    incremental
                                                    requirements in Rule
                                                    3A-02(b)(1) (1) to
                                                    disclose the
                                                    subsidiary's fiscal
                                                    year closing date
                                                    and (2) an
                                                    explanation of the
                                                    necessity for using
                                                    different closing
                                                    dates are no longer
                                                    useful to investors
                                                    because U.S. GAAP's
                                                    requirements to
                                                    recognize by
                                                    disclosure or
                                                    otherwise the effect
                                                    of intervening
                                                    events that
                                                    materially affect
                                                    the financial
                                                    position or results
                                                    of operations
                                                    eliminates the
                                                    effect of
                                                    differences in the
                                                    fiscal periods of
                                                    the issuer and its
                                                    subsidiaries.
Consolidation--Changes in       Final sentence of  Delete the final
 Fiscal Periods.                 Rule 3A-03(b) of   sentence of this
                                 Regulation S-X.    requirement as U.S.
                                                    GAAP \222\ provides
                                                    similar, but more
                                                    specific,
                                                    requirements, which
                                                    limit potential
                                                    changes, provide for
                                                    more consistency in
                                                    issuer financial
                                                    statements and
                                                    result in better
                                                    financial reporting.
Distributable Earnings for      Rule 6-04.17 of    Amend to require
 Registered Investment           Regulation S-X.    presentation of the
 Companies.                                         total, rather than
                                                    the components, of
                                                    distributable
                                                    earnings on the
                                                    balance sheet. U.S.
                                                    GAAP \223\ requires
                                                    similar presentation
                                                    and the incremental
                                                    requirement to
                                                    separately present
                                                    three components of
                                                    distributable
                                                    earnings on a book
                                                    basis is not useful
                                                    to investors because
                                                    they do not provide
                                                    insight into the tax
                                                    implications of
                                                    distributions.\224\
                                Rule 6-09.7 of     Delete the
                                 Regulation S-X.    requirement for
                                                    parenthetical
                                                    disclosure of
                                                    undistributed net
                                                    investment income on
                                                    the statement of
                                                    changes in net
                                                    assets on a book
                                                    basis, as it does
                                                    not provide insight
                                                    into the tax
                                                    implications of
                                                    distributions.
Insurance Companies--Liability  Rule 7-            Delete as U.S. GAAP
 Assumptions.                    03(a)(13)(b) of    \225\ does not limit
                                 Regulation S-X.    its disclosure to
                                                    certain assumptions,
                                                    and therefore, it
                                                    may elicit more
                                                    disclosure.
Interim Financial Statements--  Rule 8-03(b)(5)    Delete the
 Changes in Accounting           and Rule 10-       requirement for
 Principles.                     01(b)(6) of        disclosure of the
                                 Regulation S-X.    date of any material
                                                    accounting change,
                                                    as U.S. GAAP \226\
                                                    requires disclosure
                                                    of the accounting
                                                    change in the period
                                                    of the change.
------------------------------------------------------------------------

(2) Comments on Proposed Amendments

    Commenters supported these proposed amendments.\227\ In addition, 
commenters identified another overlapping requirement in Regulation

[[Page 50166]]

S-X for Registered Investment Companies.\228\ The commenters noted that 
Rule 6-09.3 of Regulation S-X requires separate disclosure of 
distributions paid to shareholders from (a) Investment income--net; (b) 
realized gain from investment transactions--net; and (c) other sources, 
while U.S. GAAP requires distributions paid to be disclosed as a single 
line item.\229\ These commenters recommended amending Regulation S-X to 
align it with the requirements in U.S. GAAP.
---------------------------------------------------------------------------

    \227\ See, e.g. letters from CAQ and NAREIT.
    \228\ See letters from E&Y and Investment Company Institute 
(Nov. 2, 2016).
    \229\ See ASC 946-20-50-8.
---------------------------------------------------------------------------

(3) Final Amendments
    We are adopting all of the amendments described in the table above 
as proposed. We are also amending Rule 6-09.3 of Regulation S-X, as 
suggested by commenters and similar to the amendments to Rule 6.04-17, 
to require presentation of the total, rather than the components, of 
distributions to shareholders, except for tax return of capital 
distributions. U.S. GAAP requires similar presentation of information 
as the Regulation S-X requirements, and the incremental requirement to 
separately present certain components is not useful to investors 
because of the unique tax status of registered investment companies.
2. Other Overlapping Disclosure Requirements
    The Proposing Release also identified overlapping Commission 
disclosure requirements. These disclosure requirements and the related 
proposed amendments are described in the table below.\230\
---------------------------------------------------------------------------

    \230\ These proposed amendments are discussed in further detail 
in Section III.C of the Proposing Release.

------------------------------------------------------------------------
                                    Commission
             Topic                  disclosure      Proposed amendments
                                  requirement(s)
------------------------------------------------------------------------
REIT Disclosures--Status as a   Rule 3-15(b) of    Delete, as Regulation
 REIT.                           Regulation S-X.    S-K \231\ requires
                                                    similar disclosures
                                                    and the incremental
                                                    requirement to
                                                    disclose assumptions
                                                    in making or not
                                                    making federal
                                                    income tax
                                                    provisions is
                                                    encompassed by the
                                                    disclosures provided
                                                    to comply with
                                                    Regulation S-K.\232\
Dividends.....................  Item 201(c)(1) of  Delete requirement to
                                 Regulation S-K.    disclose the
                                                    frequency and amount
                                                    of cash dividends
                                                    declared, as amended
                                                    Rule 3-04 of
                                                    Regulation S-X \233\
                                                    will require
                                                    disclosure of the
                                                    amount of dividends
                                                    in interim periods,
                                                    similar to Item
                                                    201(c)(1). In
                                                    addition, the
                                                    frequency of
                                                    dividends will be
                                                    evident from this
                                                    disclosure.
Invitations for Competitive     Item 601(b)(26)    Delete, as this
 Bids.                           of Regulation S-   disclosure does not
                                 K \234\.           provide additional
                                                    value to investors
                                                    because those
                                                    participating in the
                                                    competitive bid
                                                    would directly
                                                    receive the
                                                    invitation and all
                                                    other investors
                                                    would have access to
                                                    the registration
                                                    statement covering
                                                    the securities
                                                    offered at
                                                    competitive bidding,
                                                    as well as the
                                                    results of the
                                                    competitive bidding
                                                    and the terms of
                                                    reoffering.
------------------------------------------------------------------------

    Commenters supported the proposed amendments.\235\ We are adopting 
all of the amendments described in the table above as proposed because 
investors will continue to receive similar information under other 
Commission disclosure requirements.
---------------------------------------------------------------------------

    \231\ Items 101(a)(1), 503(c), and 303(a)(3)(ii) of Regulation 
S-K.
    \232\ For REITs, the primary assumption in making or not making 
federal income tax provisions is the issuer's continued REIT status 
and its consideration of the risks affecting its continued REIT 
status. Therefore, the Regulation S-K requirement to disclose 
significant risk factors and a description of known uncertainties 
that are reasonably expected to have a material effect on income 
elicit this information. In addition, issuers often repeat or expand 
on the Regulation S-X disclosures in their risk factor disclosures.
    \233\ In this release, we are adopting amendments to Rule 8-03 
and Rule 10-01 of Regulation S-X to mandate that Rule 3-04 be 
applied to interim periods. See Section V.B.2 below.
    \234\ The Commission also proposed to delete its accompanying 
reference in the Exhibit Table within Item 601.
    \235\ See, e.g. letters from CAQ; KPMG; and PwC.
---------------------------------------------------------------------------

3. Overlapping Disclosure Requirements With Both U.S. GAAP and Other 
Commission Disclosure Requirements
    The Proposing Release identified several Commission disclosure 
requirements that overlap with both U.S. GAAP and other Commission 
disclosure requirements.
a. Interim Financial Statements--Pro Forma Business Combination 
Information
(1) Proposed Amendments
    Regulation S-X \236\ and U.S. GAAP \237\ both require supplemental 
pro forma information about business combinations in the notes to 
interim financial statements. These disclosure requirements differ in 
two ways: (1) Scope and (2) the line items required to be disclosed. 
Notwithstanding these differences, the Proposing Release noted that 
U.S. GAAP and Item 9.01 of Form 8-K \238\ result in disclosures 
reasonably similar to the corresponding requirements in Regulation S-X.
---------------------------------------------------------------------------

    \236\ See Rule 8-03(b)(4) and Rule 10-01(b)(4) of Regulation S-
X. Rule 8-03(b)(4) specifically applies to SRCs and Regulation A 
issuers in a Tier 2 offering that report under U.S. GAAP, while 10-
01(b)(4) applies to non-SRCs.
    \237\ See ASC 270-10-50-7, which refers to ASC 805-10-50-2h.3 
for purposes of interim disclosures.
    \238\ 17 CFR 249.308.
---------------------------------------------------------------------------

    Regulation S-X requires disclosure of pro forma information for 
``significant'' business combinations for SRCs and Regulation A issuers 
in a Tier 2 offering that report under U.S. GAAP and ``material'' 
business combinations for non-SRCs. U.S. GAAP, on the other hand, does 
not qualify the size of the business combinations to which pro forma 
information requirements apply. Accordingly, the requirements in U.S. 
GAAP apply to the same or a greater number of business combinations 
and, thus, subsume the scope of the corresponding requirements in 
Regulation S-X.
    With respect to the line items required to be disclosed, Regulation 
S-X requires disclosure of pro forma revenue, net income, net income 
attributable to the issuer, and net income per share. Regulation S-X 
also requires SRCs and Regulation A issuers in a Tier 2 offering that 
report under U.S. GAAP to disclose pro forma income from continuing 
operations. U.S. GAAP only requires disclosure of pro forma revenue and 
earnings. This difference resulted from changes to U.S. GAAP, in part 
to converge with IFRS, in 2007.\239\
---------------------------------------------------------------------------

    \239\ For additional discussion of this difference, see Section 
III.C.9 of the Proposing Release, supra note 1, at 51621.
---------------------------------------------------------------------------

    As a result of these changes, issuers are required to disclose more 
pro forma information about business combinations in interim periods 
than in annual periods,\240\ even though Regulation S-X generally 
imposes fewer obligations with regard to interim

[[Page 50167]]

financial statements.\241\ Moreover, Rule 8-03(b)(4) requires SRCs and 
Regulation A issuers in a Tier 2 offering that report under U.S. GAAP 
to present more line items than the corresponding requirement in Rule 
10-01(b)(4) for non-SRCs, even though Commission disclosure 
requirements, as a general matter, provide certain accommodations for 
SRCs \242\ and Regulation A issuers.
---------------------------------------------------------------------------

    \240\ See ASC 805-10-50-2h.3.
    \241\ For example, Article 8 and Article 10 of Regulation S-X 
permit the presentation of condensed financial statements, do not 
require audits of interim financial statements, allow issuers to 
assume that a user has read the preceding year's audited financial 
statements, permit omission of details of accounts that have not 
changed significantly since the audited balance sheet date, and 
permit omission of the disclosures required by Rule 4-08 of 
Regulation S-X.
    \242\ For example, SRCs are required to present two, rather than 
three, years of financial statements and are not required to present 
selected financial data in accordance with Item 301 of Regulation S-
K [17 CFR 229.301].
---------------------------------------------------------------------------

    In proposing these amendments, the Commission noted that Item 9.01 
of Form 8-K mitigates at least in part the absence of a U.S. GAAP 
requirement to present pro forma earnings per share, as it requires 
SRCs and non-SRCs to file pro forma financial information for 
significant acquisitions, including earnings per share, through the 
issuer's most recently filed balance sheet.\243\ We note, however, this 
pro forma financial information would not cover the same periods as the 
pro forma information required under Rule 8-03(b)(4) and Rule 10-
01(b)(4) for SRCs and non-SRCs, and Form 8-K does not apply to 
Regulation A issuers.\244\
---------------------------------------------------------------------------

    \243\ Rule 11-01(a) and Rule 11-02(b)(7) of Regulation S-X. [17 
CFR 210.11-01(a)].
    \244\ For example, for a significant acquisition that occurs on 
September 1, 2015, the Form 8-K would contain pro forma financial 
information for the year ended December 31, 2014 and the six months 
ended June 30, 2015 and 2014. Under Rule 8-03(b)(4) and Rule 10-
01(b)(4), however, the Form 10-Q for the nine months ended September 
30, 2015 would be required to include pro forma disclosures for the 
nine months ended September 30, 2015 and 2014.
---------------------------------------------------------------------------

    Based on the foregoing, the Commission proposed to eliminate the 
requirements for pro forma financial information in interim filings for 
business combinations in Rule 8-03(b)(4) and Rule 10-01(b)(4).
(2) Comments on Proposed Amendments
    Several commenters supported the proposal to eliminate pro forma 
business combination financial information in interim filings.\245\ 
However, other commenters opposed eliminating these requirements, 
expressing concern over the level of disclosure about merger and 
acquisition activities.\246\ One commenter stated that frequent 
financial reporting about mergers, such as pro forma results on an 
interim basis, results in the issuer more timely identifying and 
disclosing problems related to a merger.\247\ Another commenter 
recommended the disclosure requirements be improved rather than deleted 
because they provide a window into merger and acquisition 
activities.\248\
---------------------------------------------------------------------------

    \245\ See letters from CAQ; Deloitte; E&Y; Grant; KPMG, and PwC.
    \246\ See letters from As You Sow, et al. and Zevin.
    \247\ See letter from Public Citizen.
    \248\ See letter from Zevin.
---------------------------------------------------------------------------

(3) Final Amendments
    We are deleting the requirement for pro forma financial information 
in interim filings for business combinations in Rule 8-03(b)(4) and 
Rule 10-01(b)(4) as proposed. We continue to believe that U.S. GAAP, 
and Item 9.01 of Form 8-K for SRCs and non-SRCs, result in reasonably 
similar disclosures as the corresponding requirements we are deleting. 
We also believe the elimination of these requirements will not result 
in less frequent financial reporting about mergers and their impact on 
issuers because U.S. GAAP will continue to require disclosure of such 
activities in interim periods as well as year-end.\249\
---------------------------------------------------------------------------

    \249\ See ASC 270-10-50, which requires disclosure of unusual 
and infrequent items and references business combinations.
---------------------------------------------------------------------------

b. Interim Financial Statements--Dispositions by SRCs and Tier 2 
Regulation A Issuers
(1) Proposed Amendments
    For significant dispositions, Regulation S-X requires SRCs and 
Regulation A issuers in a Tier 2 offering that report under U.S. GAAP 
to disclose in the notes to the financial statements pro forma 
information. The pro forma disclosure requirements for dispositions for 
these issuers are the same as described above for significant business 
combinations.\250\
---------------------------------------------------------------------------

    \250\ See Rule 8-03(b)(4) of Regulation S-X, which requires pro 
forma revenue, income from continuing operations, net income, net 
income attributable to the issuer, and net income per share for all 
interim periods presented, as though the disposition occurred at the 
beginning of the periods.
---------------------------------------------------------------------------

    There are two types of dispositions: (1) Those that meet the 
definition of discontinued operations and (2) all others (hereafter 
referred to as ``other dispositions''). U.S. GAAP requires that the 
effects of discontinued operations be isolated and separately presented 
on the income statement on a retrospective basis,\251\ thereby 
obviating the need for pro forma information for discontinued 
operations in the notes to the financial statements.
---------------------------------------------------------------------------

    \251\ See ASC 205-20-45.
---------------------------------------------------------------------------

    For other dispositions, we believe the disclosures required by U.S. 
GAAP generally result in reasonably similar disclosures as the pro 
forma disclosures mandated by Rule 8-03(b)(4). Specifically, U.S. GAAP 
requires disclosure of pre-tax profit and pre-tax profit attributable 
to the parent for individually significant dispositions for all interim 
periods presented.\252\ However, U.S. GAAP does not contain an 
equivalent to the requirement in Rule 8-03(b)(4) to disclose pro forma 
revenues as if the other disposal occurred at the beginning of the 
periods presented.
---------------------------------------------------------------------------

    \252\ See ASC 270-10-50-7, which refers to ASC 360-10-50-3A for 
purposes of interim disclosures.
---------------------------------------------------------------------------

    The Proposing Release noted that Item 9.01(b) of Form 8-K may help 
mitigate any loss of information about pro forma revenues, as it 
requires SRCs to file within four business days after a significant 
disposition, pro forma financial information pursuant to Rule 8-05 of 
Regulation S-X, including revenue, income from continuing operations, 
and income per share, through the most recently filed balance sheet 
date. This pro forma financial information would not cover the same 
periods as the separate results required under Rule 8-03(b)(4) and is 
not applicable to Regulation A issuers.\253\
---------------------------------------------------------------------------

    \253\ For example, for a significant disposal that occurs on 
August 3, 2017, the Form 8-K filed by August 7, 2017, would contain 
pro forma financial information for the year ended December 31, 2016 
and the three months ended March 31, 2017 and 2016, as if the 
disposal had occurred on January 1, 2016. In contrast, Rule 8-
03(b)(4) would require pro forma disclosures in the September 30, 
2017 interim financial statements, filed on Form 10-Q by November 
16, 2017, for the nine months ended September 30, 2017 and 2016, as 
if the disposal had occurred at the beginning of each period 
presented.
---------------------------------------------------------------------------

    In addition, Rule 8-03(b)(4) requires SRCs and Regulation A issuers 
in a Tier 2 offering that report under U.S. GAAP to disclose more 
information about dispositions in interim periods than in annual 
periods,\254\ even though Regulation S-X, as noted above, generally 
imposes fewer obligations with regard to interim financial statements. 
Moreover, Rule 8-03(b)(4) requires SRCs and Regulation A issuers in a 
Tier 2 offering that report under U.S. GAAP to disclose more extensive 
information about other dispositions than is required of non-SRCs,\255\ 
even though Commission disclosure requirements, as a general matter, 
provide certain scaled disclosure accommodations for SRCs.\256\
---------------------------------------------------------------------------

    \254\ See ASC 360-10-50-3A.
    \255\ See Rule 10-01(b)(5) of Regulation S-X.
    \256\ See supra note 234.

---------------------------------------------------------------------------

[[Page 50168]]

    Accordingly, the Commission proposed to delete the pro forma 
disclosure requirements in Rule 8-03(b)(4).
(2) Comments on Proposed Amendments
    Commenters \257\ indicated that the requirement in Item 9.01 of 
Form 8-K \258\ to provide pro forma financial information pursuant to 
Rule 8-05 does not sufficiently substitute for the pro forma disclosure 
requirement for significant dispositions in Rule 8-03(b)(4) for SRCs 
because Item 9.01 of Form 8-K only refers to significant acquisitions 
and does not reference dispositions. Several of these commenters were 
nevertheless supportive of the proposed deletion because, in their 
observation, a number of issuers provide pro forma information for 
significant dispositions under Item 9.01 of Form 8-K despite there not 
being an explicit requirement.\259\ Some commenters recommended that 
the Commission amend Article 8 to encompass significant 
dispositions.\260\
---------------------------------------------------------------------------

    \257\ See letters from BDO USA LLP (November 1, 2016) (``BDO''); 
CAQ; Deloitte; E&Y; and PwC.
    \258\ Item 9.01(b)(1) of Form 8-K states, ``For any transaction 
required to be described in answer to Item 2.01 of this form, 
furnish any pro forma financial information that would be required 
pursuant to Article 11 of Regulation S-X [17 CFR 210] or Rule 8-05 
of Regulation S-X [17 CFR 210.8-05] for smaller reporting 
companies.''
    \259\ See letters from BDO; CAQ; Deloitte; E&Y; Grant; KPMG; and 
PwC.
    \260\ See letters from BDO; CAQ; Deloitte; E&Y; and PwC.
---------------------------------------------------------------------------

(3) Final Amendments
    After further consideration, we are retaining the pro forma 
disposition disclosure requirement in Rule 8-03(b)(4). We believe the 
views expressed by commenters about Item 9.01(b) of Form 8-K and its 
reference to the pro forma requirements for significant acquisitions in 
Article 8 of Regulation S-X \261\ warrant additional analysis and 
consideration.
---------------------------------------------------------------------------

    \261\ Rule 8-05 of Regulation S-X.
---------------------------------------------------------------------------

c. Segments
(1) Proposed Amendments
    Item 101(b) of Regulation S-K requires disclosure of segment 
financial information, restatement of prior periods when reportable 
segments change, and discussion of interim segment performance that may 
not be indicative of current or future operations. U.S. GAAP \262\ and 
Item 303(b) of Regulation S-K \263\ require similar disclosures. 
Moreover, Item 101(b) explicitly permits issuers to cross-reference 
between the notes to the financial statements and the description of 
business to avoid duplicative disclosures about segments. The 
Commission, therefore, proposed to delete Item 101(b).
---------------------------------------------------------------------------

    \262\ See ASC 280-10-50-22, ASC 280-10-50-34, and ASC 280-10-50-
35.
    \263\ Specifically, Instruction 4 of Item 303(b) of Regulation 
S-K, which addresses interim periods, requires that the registrant's 
discussion of material changes in results of operations shall 
identify any significant elements of the registrant's income or loss 
from continuing operations which do not arise from or are not 
necessarily representative of the registrant's ongoing business. The 
introductory paragraph to Item 303(b) also states that the interim 
discussion and analysis shall include a discussion of material 
changes in those items specifically listed in paragraph (a) of the 
Item. Since paragraph (a) indicates that, where in a registrant's 
judgment a discussion of segment information or of other 
subdivisions of the registrant's business would be appropriate to an 
understanding of such business, the discussion shall focus on each 
relevant, reportable segment or other subdivision of the business 
and on the registrant as a whole, the requirement in Item 101(b)(2) 
of Regulation S-K is duplicative of Item 303 requirements.
---------------------------------------------------------------------------

    Regulation A issuers are similarly required to cross-reference to 
their segment disclosures under U.S. GAAP or IFRS.\264\ The Commission, 
therefore, also proposed to delete Item 7(b) of Form 1-A.
---------------------------------------------------------------------------

    \264\ See Item 7(b) of Form 1-A.
---------------------------------------------------------------------------

    Because the disclosure required by Item 101(b) of Regulation S-K 
and Item 7(b) of Form 1-A (or the cross-reference to the notes to the 
financial statements) are located in the business description section 
of the filing, while the corresponding U.S. GAAP disclosures are in the 
notes to the financial statements, the Commission noted in the 
Proposing Release that the proposed elimination gives rise to 
Disclosure Location--Prominence Considerations.
(2) Comments on Proposed Amendments
    Most commenters supported the proposed amendments.\265\ One of 
these commenters \266\ observed that another disclosure 
requirement,\267\ which requires segment disclosures for each year an 
audited financial statement is provided, also overlaps with U.S. 
GAAP.\268\ One commenter opposed the proposed amendments, stating that 
the segment disclosures in Item 101(b) of Regulation S-K, along with 
other disclosures required by Item 101, are necessary in assessing and 
understanding a company's ability to create long-term value for 
shareholders.\269\
---------------------------------------------------------------------------

    \265\ See letters from CAQ; Deloitte; E&Y; Grant; KPMG; and PwC.
    \266\ See letter from Deloitte.
    \267\ See Rule 3-03(e) of Regulation S-X.
    \268\ See ASC 280-10-50-20.
    \269\ See letter from CalSTRS.
---------------------------------------------------------------------------

(3) Final Amendments
    We are eliminating the requirements in Item 101(b) of Regulation S-
K and Item 7(b) of Form 1-A as proposed. While this will remove the 
requirement to provide financial information about segments in the 
business description section, these disclosures will continue to be 
available in the notes to the financial statements. Accordingly, we do 
not believe eliminating the requirement will affect the assessment and 
understanding of a company's ability to create long-term value for 
shareholders. Additionally, we are eliminating Rule 3-03(e) of 
Regulation S-X, as suggested by a commenter, because it is also 
redundant with U.S. GAAP.\270\ Further, U.S. GAAP requirements are 
broader than Rule 3-03(e) because U.S. GAAP requires segment 
disclosures for all periods for which a statement of income is 
provided, including unaudited interim periods, while Rule 3-03(e) 
requires the disclosure for each year for which an audited statement of 
income is provided.
---------------------------------------------------------------------------

    \270\ See ASC 280-10-50-20
---------------------------------------------------------------------------

d. Geographic Areas
(1) Proposed Amendments
    Regulation S-K \271\ requires disclosure of financial information 
by geographic area. U.S. GAAP requires similar disclosures.\272\ Item 
101(d)(2) explicitly permits issuers to cross-reference between the 
notes to the financial statements and the description of business to 
avoid duplicative disclosures about geographic areas. The Commission, 
therefore, proposed to delete Item 101(d)(1) and Item 101(d)(2).
---------------------------------------------------------------------------

    \271\ Items 101(d)(1) and 101(d)(2).
    \272\ See ASC 280-10-50-41.
---------------------------------------------------------------------------

    Further, Item 101(d)(3) of Regulation S-K requires disclosures of 
any risks associated with an issuer's foreign operations and any 
segment's dependence on foreign operations. The Proposing Release 
stated that Item 101(d)(3) requires disclosures that appear to be 
largely encompassed by the disclosures that result from compliance with 
other parts of Regulation S-K. For example, Item 503(c) of Regulation 
S-K requires disclosure of significant risk factors.
    In addition, Item 303(a) of Regulation S-K requires disclosure of 
trends and uncertainties by segment, if appropriate to an understanding 
of the issuer as a whole, which would include disclosure of a segment's 
dependence on foreign operations. The Commission, therefore, proposed 
to delete Item 101(d)(3).

[[Page 50169]]

(2) Comments on Proposed Amendments
    Most commenters \273\ were supportive of the proposed amendment, 
while a few commenters \274\ opposed it. One commenter stated that the 
geographic area disclosures, along with other disclosures required by 
Item 101, are necessary in assessing and understanding a company's 
ability to create long-term value for shareholders.\275\ Another 
commenter expressed concern that the Commission is proposing to reduce 
information about the geographic segments of a business when geographic 
factors are growing in importance (i.e., foreign tax 
consideration).\276\ This commenter further suggested that the 
Commission should simultaneously add explicit references to geographic 
factors in the required discussions of business risk and trends, if 
Items 101(d)(l)-(3) are eliminated.
---------------------------------------------------------------------------

    \273\ See letters from CAQ; Deloitte; E&Y; Grant; KPMG; and PwC.
    \274\ See letters from Bean; and CalSTRS.
    \275\ See letter from CalSTRS.
    \276\ See letter from Bean.
---------------------------------------------------------------------------

(3) Final Amendments
    We are eliminating the requirements in Item 101(d) as proposed. We 
believe that U.S. GAAP requires reasonably similar disclosures and note 
that Item 101(d)(2) explicitly permits issuers to cross-reference 
between the notes to the financial statements and the description of 
business to avoid duplicative disclosures about geographic areas. 
Further, we are amending, as proposed, Item 303(a) of Regulation S-K to 
add an explicit reference to ``geographic areas.'' \277\ We believe 
this requirement, along with the disclosures required under Item 503(c) 
of Regulation S-K, will provide the disclosure necessary to understand 
the risks associated with geographic factors and to assess a company's 
ability to create long-term value for shareholders.
---------------------------------------------------------------------------

    \277\ See discussion in Section III.C.3 below.
---------------------------------------------------------------------------

e. Seasonality
(1) Proposed Amendments
    Regulation S-K \278\ and U.S. GAAP \279\ both require disclosures 
about seasonality in interim periods. Item 101(c)(1)(v) of Regulation 
S-K requires annual seasonality disclosure. Seasonality, by definition, 
relates to variations within annual periods, so the effects of 
seasonality are not evident in annual financial statements. The 
Proposing Release stated that interim seasonality disclosures required 
under U.S. GAAP seem more useful to investors than annual seasonality 
disclosures.
---------------------------------------------------------------------------

    \278\ Instruction 5 to Item 303(b) of Regulation S-K requires a 
discussion of any seasonal aspects of an issuer's business where the 
effect is material.
    \279\ See ASC 270-10-45-11.
---------------------------------------------------------------------------

    Item 101(c)(1)(v), unlike U.S. GAAP, incrementally requires 
seasonality disclosure at the segment level, to the extent material to 
an understanding of the business as a whole. Item 303(b) of Regulation 
S-K requires disclosure of results of operations, liquidity, and 
capital resources in interim periods at the segment level, when 
appropriate to an understanding of the business.\280\ Accordingly, the 
Proposing Release stated that Item 303(b), in conjunction with U.S. 
GAAP, would seem to result in reasonably similar disclosures as Item 
101(c)(1)(v) about the effects of seasonality on an issuer's financial 
statements at the segment level, if material and appropriate to an 
understanding of the business. The Commission therefore proposed to 
delete Item 101(c)(1)(iv). Because the disclosures required by Item 
101(c)(1)(v) are located in the business description section, while the 
corresponding disclosures required by Item 303(b) and U.S. GAAP are in 
MD&A and the notes to the financial statements, the proposed amendment 
gives rise to Disclosure Location--Prominence Considerations.
---------------------------------------------------------------------------

    \280\ Specifically, Item 303(b) requires discussion of material 
changes in the items listed in Item 303(a). Item 303(a) requires 
discussion at the reportable segment level when appropriate to an 
understanding of the business.
---------------------------------------------------------------------------

    The Commission also proposed to delete Instruction 5 to Item 303(b) 
of Regulation S-K because it requires disclosures that convey 
reasonably similar information to the disclosures that result from 
compliance with U.S. GAAP.\281\ The proposed deletion of Instruction 5 
to Item 303(b) gives rise to Disclosure Location--Prominence 
Considerations because U.S. GAAP requires seasonality disclosures in 
the financial statements, whereas Instruction 5 requires disclosure in 
MD&A.
---------------------------------------------------------------------------

    \281\ See ASC 270-10-45-11. See also Item 101(c)(1)(v) of 
Regulation S-K.
---------------------------------------------------------------------------

(2) Comments on Proposed Amendments
    Most commenters supported the proposed amendments.\282\ Some of 
these commenters also provided their views on the Disclosure Location 
Considerations.\283\ For example, one commenter, who supported both 
proposed amendments, indicated that U.S. GAAP requires disclosure about 
seasonality when the interim financial statements reflect material 
seasonal variations, but it does not require disclosure when an issuer 
expects interim financial results to become seasonal or an issuer 
expects the seasonal financial results to change significantly in the 
future.\284\ Another commenter recommended that the Commission consider 
feedback from preparers and users about the potential for registrants 
to reduce any voluntary information about seasonality that may 
currently be provided that is subject to the safe harbor provisions of 
the PSLRA.\285\
---------------------------------------------------------------------------

    \282\ See letters from CAQ; CGCIV; Deloitte; E&Y; Grant; KPMG; 
PwC; and USCC.
    \283\ See letters from CAQ and KPMG.
    \284\ See letter from CAQ.
    \285\ See letter from KPMG.
---------------------------------------------------------------------------

    One commenter opposed the proposed amendments indicating that these 
disclosures, along with other disclosures required by Item 101, are 
necessary in assessing and understanding a company's ability to create 
long-term value for shareholders.\286\
---------------------------------------------------------------------------

    \286\ See letter from CalSTRS.
---------------------------------------------------------------------------

(3) Final Amendments
    We are adopting as proposed the elimination of Instruction 5 to 
Item 303(b). We continue to believe that U.S. GAAP in combination with 
the remainder of Item 303 requires disclosures in interim reports that 
convey reasonably similar information to the disclosures required by 
Instruction 5 to Item 303(b). We also believe that, even without this 
instruction, the requirements in Item 303 elicit disclosure of forward-
looking information in interim reports to the extent that the effects 
of seasonality may become material.\287\ However, we are retaining the 
seasonality disclosure requirements in annual reports in Item 
101(c)(1)(v), due to a concern about potential loss of information in 
the fourth quarter about the extent to which the business of an issuer 
or its segment(s) is or may be seasonal because U.S. GAAP may not 
elicit this disclosure.\288\
---------------------------------------------------------------------------

    \287\ See 2003 MD&A Release.
    \288\ ASC 270-10-45-11 states that entities should consider 
supplementing interim reports with information for 12-month periods 
ended at the interim date to avoid the possibility that interim 
results with material seasonal variations may be taken as fairly 
indicative of the estimated results for a full fiscal year.
---------------------------------------------------------------------------

f. Other
    The table below describes each of the remaining disclosure 
requirements that are overlapping with both U.S. GAAP and other 
Commission disclosure requirements. The related proposed amendments to 
delete those overlapping

[[Page 50170]]

Commission disclosure requirements are also discussed below.\289\
---------------------------------------------------------------------------

    \289\ These proposed amendments are discussed in further detail 
in Section III.C. of the Proposing Release.

------------------------------------------------------------------------
                                    Commission
             Topic                 requirement      Proposed amendments
------------------------------------------------------------------------
Insurance Companies--           Rule 7-            Delete, as this
 Reinsurance Transactions.       03(a)(13)(c) of    provision requires
                                 Regulation S-X.    disclosures that are
                                                    encompassed by the
                                                    disclosures that
                                                    result from
                                                    compliance with U.S.
                                                    GAAP \290\ and
                                                    Regulation S-K.\291\
Interim Financial Statements--  Rule 8-03(b)(2)    Delete the
 Material Events Subsequent to   and Rule 10-       requirements to
 the End of the Most Recent      01(a)(5) of        disclose material
 Fiscal Year.                    Regulation S-X.    events subsequent to
                                                    the end of the most
                                                    recent fiscal year,
                                                    as they require
                                                    disclosures that are
                                                    encompassed by the
                                                    disclosures that
                                                    result from
                                                    compliance with U.S.
                                                    GAAP \292\ and
                                                    Regulation S-K,\293\
                                                    in combination.
------------------------------------------------------------------------

    Commenters generally supported the proposed amendments,\294\ and no 
commenter specifically opposed the amendments. Accordingly, we are 
adopting all of the amendments described in the table above as 
proposed.
---------------------------------------------------------------------------

    \290\ See ASC 944-20-50-3 and ASC 944-20-50-4.
    \291\ See Item 303(a)(3)(i) of Regulation S-K.
    \292\ See ASC 270-10-50-1 and 7.
    \293\ See Item 303(b) of Regulation S-K (or Item 9 of Form 1-A 
and Item 1 of Form 1-SA for Regulation A issuers).
    \294\ See letters from CAQ; Deloitte; E&Y; Grant; KPMG; and PwC.
---------------------------------------------------------------------------

C. Overlapping Requirements--Proposed Integrations

    In the proposing release, the Commission discussed disclosure 
requirements that overlap with, but require information incremental to, 
other Commission disclosure requirements. In these cases, the 
Commission proposed to integrate the overlapping Commission disclosure 
requirements.
1. Foreign Currency Restrictions
a. Proposed Amendments
    If consolidation of foreign subsidiaries is deemed appropriate 
notwithstanding the presence of foreign currency exchange restrictions, 
Rule 3A-02(d) of Regulation S-X requires disclosure of the effect of 
foreign subsidiaries' currency exchange restrictions upon the 
consolidated financial position and operating results of the issuer and 
its subsidiaries. To streamline Commission disclosure requirements, the 
Commission proposed to relocate this requirement to Rule 3-20(b) of 
Regulation S-X, which addresses other currency considerations.
    Rule 3-20(b), however, applies only to foreign private issuers, 
whereas Rule 3A-02(d) applies to all issuers. To prevent any loss of 
disclosure from the relocation of Rule 3A-02(d) to Rule 3-20(b), the 
Commission proposed to delete the reference to foreign private issuers 
in the title of Rule 3-20,\295\ which would broaden the scope of Rule 
3-20(b) and Rule 3-20(e) to all issuers.\296\ Rule 3-20(b) also sets 
forth requirements for foreign private issuers if their reporting 
currency is not the U.S. dollar. Despite the proposed expansion of the 
scope of Rule 3-20(b) discussed above, the Commission stated in the 
Proposing Release that it did not intend to expand the instances in 
which a reporting currency other than the U.S. dollar would be 
permitted. The Commission therefore proposed amendments to Rule 3-20(a) 
to specify that domestic issuers and foreign issuers who do not meet 
the foreign private issuer definition \297\ must present their 
financial statements in U.S. dollars.
---------------------------------------------------------------------------

    \295\ Foreign private issuers would continue to apply Rule 3-20 
pursuant to General Instruction B(d) of Form 20-F.
    \296\ The remaining paragraphs in Rule 3-20 specify the rule's 
scope, so amending the title to Rule 3-20 would have no effect on 
the application of these paragraphs.
    \297\ See supra note 19.
---------------------------------------------------------------------------

b. Comments on Proposed Amendments
    Commenters were generally supportive of the proposed amendments 
except for the proposed amendment to Rule 3-20(a).\298\ Some commenters 
recommended that the Commission consider providing all registrants the 
same flexibility in selecting their reporting currency as foreign 
private issuers or allowing domestic issuers to report using the 
currency of the country in which they have substantially all of their 
operations.\299\ Additionally, one of these commenters recommended 
further revisions to reorganize Rule 3-20 of Regulation S-X and to move 
the disclosure requirements for currency exchange restrictions from the 
financial statement footnotes to Item 303 of Regulation S-K.\300\
---------------------------------------------------------------------------

    \298\ See letters from CAQ; Deloitte; E&Y; Grant; KPMG; and PwC.
    \299\ See letters from CAQ; E&Y; PwC; and Sullivan & Cromwell 
LLP (Aug. 2, 2017).
    \300\ See letter from E&Y. We considered the recommendation to 
reorganize Rule 3-20 of Regulation S-X and move certain disclosure 
requirements to Item 303 of Regulation S-K but are not adopting the 
recommended amendments as they could have implications that go 
beyond the scope of this rulemaking and would merit further 
consideration.
---------------------------------------------------------------------------

c. Final Amendments
    We are adopting the amendments to delete the reference to foreign 
private issuers in the title of Rule 3-20 and relocate the requirements 
of Rule 3A-02(d) to Rule 3-20(b) as proposed. We are also adopting the 
amendment to require a non-foreign private issuer to present its 
financial statements in U.S. dollars. This amendment is not intended to 
change current disclosure practices. Domestic issuers and foreign 
issuers that do not meet the foreign private issuer definition may 
continue to request to present financial statements in a currency other 
than U.S. dollars in appropriate circumstances.\301\
---------------------------------------------------------------------------

    \301\ The staff has not objected to domestic issuers and foreign 
issuers who do not meet the foreign private issuer definition from 
using a different reporting currency in situations where the issuer 
had few or no assets and operations in the U.S., substantially all 
the operations were conducted in a single functional currency other 
than the U.S. dollar, and the reporting currency selected was the 
same as the functional currency.
---------------------------------------------------------------------------

    In addition, while we acknowledge commenters' recommendation that 
we consider providing all registrants the flexibility to select their 
reporting currency; we are not adopting that suggestion at this time. 
We believe more information is needed to determine whether any 
unintended consequences could result, and thus believe such a change is 
beyond the scope of this rulemaking.
    In a technical change for clarification, we also are replacing the 
word ``selected'', in the phrase ``currency selected for reporting 
purposes,'' with ``used'' in Rule 3-20(d) because non-foreign private 
issuers are not permitted to ``select'' their reporting currency.
2. Restrictions on Dividends and Related Items

    Commission requirements mandate disclosure about restrictions on 
the

[[Page 50171]]

payment of dividends and related items in a number of locations. The 
table below describes each of the disclosure requirements related to 
this mandate, the proposed amendment, and reason for it.\302\
---------------------------------------------------------------------------

    \302\ These proposed amendments are discussed in further detail 
in Section III.D.2 of the Proposing Release.
    \303\ In lieu of disclosure, Item 201(c)(1) permits a cross-
reference to this information in the disclosures required by Item 
303 of Regulation S-K and Regulation S-X.
    \304\ This amendment gives rise to Bright Line Disclosure 
Threshold Considerations. See also Section III.B.2 of the Proposing 
Release, supra note 1, at 51616.
    \305\ This amendment gives rise to Bright Line Disclosure 
Threshold Considerations and Disclosure Location--Financial 
Statement Considerations discussed in Section I.E above (See also 
Section III.B.2 of the Proposing Release, supra note 1, at 51616).
    \306\ We did not propose and are not changing the requirements 
in Rules 5-04, 7-05, and 9-06 for parent only financial information.
    \307\ The definitions of terms used in Regulation S-X are 
located in Rule 1-02 of Regulation S-X.
    \308\ Foreign private issuers that report under U.S. GAAP or 
Another Comprehensive Body of Accounting Principles with a 
reconciliation to U.S. GAAP must comply with Rule 4-08(e). Foreign 
private issuers that report under IFRS must comply with paragraph 
79(a)(v) of IAS 1, Presentation of Financial Statements, which 
requires disclosure of restrictions on the distribution of dividends 
and the repayment of capital for each class of share capital.
    \309\ Although this requirement is similar to Rule 4-08(e), 
which creates some duplication for foreign private issuers that 
report under U.S. GAAP or Another Comprehensive Body of Accounting 
Principles with a reconciliation to U.S. GAAP, the Commission did 
not propose its deletion because IFRS does not contain an equivalent 
requirement for foreign private issuers that report under IFRS.

------------------------------------------------------------------------
                                   Commission
         Issuer type               disclosure        Proposed amendments
                                   requirement
------------------------------------------------------------------------
Domestic Issuers............  Item 201(c)(1) of     Consolidate these
                               Regulation S-K        disclosure
                               requires disclosure   requirements into a
                               of restrictions       single requirement
                               (including            in revised Rule 4-
                               restrictions on the   08(e)(3).\304\
                               ability of issuer's
                               subsidiaries to
                               transfer funds to
                               it in the form of
                               cash dividends,
                               loans or advances)
                               that currently or
                               are likely to
                               materially limit
                               the issuer's
                               ability to pay
                               dividends on its
                               common equity.\303\
                              Rule 4-08(d)(2) of
                               Regulation S-X
                               requires disclosure
                               of any restriction
                               upon retained
                               earnings that
                               arises from the
                               fact that upon
                               involuntary
                               liquidation the
                               aggregate
                               preferences of the
                               preferred shares
                               exceed the par or
                               stated value of
                               such shares.
                              Rule 4-08(e) of       Revise to require
                               Regulation S-X        the dividend
                               requires disclosure   restrictions and
                               related to the most   related disclosures
                               significant           in subparagraphs
                               restrictions of the   (i) and (ii) when
                               issuer's payment of   material, rather
                               dividends. Rule 4-    than when
                               08(e)(3) requires,    restricted net
                               where restricted      assets exceed the
                               net assets, as        25 percent
                               defined by the        threshold.\305\
                               rule, exceed 25
                               percent of
                               consolidated net
                               assets, a
                               description of: (1)
                               The restrictions on
                               the ability of
                               subsidiaries to
                               transfer funds to
                               the issuer, and (2)
                               the amount of
                               restricted net
                               assets.
                              Rule 5-04, Rule 7-    Move definition of
                               05, and Rule 9-06     restricted net
                               of Regulation S-X     assets in Rule 4-
                               refer to the          08(e)(3) to Rule 1-
                               definition of         02 \307\ and make
                               restricted net        corresponding
                               assets in Rule 4-     changes to the
                               08(e)(3) in           cross reference in
                               determining when      Rules 5-04, 7-04,
                               condensed financial   and 9-06.
                               information of the
                               issuer (``parent
                               only financial
                               information'') is
                               required to be
                               disclosed.\306\
Foreign Private Issuers.....  Item 10.F of Form 20- Delete both
                               F requires            requirements to
                               disclosure of any     disclose dividend
                               dividend              restrictions
                               restrictions.         because: (1)
                              Instruction to Item    Foreign private
                               14.B of Form 20-F     issuers are already
                               requires disclosure   required to
                               of any limitations    disclose dividend
                               on the payment of     restrictions in the
                               dividends.            notes to the
                                                     financial
                                                     statements \308\
                                                     and (2) Item
                                                     5.B.1(b) of Form 20-
                                                     F requires
                                                     disclosure of
                                                     restrictions on a
                                                     subsidiary's
                                                     ability to transfer
                                                     funds to the parent
                                                     in the form of
                                                     dividends, loans,
                                                     or advances.\309\
------------------------------------------------------------------------

    Commenters generally supported the proposed amendments, \310\ and 
no commenter specifically opposed the amendments. Accordingly, we are 
adopting all of the amendments described in the table above as 
proposed. The amendments simplify our disclosure requirements by 
integrating overlapping Commission disclosure requirements into 
existing disclosure requirements where the incremental information is 
reasonably similar.
---------------------------------------------------------------------------

    \310\ See, e.g. letters from CAQ; Deloitte; E&Y; and PwC.
---------------------------------------------------------------------------

3. Geographic Areas
    Item 101(d)(4) of Regulation S-K requires, when interim financial 
statements are presented, a discussion of the facts that indicate the 
three-year financial data for geographic performance may not be 
indicative of current or future operations. This requirement is similar 
to requirements in Instruction 3 to Item 303(a) and Instruction 4 to 
Item 303(b) to identify elements of income which are not necessarily 
indicative of the issuer's ongoing business, except that there is no 
explicit reference to ``geographic areas'' in either requirement. To 
streamline the requirements in Regulation S-K, the Commission proposed 
to revise Item 303 to add an explicit reference to ``geographic areas'' 
and delete Item 101(d)(4).
    Commenters were generally supportive of the proposed 
amendments.\311\ Some commenters recommended clarification of the 
proposed revision to Item 303, noting that it is not clear whether an 
issuer must discuss the geographic information as part of the segment 
discussion or has a choice to discuss its operations on a segment or 
geographical basis.\312\
---------------------------------------------------------------------------

    \311\ See, e.g. letter from CAQ; Deloitte; and PwC.
    \312\ See letters from CAQ; E&Y; and PwC.
---------------------------------------------------------------------------

    We are adopting the amendment substantially as proposed. As 
suggested by commenters, we are clarifying that geographic areas are an 
example of a subdivision of a business that is required to be discussed 
when management believes such discussion would be appropriate to an 
understanding of the business and that discussion of geographic areas 
is not required in all circumstances.

D. Overlapping Requirements--FASB Referrals

    In the proposing release, the Commission discussed Commission 
disclosure requirements that overlap with, but require information

[[Page 50172]]

incremental to, U.S. GAAP and solicited comments to determine whether 
to retain, modify, eliminate, or refer them to the FASB for potential 
incorporation into U.S. GAAP. For the reasons discussed below, we have 
determined to refer the incremental Commission disclosure requirements 
described in this section to the FASB for its consideration of whether 
to incorporate such disclosure requirements into U.S. GAAP as part of 
its normal standard-setting process. The discussion in this section, as 
well as Sections I.C., II.B., and III.B., constitute our referral to 
the FASB.
    Any incorporation of these incremental Commission disclosure 
requirements into U.S. GAAP could potentially affect all entities that 
prepare financial statements under U.S. GAAP, including those outside 
the scope of our regulatory authority. Additionally, the disclosure 
requirements described below in Section III.D.3 and certain Topics in 
Section III.D.5 \313\ currently allow for scaled disclosure by SRCs and 
issuers relying on Regulation A or Regulation Crowdfunding. Depending 
on how these disclosures are incorporated, if at all, into U.S. GAAP, 
U.S. GAAP may not permit these issuers to scale such disclosures.
---------------------------------------------------------------------------

    \313\ Applicable Topics in Section III.D.5. are Interim 
Financial Statements--Computation of Earnings Per Share, Interim 
Financial Statements--Retroactive Prior Period Adjustments, Interim 
Financial Statements--Common Control Transactions, and Oil and Gas 
Producing Activities.
---------------------------------------------------------------------------

    By April 4, 2020, we request that the FASB complete its process to 
determine whether the referred disclosure items will be added to its 
agenda of projects for potential standard-setting. In the meantime, we 
are retaining the disclosure requirements discussed in this section. 
Any future consideration of amendments to these disclosure requirements 
will take into account the outcome of the standard-setting activities 
undertaken by the FASB, if any, in response to the referrals we are 
making.
1. Discount on Shares
    Regulation S-X \314\ and U.S. GAAP \315\ both set forth 
requirements about the presentation of items in the equity section of 
the financial statements. However, Regulation S-X incrementally 
requires discounts on shares to be presented separately as a deduction 
from the applicable accounts. Discounts on shares may arise, for 
example, from stock issuance costs, which are recognized as a reduction 
in equity.\316\ In the Proposing Release, the Commission solicited 
comments to determine whether to retain, modify, eliminate, or refer 
this disclosure requirement to the FASB for potential incorporation 
into U.S. GAAP.
---------------------------------------------------------------------------

    \314\ See Rule 4-07 of Regulation S-X. Pursuant to Rule 4-02 of 
Regulation S-X [17 CFR 210.4-02], this separate presentation is only 
required if material.
    \315\ See ASC 505-10-45.
    \316\ See SAB Topic 5:A, Expenses of Offering.
---------------------------------------------------------------------------

    Some commenters recommended that the Commission eliminate the 
disclosure requirement in Regulation S-X, for the following reasons: 
(1) Stock issuance costs recorded within equity do not amortize, and 
therefore, the commenters did not see the ongoing relevance of the 
disclosure; (2) in the period of issuance, such costs are already 
required to be presented separately in the financing section of the 
statement of cash flows; and (3) other discounts to par or stated value 
are likely captured by other disclosure requirements.\317\ Other 
commenters recommended that the Commission refer the incremental 
disclosure requirement to the FASB for potential incorporation into 
U.S. GAAP.\318\
---------------------------------------------------------------------------

    \317\ See letters from CAQ; Deloitte; and PwC.
    \318\ See letters from E&Y; Grant; Institute of Management 
Accountants (Oct. 28, 2016) (``IMA''); and KPMG.
---------------------------------------------------------------------------

    There are various types of transactions that could result in 
discount on shares. Commenters supporting elimination of the Regulation 
S-X requirement indicated that U.S. GAAP overlaps with Rule 4-07 with 
respect to stock issuance costs but did not state whether U.S. GAAP 
overlaps with respect to other transactions that result in discount on 
shares. Based on these considerations, we are retaining the disclosure 
requirements in Rule 4-07 and are referring them to the FASB for 
potential incorporation into U.S. GAAP.
2. Income Tax Disclosures \319\
---------------------------------------------------------------------------

    \319\ See related discussion in Sections II.B.2 and IV.B.1. See 
also Sections II.B.4 and IV.B.2 of the Proposing Release, supra note 
1, at 51613 and supra note 1 at 51635, respectively.
---------------------------------------------------------------------------

    Regulation S-X \320\ and U.S. GAAP \321\ both require disclosures 
about income taxes in the notes to the financial statements.\322\ 
However, Rule 4-08(h) includes certain incremental requirements, some 
of which give rise to Bright Line Disclosure Threshold Considerations.
---------------------------------------------------------------------------

    \320\ See Rule 4-08(h) of Regulation S-X.
    \321\ See ASC 740-10-50.
    \322\ The FASB has an income tax disclosure project underway 
regarding income tax disclosures. See http://www.fasb.org/jsp/FASB/FASBContent_C/ProjectUpdatePage&cid=1176164227426.
---------------------------------------------------------------------------

    Specifically, although U.S. GAAP and Regulation S-X both require 
disclosure of the components of income tax expense, Rule 4-08(h) 
incrementally: (1) Requires disclosure of the amount of domestic and 
foreign pre-tax income and income tax expense, (2) requires 
disaggregation of the foreign component of pre-tax income and income 
tax expense with the domestic component if it exceeds five percent of 
the respective total, and (3) defines ``foreign'' for purposes of this 
disclosure.
    In addition, although U.S. GAAP and Regulation S-X both require a 
reconciliation of the domestic federal statutory tax rate to the 
effective tax rate, Rule 4-08(h) incrementally: (1) Requires 
disaggregation of reconciling items if they individually exceed five 
percent of the amount computed by multiplying pre-tax income by the 
applicable statutory income tax rate, (2) clarifies the statutory tax 
rate to use in the income tax rate reconciliation for foreign issuers, 
and (3) requires, when the statutory tax rate used differs from the 
U.S. federal corporate income tax rate, disclosure of the basis for 
using that rate.
    In the Proposing Release, the Commission solicited comments to 
determine whether to retain, modify, eliminate, or refer these 
disclosure requirements to the FASB for potential incorporation into 
U.S. GAAP.
    Several commenters recommended elimination of the Commission 
disclosure requirements, if the FASB adopts its proposed income tax 
standard.\323\ Some of these commenters further indicated that, if the 
proposed income tax standard is not adopted, the Commission should 
consider comments received by the FASB to determine whether further 
amendment should be made to Rule 4-08(h).\324\ Some commenters 
recommended retaining both requirements under Rule 4-08(h) and U.S. 
GAAP, as they believe investors need more detailed disclosure of 
corporate income tax liabilities.\325\ Only one commenter recommended 
that the Commission refer this issue to the FASB for potential 
incorporation into U.S.GAAP.\326\
---------------------------------------------------------------------------

    \323\ See, e.g. letters from BDO; CAQ; E&Y; Grant; and KPMG. The 
proposed Accounting Standards Update, Income Taxes (Topic 740): 
Disclosure Framework--Changes to the Disclosure Requirements for 
Income Taxes was issued on July 26, 2016. For a status of the 
project see, https://www.fasb.org/jsp/FASB/FASBContent_C/ProjectUpdateExpandPage&cid=1176170683850#.
    \324\ See letters from CAQ; E&Y; KPMG; and PwC.
    \325\ See letters from AFL-CIO and AFR; and Rutkowski.
    \326\ See letter from IMA.
---------------------------------------------------------------------------

    Additionally, a number of commenters recommended that the 
Commission require disclosure of certain information, such as profit or 
loss before taxes and effective tax rate,

[[Page 50173]]

on a country-by-country basis.\327\ Some of these commenters indicated 
that this transparency would help investors assess the risks that could 
arise from operating in multiple jurisdictions \328\ as well as the 
likelihood of repatriation of foreign earnings.\329\ Some of the 
commenters who recommended the country-by-country disclosure also 
recommended requiring the disclosure of the aggregate amount 
corporations would owe in U.S. taxes should they repatriate their 
offshore earnings.\330\ In contrast, one commenter indicated that 
further disaggregating foreign amounts by foreign jurisdiction would 
not provide useful information as such disaggregation would neither 
reflect exposure to future foreign tax nor shed light on future 
potential repatriation.\331\ This commenter further recommended that 
the current five percent thresholds for the effective rate 
reconciliation be revisited, as they can result in an unnecessarily 
large number of line items when pre-tax income is relatively small.
---------------------------------------------------------------------------

    \327\ See, e.g. letters from AFL-CIO and AFR; Americans for Tax 
Fairness (Nov. 2, 2016) (``ATF''); American Sustainable Business 
Council, Citizens for Tax Justice, FACT Coalition, Fair Share, 
Global Financial Integrity and Main Street Alliance (July 21, 2016); 
Main Street Alliance (Oct. 25, 2016); and Oxfam America (Nov. 2, 
2016).
    \328\ See, e.g. letter from Jeffery L. Hoopes (Oct. 3, 2016).
    \329\ See, e.g. letter from Bean.
    \330\ See, e.g. letters from ATF and Citizens for Tax Justice 
(Oct. 3, 2016).
    \331\ See letter from IMA.
---------------------------------------------------------------------------

    After considering the comments, we are retaining the income tax 
disclosure requirements in Rule 4-08(h). While we acknowledge the 
suggestions made by commenters related to additional income tax 
disclosures, these are beyond the scope of this rulemaking. There also 
have been significant changes to the tax law that may affect the 
accounting and disclosure requirements for income taxes.\332\ We are 
referring these disclosure requirements to the FASB for potential 
incorporation into U.S. GAAP. The FASB is currently reviewing its 
disclosure requirements for income taxes and discussing the financial 
reporting effects of recent changes in tax law.\333\
---------------------------------------------------------------------------

    \332\ See Tax Cuts and Jobs Act Public Law 115-97, 131 Stat. 
2054 (2017)
    \333\ See FASB's Technical Agenda and Notice of Open Meetings on 
their website related to its Disclosure Framework project, which 
includes disclosures of income taxes. http://fasb.org/jsp/FASB/FASBContent_C/ProjectUpdatePage&cid=1176163077030
---------------------------------------------------------------------------

3. Major Customers
    Regulation S-K \334\ and U.S. GAAP \335\ both require disclosures 
about major customers. However, Regulation S-K is more expansive in its 
requirements and differs from U.S. GAAP in two ways: (1) The threshold 
for disclosure and (2) the requirement to disclose a customer's name in 
certain instances. We note that because disclosures required by 
Regulation S-K, unlike those required by U.S. GAAP, may be provided 
outside of the audited financial statements, these differences give 
rise to Disclosure Location--Financial Disclosure Considerations. These 
differences also give rise to Bright Line Disclosure Threshold 
Considerations.
---------------------------------------------------------------------------

    \334\ See Item101(c)(1)(vii) and Item 101(h)(4)(vi) of 
Regulation S-K. Item 101(c)(1)(vii) applies to non-SRCs and Item 
101(h)(4)(vi) applies to SRCs.
    \335\ See ASC 280-10-50-42.
---------------------------------------------------------------------------

    First, Item 101(c)(1)(vii) of Regulation S-K requires disclosure if 
loss of a customer, or a few customers, would have a material adverse 
effect on a segment. This threshold differs from U.S. GAAP in that it 
is qualitative and focuses on the impact on a segment. In contrast, 
U.S. GAAP requires disclosure of each customer that comprises 10 
percent or more of total revenue. Although the requirements for SRCs in 
Item 101(h)(4)(vi) are more similar to U.S. GAAP in that they do not 
prescribe a segment focus, they also differ from U.S. GAAP in that they 
do not set forth a 10 percent bright line test for disclosure.
    Second, Item 101(c)(1)(vii) requires disclosure of the name of any 
customer that represents 10 percent or more of the issuer's revenues 
and whose loss would have a material adverse effect on the issuer.\336\ 
In 1999, the Commission considered deleting this requirement to conform 
to U.S. GAAP. However, the Commission determined to retain this 
requirement, as it continued to believe that the identity of major 
customers is material information to investors and that the disclosure 
allows a reader to better assess risks associated with a particular 
customer, as well as material concentrations of revenues related to 
that customer.\337\
---------------------------------------------------------------------------

    \336\ Item 101(h)(4)(vi) of Regulation S-K does not require 
disclosure of the name of major customers.
    \337\ See Segment Reporting, Release No. 33-7620, (Jan. 5, 1999) 
[64 FR 1728 (Jan. 12, 1999)].
---------------------------------------------------------------------------

    Because U.S. GAAP historically has scaled disclosure requirements 
only by public business entities versus other entities, and not by 
issuer status, incorporation of these requirements into U.S. GAAP could 
result in the application to SRCs of the disclosure threshold and the 
requirement to name a customer in certain instances.
    Several commenters supported the Commission eliminating this 
disclosure requirement because it is substantially similar to the 
corresponding U.S. GAAP requirements, which they believe sufficiently 
highlight customer concentrations.\338\ A few commenters further 
suggested that the disclosure of major customers could be harmful 
because of the competitively sensitive nature of this information.\339\ 
The remaining commenters supported referring the requirement to the 
FASB for potential incorporation into U.S. GAAP.\340\ One of these 
commenters also recommended the FASB consider whether the disclosure 
objective in U.S. GAAP should be clarified.\341\ Another commenter 
recommended a principles-based approach rather than a bright line 
disclosure threshold for the requirement to disclose customer names, as 
this threshold may not be material to some registrants.\342\ One 
commenter recommended retaining the requirement, asserting that the 
identity of major customers is material information to investors and it 
allows a reader to better assess risks associated with a particular 
customer, as well as material concentrations of revenues related to 
that customer.\343\
---------------------------------------------------------------------------

    \338\ See letters from CAQ; E&Y; EEI and AGA; KPMG; and PwC.
    \339\ See letters from E&Y and EEI and AGA.
    \340\ See letters from Davis; Deloitte; Grant; and IMA.
    \341\ See letter from Deloitte.
    \342\ See letter from Davis.
    \343\ See letter from Bean.
---------------------------------------------------------------------------

    We are retaining this disclosure requirement and are referring it 
to the FASB for potential incorporation into U.S. GAAP. We believe the 
objective of the U.S. GAAP disclosure requirement is similar to the 
Commission disclosure requirement; however, U.S. GAAP does not require 
disclosure of a major customer's name.
4. Legal Proceedings
    U.S. GAAP requires disclosure of certain loss contingencies.\344\ 
17 CFR 229.103 (``Item 103'' of Regulation S-K) requires disclosure of 
certain legal proceedings, which are one type of loss contingency. Item 
103 does not require disclosure of certain matters that do not exceed 
10 percent of the issuer's consolidated current assets, while U.S. GAAP 
provides a more general materiality threshold.\345\ In practice, to 
comply with Regulation S-K, issuers commonly repeat some or all of the 
disclosures provided in the notes to the financial statements under 
U.S. GAAP

[[Page 50174]]

or include a cross-reference to those disclosures.
---------------------------------------------------------------------------

    \344\ See ASC 450.
    \345\ See also Section III.E.15 of the Proposing Release, supra 
note 1, at 51616.
---------------------------------------------------------------------------

    As further described in Section III.E.15 of the Proposing Release, 
although Item 103 and U.S. GAAP have overlapping requirements, they 
differ in certain respects. Incorporation of Item 103 requirements into 
U.S. GAAP would have implications for investors, issuers, and other 
stakeholders. In the Proposing Release, the Commission described in 
detail (a) the differences between Item 103 and U.S. GAAP; (b) the 
potential consequences of incorporating the Item 103 requirements into 
U.S. GAAP; and (c) other considerations related to Item 103. The 
Commission solicited comment about whether to retain, modify, 
eliminate, or refer the disclosure requirements to the FASB.
    Many commenters opposed the integration of Item 103 and U.S. 
GAAP.\346\ A number of commenters \347\ stated that the objectives 
\348\ of Item 103 and U.S. GAAP differ, and some of these commenters 
\349\ indicated that a better articulation of the objectives may be 
warranted. Many commenters \350\ also indicated that, if the Commission 
chooses to move forward with the integration, the American Bar 
Association policy statement regarding lawyers' responses to auditors' 
requests for information and Public Company Accounting Oversight Board 
(``PCAOB'') auditing standards should be revisited as they both 
incorporate the U.S. GAAP disclosure requirements.\351\ On a similar 
note, some commenters \352\ indicated that integration would also 
expand audit and interim review requirements, as well as XBRL tagging 
requirements, which would be burdensome and costly to issuers. These 
commenters further expressed concern that the integration could lead to 
increased disclosure of immaterial items and may eliminate the safe-
harbor protections currently afforded to forward-looking statements 
related to legal proceedings under Regulation S-K.
---------------------------------------------------------------------------

    \346\ See, e.g. letters from CAQ; CGCIV; Davis; FedEx; Shearman; 
and USCC.
    \347\ See, e.g. letters from CAQ; and NAREIT.
    \348\ Item 103 is intended to provide a description of material 
pending legal proceedings, while U.S. GAAP is designed to provide 
information consistent with the accounting model for loss 
contingencies.
    \349\ See, e.g. letters from CAQ and Davis.
    \350\ See, e.g. letters from CAQ; Davis; and Shearman.
    \351\ See AS 2505C: Exhibit II--American Bar Association 
Statement of Policy Regarding Lawyers' Responses to Auditors' 
Requests for Information available at https://pcaobus.org/Standards/Auditing/Pages/AS2505.aspx.
    \352\ See letters from CGCIV; Davis; FedEx; NAREIT; Shearman; 
and USCC.
---------------------------------------------------------------------------

    Some commenters recommended the deletion of Item 103 altogether or 
at minimum some of the disclosure requirements contained therein.\353\ 
For example, one of these commenters stated that U.S. GAAP, together 
with Items 303 and 503(c) of Regulation S-K, elicits the appropriate 
level of disclosure of material legal proceedings to inform investment 
and voting decisions of a reasonable investor.\354\ Another commenter 
recommended the deletion of the requirement to disclose proceedings 
known to be contemplated but which are not probable of being asserted 
because this does not provide useful information to investors.\355\
---------------------------------------------------------------------------

    \353\ See letters from Davis; EEI and AGA; and Grant.
    \354\ See letter from Davis.
    \355\ See letter from EEI and AGA.
---------------------------------------------------------------------------

    The commenters \356\ who supported the integration of Item 103 into 
U.S. GAAP noted the repetition that is currently present in many 
filings.\357\ However, one of these commenters recommended the 
Commission consider undertaking outreach with preparers, users, and 
other regulators and develop disclosure objectives for the incremental 
disclosures.\358\ Other commenters also recommended that the Commission 
conduct more analysis and outreach in this area, particularly with the 
accounting and legal professions.\359\
---------------------------------------------------------------------------

    \356\ See letters from Grant; and IMA.
    \357\ While it did not support the integration of all 
requirements, the letter from EEI and AGA recommended that the 
following disclosures be integrated: (1) Proceedings involving 
capital expenditure or deferred charges; and (2) material 
bankruptcy, receivership, or similar proceedings.
    \358\ See letter from Grant.
    \359\ See letters from CGCIV; and USCC.
---------------------------------------------------------------------------

    Some commenters indicated that the existing disclosure requirements 
in both Item 103 and U.S. GAAP do not provide sufficient information 
for investors to understand the nature, potential magnitude, and timing 
of any loss contingencies relating to legal proceedings, and 
recommended specific changes to the requirements.\360\ Some of their 
recommendations include greater use of bright line disclosure 
thresholds and preserving Item 103's disclosure requirements for low-
probability but high magnitude liabilities.\361\
---------------------------------------------------------------------------

    \360\ See letters from AFL-CIO and AFR; CII; and Rutkowski.
    \361\ The letter from EEI and AGA recommended that low 
probability but high magnitude proceedings disclosures should follow 
the requirements under U.S. GAAP concerning the likelihood of loss. 
The commenter indicated that providing this information is not 
helpful to investors, if the likelihood of loss is remote, and 
having a separate rule that requires disclosure of potential losses 
beyond those that are considered ``reasonably possible'' would 
create additional burdens for issuers and auditors.
---------------------------------------------------------------------------

    Additionally, several commenters \362\ expressed concerns with the 
bright line disclosure threshold for certain matters imposed by the 
existing requirements in Item 103, stating that some of the disclosures 
based on the threshold may not be material.
---------------------------------------------------------------------------

    \362\ See letters from CGCIV; Clearing House; Davis; EEI and 
AGA; NAREIT; Shearman; and USCC.
---------------------------------------------------------------------------

    In response to the concerns expressed by commenters, we are 
retaining the disclosure requirements in Item 103 without amendment. In 
addition, we are not referring these disclosure requirements to the 
FASB for potential incorporation into U.S. GAAP at this time. In light 
of the various views expressed by commenters, we believe further 
consideration is warranted with respect to the implications of 
potential changes to these requirements.
5. Other
    The table below describes the remaining overlapping requirements 
discussed in the proposing release as well as the incremental 
differences between these requirements.\363\
---------------------------------------------------------------------------

    \363\ These proposed amendments are discussed in further detail 
in Section III.E. of the Proposing Release.

----------------------------------------------------------------------------------------------------------------
                                             Commission disclosure
                  Topic                           requirement                  Description of requirement
----------------------------------------------------------------------------------------------------------------
REIT--Tax Status of Distributions.......  Rule 3-15(c) of Regulation   Both Regulation S-X and U.S. GAAP \364\
                                           S-X.                         require disclosure of an issuer's tax
                                                                        status. Regulation S-X requires
                                                                        additional footnote disclosures,
                                                                        including distributions per unit, for
                                                                        example as ordinary income, capital
                                                                        gain, or return of capital.
Consolidation...........................  Rule 3A-03(b) of Regulation  Regulation S-X and U.S. GAAP \365\ both
                                           S-X.                         set forth disclosure requirements about
                                                                        consolidation matters. Regulation S-X
                                                                        incrementally requires disclosure of
                                                                        material changes in the entities
                                                                        included in or excluded from the
                                                                        consolidated financial statements.

[[Page 50175]]

 
Assets Subject to Lien..................  Rule 4-08(b) of Regulation   Regulation S-X and U.S. GAAP \366\ both
                                           S-X.                         require disclosure of assets subject to
                                                                        lien and the obligation collateralized
                                                                        for the most recent audited balance
                                                                        sheet being filed. U.S. GAAP disclosure
                                                                        requirements only apply to certain
                                                                        financial assets (e.g., repurchase
                                                                        agreements or securities lending
                                                                        transactions), whereas Regulation S-X
                                                                        applies to all assets.
Obligations--Defaults Not Cured.........  Rule 4-08(c) of Regulation   Regulation S-X and U.S. GAAP \367\ both
                                           S-X.                         require disclosure of information
                                                                        related to covenant violations.
                                                                        Regulation S-X requires disclosure of
                                                                        the facts and amounts related to
                                                                        defaults, while U.S. GAAP sets forth
                                                                        classification requirements for
                                                                        obligations for which there has been a
                                                                        covenant violation, with limited
                                                                        disclosure requirements.
Obligations--Waived Defaults............  Rule 4-08(c) of Regulation   Regulation S-X and U.S. GAAP \368\ both
                                           S-X.                         require disclosure of information
                                                                        related to waived defaults. Regulation S-
                                                                        X requires disclosure of the amount of
                                                                        the obligation and the period of the
                                                                        waiver, while U.S. GAAP sets forth
                                                                        requirements for when to present debt
                                                                        subject to a covenant violation as a
                                                                        current liability.
Obligations--Changes in Obligations.....  Rule 4-08(f) of Regulation   Regulation S-X and U.S. GAAP \369\ both
                                           S-X.                         require disclosure of issuances of debt
                                                                        subsequent to the balance sheet date.
                                                                        However, Regulation S-X incrementally
                                                                        requires disclosure of significant
                                                                        changes in the authorized amounts of
                                                                        debt subsequent to the latest balance
                                                                        sheet date.
Obligations--Amounts and Terms of         Rule 5-02.19(b), Rule 5-     Regulation S-X and U.S. GAAP \370\ both
 Financing Arrangements.                   02.22(b), Rule 6-04.13(b),   require disclosures of an issuer's
                                           Rule 7-03.16(b), Rule 7-     financing arrangements. Regulation S-X
                                           03.16(c), Rule 9-03.13(a),   incrementally requires disclosure of
                                           and Rule 9-03.16 of          specific information related to the
                                           Regulation S-X.              financing arrangement.
Preferred Shares........................  Rule 4-08(d)(1) of           Regulation S-X and U.S. GAAP \371\ both
                                           Regulation S-X.              require disclosure about preferred share
                                                                        preferences in involuntary liquidation.
                                                                        However, Regulation S-X requires
                                                                        disclosure in more circumstances than
                                                                        U.S. GAAP.
Related Parties.........................  Rule 4-08(k)(1) of           Regulation S-X and U.S. GAAP \372\ both
                                           Regulation S-X.              require the amount of related party
                                                                        transactions to be disclosed in the
                                                                        financial statements. Regulation S-X
                                                                        incrementally requires that these
                                                                        amounts be presented on the face of the
                                                                        financial statements, if material.
Repurchase and Reverse Purchase           Rule 4-08(m) of Regulation   Regulation S-X and U.S. GAAP \373\ both
 Agreements.                               S-X.                         set forth presentation and disclosure
                                                                        requirements for repurchase and reverse
                                                                        repurchase agreements in the financial
                                                                        statements. However, Regulation S-X
                                                                        provides additional requirements.\374\
Interim Financial Statements--            Rule 10-01(b)(2) of          Commission disclosure requirements and
 Computation of Earnings Per Share.        Regulation S-X, and Item     U.S. GAAP \375\ both require disclosure
                                           601(b)(11) of Regulation S-  in the notes to the financial statements
                                           K.                           of the computation of earnings per
                                                                        share. However, U.S. GAAP does not
                                                                        specifically require disclosure of the
                                                                        computation in interim financial
                                                                        statements.
Interim Financial Statements--            Rule 8-03(b)(5) and Rule 10- Regulation S-X and U.S. GAAP \376\ both
 Retroactive Prior Period Adjustments.     01(b)(7) of Regulation S-X.  require certain disclosures of the
                                                                        effects of changes in accounting
                                                                        principles, correction of an error, and
                                                                        changes in reporting entities. However,
                                                                        Regulation S-X incrementally requires
                                                                        disclosures in the interim period of
                                                                        change, and for non-SRCs, incrementally
                                                                        requires disclosure of the effect on
                                                                        retained earnings.
Interim Financial Statements--Common      Rule 10-01(b)(3) of          Regulation S-X and U.S. GAAP \377\ both
 Control Transactions.                     Regulation S-X.              set forth accounting and disclosure
                                                                        requirements for combinations of
                                                                        entities under common control. However,
                                                                        Regulation S-X incrementally requires
                                                                        non-SRCs to disclose the separate
                                                                        results of the combined entities for
                                                                        periods prior to the combination.
Products and Services...................  Item 101(c)(1)(i) of         Regulation S-K and U.S. GAAP \378\ both
                                           Regulation S-K.              require disclosure of the amount of
                                                                        revenue from products and services.
                                                                        Regulation S-K only requires this
                                                                        disclosure if a certain threshold is
                                                                        met, while U.S. GAAP includes a
                                                                        practicability exception.
Oil and Gas Producing Activities........  Item 302(b) of Regulation S- Regulation S-K and U.S. GAAP \379\ both
                                           X.                           require issuers engaged in oil and gas
                                                                        producing activities to disclose
                                                                        information about those activities in
                                                                        the notes to the financial statements.
                                                                        Regulation S-K incrementally requires
                                                                        that the U.S. GAAP disclosures must be
                                                                        provided for each period presented.
----------------------------------------------------------------------------------------------------------------

    Some commenters recommended that the Commission eliminate some of 
these disclosure requirements because the required disclosures are 
available

[[Page 50176]]

elsewhere.\380\ For example, one commenter recommended the deletion of 
the requirement related to tax status of distributions per unit \381\ 
because this information is available to shareholders in Internal 
Revenue Service (IRS) Form 1099.\382\ Some commenters recommended 
eliminating the consolidation disclosure requirements in Rule 3A-03(b) 
because they overlap with U.S. GAAP \383\ disclosure requirements.\384\ 
One commenter recommended deletion of the repurchase and reverse 
repurchase agreement disclosure requirements because they provide 
reasonably similar information as the corresponding U.S. GAAP 
requirements.\385\ This commenter recommended that the only repurchase 
and reverse repurchase agreement disclosure requirement that the 
Commission should refer to the FASB for potential incorporation into 
U.S. GAAP is the requirement to disclose the repurchase liability and 
the interest rate(s) thereon.\386\ Another commenter recommended 
eliminating certain interim financial statement information due to 
overlapping U.S. GAAP disclosure requirements.\387\ Some commenters 
also suggested eliminating the products and services disclosure 
requirement \388\ because U.S. GAAP \389\ requires substantially 
similar disclosures.\390\ These commenters observed that while U.S. 
GAAP provides an impracticability exception, that exception is used 
infrequently and, when it is relied upon, the issuer will have the same 
practicability issue with providing the products and services 
disclosures under Regulation S-K. A few commenters observed that U.S. 
GAAP oil and gas producing disclosures are generally interpreted to 
apply to each period presented.\391\ For this reason, one commenter 
recommended deletion of Item 302(b) of Regulation S-K.\392\
---------------------------------------------------------------------------

    \364\ See ASC 740-10-50-16.
    \365\ See ASC 810-10-50.
    \366\ See ASC 860-30-50-1A and ASC 860-30-50-7.
    \367\ See ASC 470-10-45-1 and ASC 470-10-45-11. See also ASC 
470-10-50-2, which requires disclosure of the circumstances 
surrounding a covenant violation in certain situations, but not the 
amount of the obligation.
    \368\ See ASC 470-10-45-1 and ASC 470-10-45-11.
    \369\ See ASC 855-10-50-2 and ASC 855-10-55-2a.
    \370\ See ASC 470-10-50.
    \371\ See ASC 505-10-50-4.
    \372\ See ASC 850-10-50-1.
    \373\ See ASC 860-30-45-2 and ASC 860-30-50.
    \374\ Rule 4-08(m) of Regulation S-X requires the following 
incremental disclosures when a specified bright line threshold is 
met: (1) The liabilities associated with repurchase agreements that 
are separately presented on the balance sheet to include accrued 
interest payable, (2) disclosure of the interest rates associated 
with certain repurchase liabilities, (3) information about 
counterparties and agreements with them, where there is a 
concentration of counterparties, (4) separate presentation on the 
balance sheet of the carrying amount of reverse repurchase 
agreements, and (5) disclosure of the nature of any provisions to 
ensure that the market value of the underlying assets remains 
sufficient to protect the issuer in the event of counterparty 
default.
    \375\ See ASC 260-10-50-1.
    \376\ See ASC 250-10-50-1 and 250-10-50-6 to 8.
    \377\ See ASC 805-50-45-1 to 5.
    \378\ See ASC 280-10-50-40.
    \379\ See ASC 932-235-50.
    \380\ See, e.g. letters from CAQ; Deloitte; E&Y; KPMG; and PwC.
    \381\ Rule 3-15(c).
    \382\ See letter from NAREIT. The other Rule 3-15 amendments 
described in Section III.B rely on this disclosure requirement that 
is incremental to U.S. GAAP.
    \383\ See ASC 805; 810-10-50; and ASC 205-10-45.
    \384\ See letters from CAQ; E&Y; Grant; and PwC.
    \385\ See letter from KPMG.
    \386\ See discussion in Section III.B.1.a below. See also 
Section III.C.3 of the Proposing Release, supra note 1, at 51618.
    \387\ See E&Y letter. This commenter recommended that we delete 
Rule 10-01(b)(2) of Regulation S-X and Item 601(b) of Regulation S-K 
because these overlap with ASC 260-10-50-1. In addition, the 
commenter recommended we delete all requirements related to changes 
in reporting entities in Rule 10-01(b)(7) and Rule 8-03(b)(5) and 
ask that the FASB reconsider the disclosure requirements in ASC 250-
10-50-6.
    \388\ Item 101(c)(1)(i) of Regulation S-K.
    \389\ See ASC 280
    \390\ See letters from CAQ; EEI and AGA; E&Y; Grant; KPMG; and 
PwC.
    \391\ See letters from CAQ; E&Y; and PwC.
    \392\ See letter from E&Y.
---------------------------------------------------------------------------

    Most commenters, however, including some who recommended 
eliminating certain disclosure requirements, supported the Commission 
retaining most or all of these disclosure requirements and referring 
them to the FASB for potential incorporation into U.S. GAAP.\393\ One 
commenter specifically requested the Commission retain the disclosure 
requirements for repurchase and reverse repurchase agreements as they 
are complex financial instruments that can impact the financing and 
liquidity of financial institutions and other businesses.\394\
---------------------------------------------------------------------------

    \393\ See letters from CAQ; Deloitte; E&Y; IMA; KPMG; and PwC.
    \394\ See letter from Bean.
---------------------------------------------------------------------------

    Commenters had the following additional recommendations for both 
the Commission and the FASB as it relates to the potential 
incorporation of the Commission's disclosure requirements into U.S. 
GAAP:
    <bullet> Revisit the bright line disclosure thresholds in the 
requirements (e.g., the 10% threshold in Rule 4-08(m)) and whether U.S. 
GAAP should require similar bright line disclosure thresholds; \395\
---------------------------------------------------------------------------

    \395\ See letters from Clearing House and EEI and AGA.
---------------------------------------------------------------------------

    <bullet> Clarify the concept of ``authorization of debt'' in Rule 
4-08(f); \396\
---------------------------------------------------------------------------

    \396\ See letters from CAQ and Grant.
---------------------------------------------------------------------------

    <bullet> Coordinate to provide enhanced disclosures for significant 
accounting policies that provide a more comprehensive discussion of 
critical accounting estimates, including more robust information about 
underlying assumptions that are highly judgmental, as well as their 
propensity to change; \397\
---------------------------------------------------------------------------

    \397\ See letters from CGCIV and FedEx.
---------------------------------------------------------------------------

    <bullet> Consider the timing of the disclosure requirements related 
to combinations of entities under common control because these 
disclosures could be useful to investors on both an interim and annual 
basis and ensure the disclosure objectives and requirements are clear; 
\398\ and
---------------------------------------------------------------------------

    \398\ See letters from CAQ; E&Y; and PwC.
---------------------------------------------------------------------------

    <bullet> Work together to further reduce redundancies between 
Commission disclosure requirements and U.S. GAAP, such as the oil and 
gas disclosures in 17 CFR 229.1200 (``Item 1200'' of Regulation S-K) 
and those in U.S. GAAP \399\ industry standards.\400\
---------------------------------------------------------------------------

    \399\ ASC 932
    \400\ See letters from CAQ; Deloitte; E&Y; and PwC.
---------------------------------------------------------------------------

    We are retaining these requirements and referring all of the 
disclosure requirements described in the table above to the FASB for 
potential incorporation into U.S. GAAP.

IV. Outdated Requirements

A. Background

    The Commission proposed to amend certain requirements that have 
become outdated as a result of the passage of time or changes in the 
regulatory, business, or technological environments. These amendments 
were intended to simplify issuer compliance efforts. Further, to reduce 
any loss of information or increased burdens for investors, the 
Commission also proposed to require additional disclosure of 
information that is expected to be readily available to issuers.

B. Disclosure Requirements Outdated Due to Passage of Time

    In the Proposing Release, the Commission noted that some of its 
disclosure requirements have become obsolete due to passage of time. 
The table below describes each outdated requirement and what the 
Commission proposed to eliminate.\401\
---------------------------------------------------------------------------

    \401\ These proposed amendments are discussed in further detail 
in Section IV.B of the Proposing Release.

------------------------------------------------------------------------
                                    Commission
             Topic                  disclosure     Proposed amendment(s)
                                  requirement(s)
------------------------------------------------------------------------
Stale Transition Dates........  Rule 4-01(a)(3)    Delete references to
                                 and Note 6 to      transition dates
                                 Rule 8-01 of       given the passage of
                                 Regulation S-X;    these transition
                                 Forms S-3, F-1,    dates.
                                 F-3, F-4, and 20-
                                 F; and Exchange
                                 Act Rule 13a-
                                 10(g)(3), 15d-2,
                                 and 15d-10(g)(3).

[[Page 50177]]

 
Income Tax Disclosures........  Rule 4-            Delete the
                                 08(h)(1)(ii),      instructions to the
                                 the                rule that relate to
                                 parenthetical at   adoption of ASC 740--
                                 the end of Rule    Income Taxes because
                                 4-08(h)(1), part   all issuers are now
                                 of the             required to apply
                                 introductory       it.
                                 sentence of Rule
                                 4-08(h)(2), and
                                 all of Rule 4-
                                 08(h)(3) of
                                 Regulation S-X.
------------------------------------------------------------------------

    Commenters supported the proposed amendments to delete the 
requirements above, which have become outdated.\402\ We are adopting 
both of the amendments described in the table above as proposed.
---------------------------------------------------------------------------

    \402\ See letters from CAQ; Deloitte; E&Y; Grant; PwC; and R.G. 
Associates.
---------------------------------------------------------------------------

C. Disclosure Requirements Outdated due to Changes in the Regulatory, 
Business, or Technological Environment

    In the Proposing Release, the Commission staff noted that some of 
its disclosure requirements have become obsolete as the regulatory, 
business, or technological environments have changed over time. For 
example, some of the Commission's disclosure requirements are no longer 
relevant, or some information required to be disclosed is no longer 
readily available or can be derived from alternative sources. Below we 
discuss these outdated requirements and the related proposed 
amendments.
1. Market Price Disclosure
a. Proposed Amendments
    Item 201(a)(1) of Regulation S-K requires issuers to disclose the 
following:
    <bullet> The principal U.S. market(s) where its common equity is 
traded. Foreign issuers must also disclose the principal established 
foreign public trading market, if applicable. Where applicable, issuers 
must disclose that there is no established public trading market for 
their common equity.\403\
---------------------------------------------------------------------------

    \403\ Item 201(a)(1)(i) of Regulation S-K
---------------------------------------------------------------------------

    <bullet> If the principal U.S. market is an exchange, the high and 
low sale prices for their common equity for each quarter within the two 
most recent fiscal years and subsequent interim period.\404\
---------------------------------------------------------------------------

    \404\ Item 201(a)(1)(ii) of Regulation S-K.
---------------------------------------------------------------------------

    <bullet> If the principal U.S. market is not an exchange, the high 
and low bid quotations for the same periods as above. Where applicable, 
issuers must identify the source of the quotations and include 
appropriate qualifying language.\405\
---------------------------------------------------------------------------

    \405\ Item 201(a)(1)(iii) of Regulation S-K. This provision 
requires qualification where the over-the-counter quotations reflect 
inter-dealer prices, without retail mark-up, mark-down or commission 
and may not necessarily represent actual transactions. Reference to 
quotations must be qualified by appropriate explanation where there 
is an absence of an established public trading market.
---------------------------------------------------------------------------

    <bullet> Foreign issuers that identify a principal established 
foreign trading market for common equity are also required to provide 
market price disclosure comparable to that of a domestic issuer. If the 
primary U.S. market for the foreign issuer trades using American 
Depositary Receipts (``ADRs''), then foreign issuers must disclose 
prices based on the ADRs.\406\
---------------------------------------------------------------------------

    \406\ Item 201(a)(1)(iv) of Regulation S-K.
---------------------------------------------------------------------------

    <bullet> When Item 201(a)(1) disclosure is included in a Securities 
Act registration statement or an Exchange Act proxy or information 
statement, the price for their common equity as of the latest 
practicable date.\407\
---------------------------------------------------------------------------

    \407\ Item 201(a)(1)(v) of Regulation S-K. The Commission has 
required this or similar pricing disclosure since the 1960s. See 
Guides for Preparation and Filing of Registration Statements, 
Release No. 33-4936 (Dec. 9, 1968) [33 FR 18617 (Dec. 17, 1968)].
---------------------------------------------------------------------------

    Today, the daily market prices of most publicly traded common 
equity securities, including those quoted on an automated quotation 
system, are readily available free on numerous websites, including the 
exchanges' or quotation systems' websites.\408\ On these websites, 
investors can view daily closing prices, up to the previous day, and 
intra-day quotes, which would be more up-to-date than the prices 
required by Item 201(a)(1)(v) of Regulation S-K. Additionally, many of 
these websites allow users to download the daily historical data over 
customized time horizons. These features result in more robust 
information than the disclosure required by Item 201(a)(1) of 
Regulation S-K.
---------------------------------------------------------------------------

    \408\ See, e.g., www.finance.yahoo.com; www.google.com/finance; 
www.bloomberg.com; www.nyse.com; www.nasdaq.com; 
www.londonstockexchange.com; deutsche-boerse.com; www.otcbb.com; and 
www.otcmarkets.com.
---------------------------------------------------------------------------

    As a result, the Commission proposed the following amendments to 
Item 201(a)(1) of Regulation S-K:
    <bullet> Issuers with one or more classes of common equity would be 
required to disclose the principal U.S. market(s) where each class is 
traded and the trading symbol(s) used by the market(s) for each class 
of common equity. Foreign issuers also would be required to identify 
the principal established foreign public trading market, if any, and 
the trading symbol(s), for each class of their common equity.
    <bullet> Issuers with common equity that is not traded on an 
exchange would be required to indicate, as applicable, that any over-
the-counter quotations in such trading systems reflect inter-dealer 
prices, without retail mark-up, mark-down or commission and may not 
necessarily represent actual transactions.
    <bullet> Issuers with no class of common equity traded in an 
established public trading market would be required to state that fact 
and disclose the range of high and low bid information, if applicable, 
for each quarter over the last two fiscal years and any subsequent 
interim period.\409\ Also, such issuers would be required to disclose 
the source and explain the nature of such quotations.
---------------------------------------------------------------------------

    \409\ Item 201(a)(1)(i) currently notes that the existence of 
limited or sporadic quotations should not, by itself, be deemed to 
constitute an established public trading market.
---------------------------------------------------------------------------

    As proposed to be amended, Item 201(a)(1) would eliminate the 
detailed disclosure requirement of sale or bid prices for most issuers 
whose common equity is traded in an established public trading market 
and replace it with disclosure of the trading symbol.\410\ The proposed 
amendments would also align Item 201(a)(1) with Item 501(b)(4) of 
Regulation S-K.\411\
---------------------------------------------------------------------------

    \410\ Form N-2, which is used for registration of closed-end 
management investment companies, includes disclosure requirements 
relating to sales prices and bid information that are similar to 
those in Item 201(a)(1) of Regulation S-K. Item 1, Instruction 1 and 
Item 8.5(b) of Form N-2. In addition to these requirements, Form N-2 
requires disclosure of information relating to net asset value and 
discount or premium to net asset value. Item 8.5(b), Instructions 4 
and 5 and Item 8.5(c) through (e) of Form N-2. Disclosure of sales 
prices and bid information is needed in registration statements on 
Form N-2 so that the required premium/discount disclosure can be 
fully understood. Accordingly, the Commission did not propose to 
change the requirements in Form N-2 relating to sales prices and bid 
information.
    \411\ 17 CFR 229.501(b)(4). Item 501(b)(4) of Regulation S-K 
requires prospectus cover page disclosure of the trading symbol(s) 
and market(s) for securities being offered and registered on a 
Securities Act registration statement. The proposed amendments to 
Item 201(a)(1) are also consistent with those proposed to Item 
501(b)(4) and the cover pages of Forms 10-K, 20-F, 40-F, 10-Q, and 
8-K in a separate rulemaking. See FAST Act Modernization and 
Simplification of Regulation S-K, Release No. 33-10425 (Oct. 10, 
2017) [82 FR 50988 (Nov. 2, 2017)].

---------------------------------------------------------------------------

[[Page 50178]]

    Foreign private issuers that file Form 20-F are subject to 
disclosure requirements similar to those included in Item 201(a)(1) of 
Regulation S-K. Item 9.A.4 of Form 20-F requires the following price 
history of the stock to be offered or listed for both the U.S. market 
and the principal trading market outside the United States, as 
applicable:
    <bullet> The annual high and low market prices for the last five 
full financial years;
    <bullet> Quarterly high and low market prices for the last two full 
financial years and any subsequent period; and
    <bullet> Monthly high and low market prices for the last six 
months.
    For preemptive share issuances, the issuer must disclose the market 
prices for the first trading day in the most recent six months, the 
last trading day before the announcement of the offering, and for the 
latest practicable date. If an issuer's securities are ``not regularly 
traded in an organized market,'' the issuer must discuss any lack of 
liquidity.
    The Commission also proposed to amend Item 9.A.4 of Form 20-F to be 
consistent with the proposals related to Item 201(a)(1) of Regulation 
S-K. Specifically, the Commission proposed to amend Item 9.A.4 to 
require disclosure of the U.S. and principal market(s) where the 
issuer's common equity trades and the trading symbol(s) assigned to the 
issuer's common equity that is traded in the U.S. market and principal 
market. For issuers whose common equity is not traded in any 
established public trading market, disclosure of that fact would still 
be required.
b. Comments on Proposed Amendments
    Commenters generally supported the proposed amendments.\412\ In the 
Proposing Release the Commission asked if investors and issuers 
understood the term ``established public trading market'' and whether 
further guidance is needed to determine what constitutes ``limited or 
sporadic quotations.'' \413\ One commenter recommended that the 
Commission clarify and define these terms without suggesting specific 
changes.\414\ Another commenter recommended that the Commission require 
disclosure of trading symbol(s) for primary markets where all issued 
``instruments'' are traded, and define clear standards for the ticker 
notation so that all filers use the same notation.\415\ This commenter 
also recommended disclosure of the security identifier (CUSIP) in 
addition to the trading symbol and the ADR ratio,\416\ as applicable.
---------------------------------------------------------------------------

    \412\ See letters from E&Y; EEI and AGA; FedEx; KPMG; R.G. 
Associates; and XBRL US, Inc. (Oct. 3, 2016) (``XBRL'').
    \413\ See Section IV.B.4 of the Proposing Release, supra note 1, 
at 51638.
    \414\ See letter from E&Y.
    \415\ See letter from XBRL.
    \416\ ADR ratio is the number of foreign shares represented by 
one ADR.
---------------------------------------------------------------------------

c. Final Amendments
    To help investors locate listed securities and current trading 
prices, we are adopting the amendment to Item 201(a)(1) of Regulation 
S-K and Item 9.A.4 of Form 20-F substantially as proposed, with minor 
modifications. First, we are removing the term ``established'' from 
``principal established foreign public trading market'' in Item 
201(a)(1) to be consistent with the scope of disclosure required for 
domestic issuers in the U.S. market and for foreign private issuers in 
Item 9.A.4. Second, we are retaining the clarification currently in 
Item 9.A.4 that ``principal market'' means ``outside the host market'' 
as this language was inadvertently proposed for elimination. Finally, 
we are adding the term ``principal'' in front of ``host market'' in the 
amended first sentence of Item 9.A.4. to be consistent with Item 201, 
which requires disclosure of ``principal United States market(s).'' 
\417\
---------------------------------------------------------------------------

    \417\ ``Host country,'' as defined in General Instruction F. of 
Form 20-F, means the United States and its territories, as the term 
is used in Form 20-F.
---------------------------------------------------------------------------

    In addition, while we acknowledge the commenter's recommendations 
that we also require disclosure of trading symbol(s) for all issued 
``instruments,'' as well as CUSIP and ADR ratio when applicable, we are 
not adopting that suggestion as it is beyond the scope of this 
rulemaking.
2. Other
    The table below describes each of the remaining disclosure 
requirements that have become obsolete as the regulatory, business, or 
technological environments changed over time, and the related proposed 
amendments.\418\
---------------------------------------------------------------------------

    \418\ These proposed amendments are discussed in further detail 
in Section IV.B of the Proposing Release.

------------------------------------------------------------------------
                                    Commission
             Topic                  disclosure      Proposed amendments
                                  requirement(s)
------------------------------------------------------------------------
Available Information--Public   Item 101(e)(2)     Delete the
 Reference Room.                 and Item           requirements to
                                 101(h)(5)(iii)     identify the Public
                                 of Regulation S-   Reference Room and
                                 K; Forms S-1, S-   disclose its
                                 3, S-4, S-11, F-   physical address and
                                 1, F-3, and F-4;   phone number. The
                                 Item 1118(b) of    Commission's Public
                                 Regulation AB;     Reference Room is
                                 and Forms SF-1,    rarely used by the
                                 SF-3, N-1A, N-2,   public to obtain or
                                 N-3, N-5, N-6,     review issuer
                                 and N-8B-2.        filings, as paper
                                                    filings are now only
                                                    permitted (and
                                                    sometimes required)
                                                    in very limited
                                                    circumstances.\419\
                                                    Also delete the
                                                    instruction in
                                                    certain N Forms on
                                                    how to send a
                                                    written request by
                                                    mail to the SEC's
                                                    Public Reference
                                                    Room to obtain
                                                    certain hard copy
                                                    information.
                                Item 101(e)(2) of  Retain the
                                 Regulation S-K;    requirement to
                                 and Forms S-1, S-  disclose the
                                 3, S-4, S-11, F-   Commission's
                                 1, F-3, F-4, 20-   Internet address and
                                 F, SF-1, SF-3,     a statement that
                                 and N-4.           electronic SEC
                                                    filings are
                                                    available there.
                                                    However, delete the
                                                    qualifier ``if you
                                                    are an electronic
                                                    filer'' because all
                                                    but a limited number
                                                    of issuers are now
                                                    required to file
                                                    electronically.\420\
                                                    Also expand this
                                                    requirement to Forms
                                                    20-F and F-1 in
                                                    order to align the
                                                    requirements for
                                                    foreign private
                                                    issuers with
                                                    domestic issuers.
Available Information--Issuer   Items 101(e) and   Require all issuers
 Internet Address.               101(h)(5) of       to disclose their
                                 Regulation S-K;    Internet addresses
                                 and Forms S-3, S-  (or, in the case of
                                 4, F-1, F-3, F-    asset-backed
                                 4, 20-F, SF-1,     issuers, the address
                                 and SF-3.          of the specified
                                                    transaction party),
                                                    if they have one.
                                                    Many non-accelerated
                                                    filers already
                                                    disclose their
                                                    Internet addresses
                                                    \421\ and the
                                                    Commission has
                                                    provided guidance
                                                    about the liability
                                                    framework for
                                                    certain types of
                                                    disclosures on
                                                    company websites.
                                                    Further, we believe
                                                    that such a
                                                    requirement would
                                                    help ensure that
                                                    investors are aware
                                                    of an additional
                                                    resource for
                                                    information about
                                                    issuers.

[[Page 50179]]

 
Exchange Rate data............  Item 3.A.3 of      Delete the
                                 Form 20-F.         requirement for
                                                    foreign private
                                                    issuers to provide
                                                    exchange rate data
                                                    when financial
                                                    statements are
                                                    prepared in a
                                                    currency other than
                                                    the U.S. dollar.
                                                    Exchange rate
                                                    information is
                                                    readily available
                                                    free on a number of
                                                    websites.\422\
Foreign Private Issuer Initial  Instruction 2 to   Remove the reference
 Public Offering--Age of         Item 8.A.4 of      to a waiver and
 Financial Statements.           Form 20-F.         clarify the facts
                                                    and circumstances
                                                    when foreign private
                                                    issuers may comply
                                                    with the aging
                                                    requirement to
                                                    include audited
                                                    financial statements
                                                    in an initial public
                                                    offering that are
                                                    not older than 15
                                                    months compared to
                                                    the 12 months aging
                                                    requirement.
------------------------------------------------------------------------

    Commenters supported the proposed amendments and agreed with the 
reasons provided in the Proposing Release.\423\ We are adopting all of 
the amendments described in the table above as proposed, which will 
remove obsolete disclosure requirements and reduce issuers' compliance 
burdens.
---------------------------------------------------------------------------

    \419\ See Rules 14 [17 CFR 232.14], 101 [17 CFR 232.101], and 
102 [17 CFR 232.102] of Regulation S-T.
    \420\ See Rules 100 [17 CFR 232.100] and 101 [17 CFR 232.101] of 
Regulation S-T.
    \421\ Existing rules only require the disclosure by accelerated 
and large accelerated filers.
    \422\ See note [451].
    \423\ See letters from E&Y; KPMG; and R.G. Associates.
---------------------------------------------------------------------------

V. Superseded Requirements

A. Background

    As accounting, auditing, and disclosure requirements have changed 
over time, inconsistencies have arisen between the newer requirements 
and existing Commission disclosure requirements. The Commission 
proposed amendments to update Commission disclosure requirements to 
reflect more recently updated U.S. GAAP requirements or more recently 
updated Commission disclosure requirements.

B. Disclosure Requirements Superseded by U.S. GAAP

    The Commission staff has observed in its filing reviews that, in 
practice, issuers are able to successfully navigate inconsistencies 
between newer accounting and disclosure requirements and existing 
Commission disclosure requirements by complying with the requirement 
that was updated more recently. This is particularly the case with 
respect to changes in U.S. GAAP requirements, as the Commission has 
designated the FASB as the private-sector accounting standard 
setter.\424\ However, the Commission sought to simplify compliance 
efforts by proposing changes to several disclosure requirements that 
the Commission believed were superseded by U.S. GAAP.\425\
---------------------------------------------------------------------------

    \424\ See Section I.C.I of the Proposing Release, supra note 1, 
at 51611.
    \425\ Some of the proposed amendments to eliminate superseded 
Commission disclosure requirements apply both to issuers that report 
under U.S. GAAP and IFRS. We do not expect the amendments to conform 
these requirements to U.S. GAAP to cause confusion for issuers that 
report under IFRS because U.S. GAAP and IFRS are substantially 
converged for these topics.
---------------------------------------------------------------------------

1. Gains or Loss on Sale of Properties by REITS
    Regulation S-X requires REITs to present separately all gains and 
losses on the sale of properties outside of continuing operations in 
the income statement.\426\ U.S. GAAP, however, restricts that 
presentation to gains and losses on disposals that meet the definition 
of discontinued operations.\427\ As a result, the Commission proposed 
to eliminate Rule 3-15(a)(1) of Regulation S-X.
---------------------------------------------------------------------------

    \426\ Rule 3-15(a)(1) of Regulation S-X.
    \427\ ASC 205-20-45-1B.
---------------------------------------------------------------------------

    Commenters were supportive of the proposed amendment.\428\ We are 
adopting the elimination of Rule 3-15(a)(1) of Regulation S-X as 
proposed. We believe this amendment will simplify compliance for 
issuers by eliminating the disclosure requirement in Rule 3-15(a)(1) of 
Regulation S-X that conflicts with the requirement in U.S. GAAP.
---------------------------------------------------------------------------

    \428\ See letters from CAQ; Deloitte; E&Y; Grant; KPMG; NAREIT; 
PwC; and R.G. Associates.
---------------------------------------------------------------------------

2. Consolidation
a. Proposed Amendments
    The Commission provided guidance on the presentation of 
consolidated and combined financial statements when it first issued 
Regulation S-X in 1940.\429\ Since that time, certain U.S. GAAP 
consolidation requirements have changed significantly, creating 
inconsistencies between Regulation S-X and U.S. GAAP.\430\ For 
instance, Article 3A of Regulation S-X, Consolidated and Combined 
Financial Statements, includes several inconsistencies with U.S. GAAP 
related to difference in fiscal periods, the Bank Holding Company Act 
of 1956 (``BHC Act''), and intercompany transactions. The table below 
describes each requirement related to consolidation that the Commission 
proposed to eliminate and the reason for its proposed elimination.\431\
---------------------------------------------------------------------------

    \429\ See Adoption of Regulation S-X, (March 6, 1940) [5 FR 954 
(Mar. 6, 1940)].
    \430\ For example, Accounting Research Bulletin (``ARB'') No. 
51, Consolidated Financial Statements (``ARB No. 51''), was issued 
in 1959. Since then, the FASB has issued additional guidance, 
including but not limited to SFAS No. 94, Consolidation of All 
Majority-Owned Subsidiaries--an amendment of ARB No. 51, with 
related amendments of APB Opinion No. 18 and ARB No. 43, Chapter 12; 
FASB Interpretation No. 46, Consolidation of Variable Interest 
Entities--an interpretation of ARB No. 51; FASB Interpretation No. 
46 (revised December 2003), Consolidation of Variable Interest 
Entities--an interpretation of ARB No. 51; SFAS No. 167, Amendments 
to FASB Interpretation No. 46(R); and ASU No. 2015-02, Consolidation 
(Topic 810): Amendments to the Consolidation Analysis.
    \431\ These proposed amendments are discussed in further detail 
in Section V.B.4. of the Proposing Release.

------------------------------------------------------------------------
                                    Commission
             Topic                  disclosure      Proposed amendments
                                  requirement(s)
------------------------------------------------------------------------
Consolidation--Difference in    Rule 3A-02(b)      Delete the
 Fiscal Periods.                 \432\ and Rule     requirements because
                                 3A-02(b)(2)        U.S. GAAP \434\
                                 \433\ of           requires
                                 Regulation S-X.    consolidation
                                                    despite different
                                                    fiscal periods and
                                                    the fiscal periods
                                                    of combined entities
                                                    must differ by less
                                                    than three months.
Consolidation--Bank Holding     Rule 3A-02(c) of   Delete the
 Company Act of 1956.            Regulation S-X     requirement because
                                 \435\.             U.S. GAAP \436\ does
                                                    not provide an
                                                    exception to
                                                    consolidation for
                                                    subsidiaries of
                                                    issuers subject to
                                                    the BHC Act in
                                                    relation to a
                                                    divestiture.

[[Page 50180]]

 
Consolidation--Intercompany     Rule 3A-04 of      Delete the
 Transactions Generally.         Regulation S-X     requirement because
                                 \437\.             U.S. GAAP \438\
                                                    requires the
                                                    elimination of
                                                    intercompany
                                                    transactions from
                                                    consolidated
                                                    financial
                                                    statements.
Consolidation--Intercompany     Rule 4-08(k)(2)    Delete the
 Transactions in Separate        of Regulation S-   requirement to
 Financial Statements.           X \439\.           disclose, in
                                                    separate financial
                                                    statements of a
                                                    subset of a
                                                    consolidated
                                                    group,\440\ the
                                                    intercompany
                                                    transactions which
                                                    are eliminated or
                                                    not eliminated,
                                                    because U.S. GAAP
                                                    \441\ prohibits
                                                    elimination of these
                                                    transactions in the
                                                    separate financial
                                                    statements.
Dividends Per Share in Interim  Rule 8-03(a)(2)    Delete the
 Financial Statements.           and Rule 10-       requirements to
                                 01(b)(2) of        present dividends
                                 Regulation S-X     per share on the
                                 \442\.             face of the income
                                                    statement for
                                                    interim periods
                                                    because U.S. GAAP
                                                    \443\ (1) prohibits
                                                    this disclosure on
                                                    the face of the
                                                    financial statements
                                                    and (2) instead
                                                    permits it in the
                                                    notes to the
                                                    financial
                                                    statements.
                                Rule 3-04 of       Extend the annual
                                 Regulation S-X     disclosure
                                 \444\.             requirement of
                                                    changes in
                                                    stockholders' equity
                                                    and the amount of
                                                    dividends per share
                                                    for each class of
                                                    shares to interim
                                                    periods\445\
------------------------------------------------------------------------

b. Comments on Proposed Amendments
---------------------------------------------------------------------------

    \432\ Regulation S-X prohibits the consolidation of an entity if 
its fiscal period differs substantially, for example by more than 93 
days, from that of the issuer.
    \433\ Regulation S-X permits the combination of entities under 
common control even if their fiscal periods differ by more than 93 
days, but requires the recasting of the latest fiscal year to within 
93 days and disclosure of amounts excluded or included more than 
once as a result of the recasting.
    \434\ ASC 810-10-15-11.
    \435\ Regulation S-X prohibits consolidation of subsidiaries of 
issuers subject to the BHC Act when a divestiture has been made or 
it is substantially likely that the divestiture will be necessary in 
order to comply with provisions of the BHC Act.
    \436\ ASC 810-10-15-10a. See also paragraph C2.a of SFAS No. 
144, Accounting for the Impairment or Disposal of Long-Lived Assets 
(August 2001), which eliminated the pre-existing exception from 
consolidation for subsidiaries under temporary control under ARB No. 
51.
    \437\ If an issuer does not eliminate intercompany transactions 
from its financial statements, Regulation S-X requires it to explain 
why and how the transactions are treated.
    \438\ See ASC 323-10-35-5a and ASC 810-10-45-1.
    \439\ When separate financial statements of a subset of a 
consolidated group, such as a parent, subsidiaries, or investees, 
are presented, Regulation S-X contemplates the elimination of some 
transactions between the subset of the consolidated group presented 
in the separate financial statements and other entities in the 
consolidated group.
    \440\ A subset of a consolidated group that may present separate 
financial statements includes financial statements of the 
registrant, certain investees, or subsidiaries.
    \441\ ASC 810-10-45-1.
    \442\ Regulation S-X requires, for interim periods, the 
presentation of dividends per share on the face of the income 
statement. Rule 8-03(a)(2) specifically applies to SRCs and 
Regulation A issuers in a Tier 2 offering that report under U.S. 
GAAP, while Rule 10-01(b)(2) applies to non-SRCs.
    \443\ See ASC 260-10-45-5.
    \444\ Rule 3-04 of Regulation S-X allows annual disclosures of 
changes in stockholders' equity, including dividends per share 
amounts, to be provided in a note to the financial statements or in 
a separate financial statement.
    \445\ The option to present dividend per share disclosures in a 
separate financial statement does not comply with U.S. GAAP, which 
prohibits this per share presentation on the face of financial 
statements. However, the Commission saw benefits in continuing to 
provide (and extending to interim periods) an option to present 
dividends per share on the face of the statement of stockholders' 
equity, if an issuer elects to present changes in stockholders' 
equity in a separate financial statement, irrespective of the 
prohibition under U.S. GAAP. The Commission believed that the 
presentation of dividends per share alongside disclosure of changes 
in stockholders' equity facilitates investor understanding of 
stockholders' equity, as dividends are distributed from 
stockholders' equity. In addition, the proposed amendments address 
the more significant issue in Regulation S-X associated with the 
requirement to present interim dividends per share on the income 
statement, which is unrelated to dividends, a component of 
stockholders' equity.
    For Regulation A issuers, the Commission proposed amendments 
directly to Forms 1-A and 1-SA to require interim disclosures of 
changes in stockholders' equity and dividends per share amounts to 
address the inconsistency described above with U.S. GAAP, rather 
than to refer to Rule 3-04. The proposed amendments to Form 1-A 
would apply to all Regulation A issuers and the proposed amendments 
to Form 1-SA would apply to all Regulation A issuers in a Tier 2 
offering, even though Rule 8-03(a)(2) only applies to Regulation A 
issuers in a Tier 2 offering that report under U.S. GAAP. However, 
the Commission did not expect any increased burdens for Regulation A 
issuers in a Tier 2 offering that report under IFRS, as such issuers 
are already required to present a condensed statement of changes in 
equity and dividend amounts either in the aggregate or per share, 
pursuant to paragraphs 8 and 16A(f), respectively, of IAS 34, 
Interim Financial Reporting. The Commission expected the burdens for 
Regulation A issuers in a Tier 1 offering that report under U.S. 
GAAP on Form 1-A to be minimal, as the required information already 
would be available from the preparation of the interim financial 
statements.
---------------------------------------------------------------------------

    Commenters were generally supportive of the proposed 
amendments.\446\ Some commenters asked for clarification on whether the 
amendment to extend the changes in stockholders' equity and non-
controlling interests disclosure requirement to interim periods would 
be presented only for the year-to-date period, or for quarterly 
period(s) as well.\447\ One commenter supported the proposed 
elimination of Rule 8-03(a)(2) and Rule 10-01(b)(2) in Regulation S-X, 
but questioned whether the extension of the disclosure requirement in 
Rule 3-04 of Regulation S-X to interim periods was necessary or 
efficient.\448\ As an alternative, the commenter recommended amending 
Regulation S-X to move the dividend per share disclosure requirements 
from the face of the financial statements to the notes to the financial 
statements, which would eliminate the conflict with U.S. GAAP.
---------------------------------------------------------------------------

    \446\ See letters from CAQ; Deloitte; E&Y; Grant; KPMG; PwC; and 
R.G. Associates.
    \447\ See letters from CAQ and PwC.
    \448\ See letter from E&Y.
---------------------------------------------------------------------------

    One commenter observed the need to update Rule 6-03(c)(1)(i) of 
Regulation S-X, which also has been superseded by U.S. GAAP.\449\ The 
commenter noted the Commission disclosure requirement permits the 
consolidation of the financial statements of registered investment 
companies and business development companies only with the financial 
statements of subsidiaries which are investment companies, whereas U.S. 
GAAP also permits consolidation when an investment company holds a 
controlling financial interest in an operating entity that provides 
services to the investment company.\450\
---------------------------------------------------------------------------

    \449\ See letter from E&Y.
    \450\ ASC 946-810-45.
---------------------------------------------------------------------------

c. Final Amendments
    We are adopting the amendments as proposed with one minor change. 
As suggested by commenters, the final amendments clarify that Rule 3-04 
of Regulation S-X requires both the year-to-date information and 
subtotals for each interim period.
    The extension of the disclosure requirement in Rule 3-04 of 
Regulation S-X may create some additional burden for issuers, including 
Regulation A issuers, because it will require disclosure of dividends 
per share for each class of shares, rather than only for common stock, 
and disclosure of changes in stockholders' equity in

[[Page 50181]]

interim periods.\451\ However, as noted in the Proposing Release, we 
expect this burden will be minimal, as the required information is 
already available from the preparation of other aspects of the interim 
financial information such as the balance sheet and earnings per 
share.\452\ The amended rule will require companies to provide 
information on the dividends issued and the relationship the dividends 
have to stockholders' equity in one place, which may help investors 
understand some of the strategic decisions made by management, such as 
dividend payout versus share buyback.
---------------------------------------------------------------------------

    \451\ ASC 505-10-50-2 requires disclosure of changes in the 
separate accounts comprising stockholders' equity (e.g., common 
stock, additional paid-in capital, retained earnings) during at 
least the most recent annual fiscal period and any subsequent 
interim period presented. The proposed amendments would require 
disclosure of changes in stockholders' equity for each period 
presented, which would include comparative periods.
    \452\ Some registrants already include the disclosure required 
by Rule 3-04 in the Form 10-Q. U.S. GAAP also requires disclosure of 
significant changes in financial position, like stockholders' 
equity, in interim reporting. ASC 270-10-50.
---------------------------------------------------------------------------

    In response to a commenter's suggestion, we are deleting the 
requirements for consolidation by investment companies in Regulation S-
X \453\ because it conflicts with U.S. GAAP. The U.S. GAAP requirement 
is broader and additionally requires consolidated financial statements 
when a reporting entity has a controlling financial interest in another 
entity.
---------------------------------------------------------------------------

    \453\ Rule 6-03(c)(1)(i) of Regulation S-X.
---------------------------------------------------------------------------

3. Development Stage Companies
    U.S. GAAP previously required presentation of cumulative financial 
information from inception and related disclosures for development 
stage companies.\454\ Regulation S-X requires the U.S. GAAP disclosures 
for development stage companies in interim periods.\455\ In June 2014, 
the FASB eliminated the U.S. GAAP disclosure requirements for 
development stage companies.\456\ Accordingly, the Commission proposed 
to eliminate the superseded U.S. GAAP disclosure requirement for 
development stage companies in Rule 8-03(b)(6) and Rule 10-01(a)(7).
---------------------------------------------------------------------------

    \454\ FASB ASC Topic 915, Development Stage Entities.
    \455\ See Rule 8-03(b)(6) and Rule 10-01(a)(7) of Regulations S-
X. Rule 8-03(b)(6) specifically applies to SRCs and Regulation A 
issuers in a Tier 2 offering that report under U.S. GAAP, while Rule 
10-01(a)(7) applies to non-SRCs.
    \456\ ASU No. 2014-10, Development Stage Entities (Topic 915): 
Elimination of Certain Financial Reporting Requirements, Including 
an Amendment to Variable Interest Entities guidance in Topic 810, 
Consolidation. After public comment, the FASB determined that the 
disclosure provided ``information that had limited relevance.''
---------------------------------------------------------------------------

    Commenters supported our proposal to eliminate these 
requirements.\457\ Some of these commenters also recommended deleting 
the definition of development stage company in in Rule 1-02(h) of 
Regulation S-X.\458\
---------------------------------------------------------------------------

    \457\ See letters from CAQ; Deloitte; E&Y; Grant; KPMG; PwC; and 
R.G. Associates.
    \458\ See letters from CAQ; Deloitte; Grant; and PwC. The 
definition of development stage entities under U.S. GAAP was the 
same as development stage companies under Regulation S-X.
---------------------------------------------------------------------------

    We are adopting the amendments as proposed. We are not deleting the 
definition of development stage company in Rule 1-02(h) of Regulation 
S-X as it is used in other Commission requirements (e.g., Rule 
251(b)(3) of Regulation A and Rule 419(a)(2)(i) of Regulation C). As a 
result, we believe the definition in Rule 1-02(h) of Regulation S-X 
continues to be useful when applying these other Commission 
requirements.
4. Insurance Companies
a. Proposed Amendments
    17 CFR 210.7-02(b) (``Rule 7-02(b)'' of Regulation S-X) permits 
mutual life insurance companies and their wholly-owned stock insurance 
company subsidiaries to prepare financial statements in accordance with 
statutory accounting requirements. In the proposing release, the 
Commission proposed to eliminate this rule, as the Commission did not 
believe that issuers under the Securities Act or the Exchange Act 
currently rely on Rule 7-02(b) of Regulation S-X as a basis to report 
under statutory accounting requirements.\459\
---------------------------------------------------------------------------

    \459\ Some insurance companies sponsoring variable annuity 
contracts for registration on Forms N-3 and N-4 under the Investment 
Company Act and the Securities Act and some insurance companies 
offering variable life insurance contracts for registration on Form 
N-6 under the Investment Company Act and Securities Act prepare 
financial statements under statutory accounting requirements. These 
companies are permitted to do so in certain circumstances by the 
applicable form requirements. Specifically, each of these forms 
requires financial statements of the insurance company and states 
that if the insurance company would not have to prepare financial 
statements in accordance with U.S. GAAP except for use in the 
registration statement being filed or other specified registration 
statements used for variable insurance contracts, then its financial 
statements may be prepared in accordance with statutory accounting 
requirements. See Form N-3, Item 28(b), Instruction 1; Form N-4, 
Item 23(b), Instruction 1; and Form N-6, Item 24(b), Instruction 1. 
The proposed elimination of Rule 7-02(b) would not change these 
forms.
---------------------------------------------------------------------------

    The Commission also proposed two other amendments related to 
Insurance Companies and Regulation S-X. The first amendment relates to 
the separate presentation on the balance sheet of an asset called 
``reinsurance recoverable on paid losses.'' \460\ The Commission 
proposed to delete the reference to ``paid losses'' in this line item 
because U.S. GAAP was revised in 1992 to allow reinsurance recoverable 
receivables on paid and unpaid losses to be presented together.\461\ 
The second amendment relates to the definition of ``Separate Account 
Assets'' that are presented separately as a summary total on the 
balance sheet.\462\ U.S. GAAP defines differently separate account 
assets that are required to be reported as a summary total.\463\ Thus, 
the Commission proposed to replace the reference to variable annuities, 
pension funds, and similar activities in Rule 7-03(a)(11) with a 
reference to U.S. GAAP.
---------------------------------------------------------------------------

    \460\ See Rule 7-03(a)(6) of Regulation S-X.
    \461\ In 1992 the FASB issued SFAS No. 113, which established 
that reinsurance receivables on unpaid losses are also assets and 
may be presented together or separately with other reinsurance 
receivables. See paragraphs 74 to 76 in SFAS No. 113 and paragraph 
76 was codified in ASC 944-20-50-5.
    \462\ See Rule 7-03(a)(11) of Regulation S-X.
    \463\ See ASC 944-80-25-1 to 5.
---------------------------------------------------------------------------

b. Comments on Proposed Amendments
    Many commenters supported all three proposals.\464\ However, some 
commenters opposed the elimination of the ability of mutual life 
insurance companies to utilize statutory accounting principles for 
registration of insurance products under the Securities Act.\465\ These 
commenters stated that the preparation of U.S. GAAP financial 
statements would impose significant financial and administrative 
burdens on mutual life insurers. These commenters indicated that if the 
amendments to Rule 7-02(b) were adopted, a mutual insurance company 
issuing a general account insurance product would have to comply with 
the requirement to provide U.S. GAAP financial statements in Form S-1 
or S-3, and as a result, mutual life insurance companies that do not 
already prepare U.S. GAAP financial statements may limit their 
offerings of general account insurance products. One commenter 
suggested that the Commission should expand Rule 7-02(b) to allow its 
application to all insurance companies that do not otherwise prepare 
U.S. GAAP financial statements.\466\ Other commenters advised that 
elimination of the rule should involve a full analysis of the

[[Page 50182]]

potential costs and benefits.\467\ These commenters also outlined the 
relevance of financial statements prepared under statutory accounting 
principles for general account insurance products.
---------------------------------------------------------------------------

    \464\ See letters from CAQ; Deloitte; E&Y; Grant; KPMG; PwC; and 
R.G. Associates.
    \465\ See letters from American Council of Life Insurers (Oct. 
21, 2016) (``ACLI''); Committee of Annuity Insurers (Oct. 11, 2016); 
and Northwestern Mutual Life Insurance Company (Nov. 1, 2016) 
(``Northwestern Mutual'').
    \466\ See letter from Committee of Annuity Insurers.
    \467\ See letters from ACLI and Northwestern Mutual.
---------------------------------------------------------------------------

c. Final Amendments
    After further consideration and in light of the concerns expressed 
by commenters, we are not adopting the proposed amendment to eliminate 
Rule 7-02(b). We are adopting the amendments to Rule 7-03(a)(6) and 7-
03(a)(11) as proposed to simplify compliance for issuers by removing 
the elements of those rules that conflict with U.S. GAAP.
5. Extraordinary Items
a. Proposed Amendments
    Various Commission disclosure requirements and forms refer to 
extraordinary items. In January 2015, the FASB eliminated extraordinary 
items from U.S. GAAP.\468\ To update Commission disclosure 
requirements, the Commission proposed to delete references to 
extraordinary items in our rules and forms.\469\ The Commission 
proposed to delete the requirement in Item 302(a)(1) of Regulation S-K 
to disclose ``income (loss) before extraordinary items and cumulative 
effect of a change in accounting'' in supplemental quarterly financial 
information, and in its place, require disclosure of ``Income (loss).'' 
The Commission also proposed amendments to the investment company 
registration forms (Form N-1A, Form N-3, Form N-4, and Form N-6) to 
replace the outdated reference to the U.S. GAAP definition of 
extraordinary items with a definition of extraordinary expenses \470\ 
The Proposing Release indicated that the proposed amendments were not 
intended to change the content required to be presented in these 
forms.\471\
---------------------------------------------------------------------------

    \468\ See ASU No. 2015-01, Income Statement--Extraordinary and 
Unusual Items (Subtopic 225-20): Simplifying Income Statement 
Presentation by Eliminating the Concept of Extraordinary Items. 
Previously, ASC 225-20-45-2 defined ``extraordinary items'' as an 
event or transaction that is unusual in nature and infrequent in 
occurrence, and ASC 225-20-45-3 required separate presentation of 
the effect of the extraordinary item on the income statement.
    \469\ The proposed amendments apply to the following rules: Rule 
1-02(w)(3), Rule 1-02(bb)(1)(ii), Rule 3-01(c)(2), Rule 3-01(c)(3), 
Rule 3-15(a)(1), Rule 3A-02(b)(2), Rule 5-03(b), Rule 7-04, Rule 8-
03(a)(2), Rule 8-04(b)(3), Rule 9-04, Rule 10-01(b)(4), Rule 11-
02(b)(7), and Instruction 1 to Rule 11-02; Item 10(b)(2), Item 
302(a)(1), and Item 302(a)(3) of Regulation S-K; Securities Act Rule 
405, Exchange Act Rule 3a51-1(a)(2)(i)(A)(3); Exchange Act Rule 12b-
2; Exchange Act Rule 13a-10(b); and Exchange Act 15d-10(b). The 
proposed amendments also apply to Form X-17A-5.
    Rule 3a51-1 of the Exchange Act contains a net income measure 
that is used in evaluating whether certain equity securities are 
penny stocks, which currently excludes ``extraordinary and non-
recurring items'' from the net income calculation. As a result of 
the proposed amendment, the reference to ``extraordinary items'' 
would be deleted, but the exclusion of non-recurring items from net 
income would remain. The deletion of the ``extraordinary items'' 
reference from net income calculations under Rule 3a51-1 is not 
intended to affect the application of the rule, as we believe that 
non-recurring items encompass items that would have been 
``extraordinary items'' previously. Thus, the calculation of net 
income for purposes of Rule 3a51-1 should not change.
    \470\ The proposed definition is consistent with the historical 
U.S. GAAP definition of ``extraordinary items.''
    \471\ While the FASB has eliminated the concept of extraordinary 
items from U.S. GAAP for general purpose financial reporting, the 
concept of extraordinary expenses is still relevant for investment 
companies, particularly in disclosure of expense ratios in 
registration statements. Certain investment company registration 
forms eliminate extraordinary expenses from expense ratios in the 
fee table in order to disclose to investors the ongoing level of 
expense that can be expected. The proposed amendment did not seek to 
change the requirement that extraordinary expenses be excluded in 
the fee table and included in footnote disclosure reflecting 
extraordinary expenses if they would have a material effect. See 
Section V.B.11 of the Proposing Release.
---------------------------------------------------------------------------

b. Comments on Proposed Amendments
    While commenters \472\ generally supported the proposed amendments, 
some commenters \473\ recommended requiring disclosure of ``income 
(loss) from continuing operations'' and ``net income (loss)'' where the 
existing rule previously required ``income (loss) before extraordinary 
items and cumulative effect of a change in accounting principle.'' This 
recommendation was based on a view that: (1) It was unclear what income 
statement line ``income (loss)'' referred to; and (2) the alternative 
formulation would highlight the effects of discontinued operations. 
Additionally, these commenters recommended that the Commission 
reconsider the per share financial metrics required to be disclosed in 
interim periods, such as the disclosure requirement in Item 302(a)(1) 
of Regulation S-K,\474\ and make the metrics consistent with measures 
that are presented on the face of the interim income statements. One 
commenter expressly supported the proposed amendments to retain the 
historical U.S. GAAP definition of ``extraordinary expenses'' in 
certain investment company registration forms.\475\
---------------------------------------------------------------------------

    \472\ See letters from CAQ: Deloitte; E&Y; Grant; KPMG; PwC; and 
R.G. Associates.
    \473\ See letters from CAQ, E&Y, and PwC.
    \474\ Item 302(a)(1) of Regulation S-K requires per share data 
based upon the income (loss) before extraordinary items and 
cumulative effect of a change in accounting.
    \475\ See letter from ICI.
---------------------------------------------------------------------------

c. Final Amendments
    We are adopting the amendments as proposed, eliminating all 
references to extraordinary items and adding a definition of 
extraordinary expenses within certain N-Forms. We are also making 
several revisions recommended by commenters related to Item 302(a)(1). 
Specifically, we are replacing the proposed reference to ``income 
(loss)'' with ``income (loss) from continuing operations'' and the 
reference to ``per share data based upon such income'' with ``per share 
data based upon income (loss) from continuing operations'' \476\ and 
``per share data based upon net income (loss).'' These additional 
changes should help to simplify the resulting disclosure and reduce any 
confusion for issuers.
---------------------------------------------------------------------------

    \476\ See ASC 260-10-45-2.
---------------------------------------------------------------------------

6. Other
    The table below describes each of the remaining disclosure 
requirements that are superseded by U.S. GAAP and the related proposed 
amendments.\477\
---------------------------------------------------------------------------

    \477\ These proposed amendments are discussed in further detail 
in Section V.B. of the Proposing Release.
    \478\ See Amendments to Rules and Forms, Release No. 33-6958A, 
(Oct. 1, 1992) [57 FR 45287 (Oct. 1, 1992)].
    \479\ See ASC 270-10-50-7, which refers to ASC 805-10-50-2h.3 
for purposes of interim disclosures.

------------------------------------------------------------------------
                                   Commission
            Topic                  disclosure        Proposed amendments
                                 requirement(s)
------------------------------------------------------------------------
Statement of Cash Flows.....  Rule 3-02 of          Amend to replace the
                               Regulation S-X.       reference to
                                                     ``changes in
                                                     financial
                                                     position'' in the
                                                     title with ``cash
                                                     flows'' because
                                                     similar amendments
                                                     to various rules
                                                     and forms were made
                                                     in 1992.\478\
Consolidation--Interim        Rule 8-03(b)(4) and   Delete reference to
 Financial Statements--Pro     Rule 10-01(b)(4) of   when a business
 Forma Business Combination    Regulation S-X.       combination should
 Information.                                        be assumed to have
                                                     occurred in pro
                                                     forma financial
                                                     information because
                                                     U.S. GAAP \479\
                                                     requires reflection
                                                     of the business
                                                     combination at the
                                                     beginning of the
                                                     preceding fiscal
                                                     year.

[[Page 50183]]

 
Bank Holding Companies--Net   Rule 9-03.3 of        Delete requirement
 Presentation.                 Regulation S-X.       for federal funds
                                                     sold and securities
                                                     purchased under
                                                     resale agreements
                                                     or similar
                                                     arrangements to be
                                                     presented on the
                                                     balance sheet gross
                                                     of federal funds
                                                     purchased and
                                                     securities sold
                                                     under agreements to
                                                     repurchase because
                                                     U.S. GAAP \480\
                                                     permits net
                                                     presentation under
                                                     certain conditions.
Bank Holding Companies--      Rule 9-03.10(1) and   Delete the
 Goodwill.                     Rule 9-04.14(c) of    parenthetical
                               Regulation S-X.       reference to net of
                                                     amortization in
                                                     Rule 9-03.10(1) and
                                                     delete the
                                                     reference to
                                                     goodwill
                                                     amortization in
                                                     Rule 9-04.14(c)
                                                     because U.S. GAAP
                                                     \481\ prohibits
                                                     amortization of
                                                     goodwill.
Discontinued Operations.....  Instruction 1 to      Replace the
                               Rule 11-02(b) of      reference to
                               Regulation S-X; and   ``segments'' with
                               Item 302(a)(3) of     ``discontinued
                               Regulation S-K.       operations''
                                                     because the
                                                     definition of
                                                     ``discontinued
                                                     operations'' under
                                                     U.S. GAAP \482\ has
                                                     changed and no
                                                     longer incorporates
                                                     the term
                                                     ``segment.''
Pooling-of-Interests........  Rule 11-02(c)(2)(ii)  Delete references to
                               of Regulation S-X;    ``pooling-of-
                               Rule 405 of           interests'' and
                               Regulation C; Item    replace them with
                               4A(b)(1)(iii) of      references to
                               Form F-1;             ``combinations of
                               Instruction 1 to      entities under
                               paragraphs (e) and    common control''
                               (f) of Item 3 of      because similar
                               Form F-4; Item        amendments were
                               10(c)(3) of Form F-   made in 2009.\483\
                               4; Introduction to
                               Item 12 of Form F-
                               4; and Item
                               12(b)(2)(iv) of
                               Form F-4.
Statement of Comprehensive    Rule 1-02, Rule 3-    Replace (or, in some
 Income.                       02, Rule 3-03, Rule   cases, supplement)
                               3-04, Rule 3-05,      the existing
                               Rule 3-12, Rule 3-    references to
                               14, Rule 3-17, Rule   ``income
                               4-08, Rule 4-10,      statement'' and
                               Rule 5-02, Rule 5-    variations thereof
                               03, Rule 5-04, Rule   with ``statement of
                               6-07, Rule 6A-04,     comprehensive
                               Rule 6A-05, Rule 7-   income'' because
                               03, Rule 7-04, Rule   the FASB has
                               7-05, Rule 8-02,      replaced the income
                               Rule 8-03, Rule 8-    statement with the
                               05, Rule 8-06, Rule   statement of
                               9-03, Rule 9-04,      comprehensive
                               Rule 9-05, Rule 9-    income.\485\ Also
                               06, Rule 10-01,       amend to clarify
                               Rule 11-02, Rule 11-  the two
                               03, Rule 12-16,       presentation
                               Rule 12-17, Rule 12-  options for the
                               18, Rule 12-28, and   statement by
                               Rule 12-29 of         defining the term
                               Regulation S-X;       ``statement of
                               Item 10, Item 302,    comprehensive
                               and Item 303 of       income'' in
                               Regulation S-K;       Regulation S-X.
                               Item 1010 of
                               Regulation M-A;
                               Securities Act Rule
                               158; Exchange Act
                               Rule 15c3-1g, 17a-
                               5, 17a-12, 17g-3,
                               and 17h-1T; Forms 1-
                               A , 1-K, 1-SA, 20-
                               F, 11-K, and X-17A-
                               5.\484\
                              Rule 5-03, Rule 7-    Amend to add line
                               04, and Rule 9-04     items to present
                               of Regulation S-      comprehensive
                               X.\486\               income and related
                                                     items in the
                                                     statement of
                                                     comprehensive
                                                     income.
                              Rule 5-02.30(a) and   Amend to include
                               Rule 7-03(a)(23)(a)   accumulated other
                               of Regulation S-X;    comprehensive
                               and Form X-17-A-5.    income in its list
                                                     of balance sheet
                                                     line items. Also
                                                     delete the
                                                     reference in Rule 7-
                                                     03(a)(23)(a) to
                                                     unrealized
                                                     appreciation or
                                                     depreciation of
                                                     equity securities,
                                                     as it is a
                                                     component of
                                                     accumulated other
                                                     comprehensive
                                                     income required to
                                                     be presented
                                                     separately under
                                                     U.S. GAAP.
Cumulative Effect of Changes  Rule 1-02, Rule 3-    Delete references to
 in Accounting Principles.     01, Rule 3-15, Rule   cumulative effect
                               5-03, Rule 7-04,      of a change in
                               Rule 8-03, Rule 8-    accounting
                               04, Rule 9-04, Rule   principle because
                               10-01, Rule 11-02,    the FASB has
                               and Instruction 1     eliminated the
                               to Rule 11-02 of      requirement to
                               Regulation S-X;       report cumulative
                               Item 302 of           effect of a change
                               Regulation S-K;       in accounting
                               Securities Act Rule   principle in the
                               405; Exchange Act     income
                               Rule 12b-2, Rule      statement.\487\
                               13a-10(b), and Rule
                               15d-10(b); and Form
                               X-17A-5.
------------------------------------------------------------------------

    Commenters supported the proposed amendments.\488\ We are adopting 
all of the amendments described in the table above as proposed.
---------------------------------------------------------------------------

    \480\ See ASC 210-20-45. Where amounts are presented net, ASC 
210-20-50-3(a) requires disclosure in the notes to the financial 
statements of the gross amounts.
    \481\ See SFAS No. 142, Goodwill and Other Intangible Assets.
    \482\ See ASC 205.
    \483\ See Technical Amendment to Rules, Forms, Schedules, and 
Codification of Financial Reporting Policies, Release No. 33-9026, 
(Apr. 15, 2009) [74 FR 18612 (April 23, 2009)].
    \484\ See Rule 1-02, Rule 3-02, Rule 3-03, Rule 3-04, Rule 3-05, 
Rule 3-12, Rule 3-14, Rule 3-17, Rule 4-08, Rule 4-10, Rule 5-02, 
Rule 5-04, Rule 6-07, Rule 6A-04, Rule 6A-05, Rule 7-03, Rule 7-05, 
Rule 8-02, Rule 8-03, Rule 8-05, Rule 8-06, Rule 9-03, Rule 9-05, 
Rule 9-06, Rule 10-01, Rule 11-02, Rule 11-03, Rule 12-16, Rule 12-
17, Rule 12-18, Rule 12-28, and Rule 12-29 of Regulation S-X; Item 
10, Item 302, and Item 303 of Regulation S-K; Item 1010 of 
Regulation M-A; Securities Act Rule 158; Exchange Act Rule 15c3-1g; 
Exchange Act Rule 17a-5; Exchange Act Rule 17a-12; Exchange Act Rule 
17g-3; Exchange Act Rule 17h-1T; Form 1-A; Form 1-K; Form 1-SA; Form 
20-F; Form 11-K; and Form X-17A-5.
    \485\ See ASU No. 2011-05, Comprehensive Income (Topic 220): 
Presentation of Comprehensive Income. The statement of comprehensive 
income may be presented as either: (1) A single statement of 
comprehensive income or (2) two separate but consecutive statements, 
composed of the income statement and a separate statement, which 
begins with net income and separately presents the components of 
other comprehensive income, a total of other comprehensive income, 
and a total of comprehensive income.
    Items of other comprehensive income include, for example: 
foreign currency translation adjustments, certain unrealized holding 
gains and losses, and gains or losses associated with pension or 
other postretirement benefits (that are not recognized immediately 
as a component of net periodic benefit cost). See ASC 220-10-45-10A 
for additional items.
    \486\ See Rule 5-03, Rule 7-04, and Rule 9-04.
    \487\ See SFAS No. 154, Accounting Changes and Error 
Corrections. This is now reflected in ASC 250, Accounting Changes 
and Error Corrections.
    \488\ See letters from CAQ; Deloitte; E&Y; Grant; KPMG; PwC; and 
R.G. Associates.
---------------------------------------------------------------------------

C. Disclosure Requirements Superseded by Other Commission Requirements

    Commission disclosure requirements have also changed over time, 
which has resulted in inconsistencies within our disclosure 
requirements. The Proposing Release identified disclosure requirements 
that have been superseded by other Commission disclosure requirements.
1. Auditing Standards
a. Proposed Amendments
    Section 103(a) of the Sarbanes-Oxley Act authorized the PCAOB to 
establish auditing and related professional practice standards used by 
registered public accounting firms when conducting audits of 
issuers.\489\ Prior to the creation of the PCAOB, public accounting 
firms conducted audits of issuers pursuant to Generally Accepted 
Auditing Standards (``GAAS'') \490\ and many Commission rules continue 
to refer to those standards. In addition, Section 10A of the Exchange 
Act also refers to GAAS in its requirements for

[[Page 50184]]

audits. The standards of the PCAOB are different from GAAS.
---------------------------------------------------------------------------

    \489\ Public Law 107-204, 116 Stat. 745 (2002). Pursuant to 
Section 2(a)(7) of the Sarbanes-Oxley Act, an issuer is defined as 
an issuer with securities registered under Section 12 of the 
Exchange Act or required to file reports under Section 15(d) of the 
Exchange Act. 15 U.S.C. 7201(a)(7).
    \490\ These standards are currently promulgated by the American 
Institute of Certified Public Accountants.
---------------------------------------------------------------------------

    In 2004, the Commission published interpretive guidance explaining 
that references to GAAS in Commission rules and staff guidance, as they 
relate to issuers, should be understood to mean the standards of the 
PCAOB plus any applicable rules of the Commission.\491\ Further, the 
Commission stated its intent to codify this interpretation in the 
future.\492\ The table below describes each of the disclosure 
requirements that the Commission proposed to amend as part of the 
codification.\493\
---------------------------------------------------------------------------

    \491\ See Commission Guidance Regarding the Public Company 
Accounting Oversight Board's Auditing and Related Professional 
Practice Standard No. 1, Release No. 34-49708 (May 14, 2004) [69 FR 
29064 (May 20, 2004)]. Subsequently, Section 982 of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (the ``Dodd-Frank 
Act'') amended the Sarbanes-Oxley Act to establish the PCAOB's 
authority to oversee the independent public accountants that audit 
registered brokers and dealers. See Public Law 111-203, 124 Stat. 
1376 (2010).
    \492\ Id.
    \493\ These proposed amendments are discussed in further detail 
in Section V.B.1. of the Proposing Release.

------------------------------------------------------------------------
       Commission disclosure
          requirement(s)                     Proposed amendments
------------------------------------------------------------------------
Rule 1-02(d) of Regulation S-X....  Amend to refer to ``the standards of
                                     the Public Company Accounting
                                     Oversight Board (United States)
                                     (``PCAOB'')'' as it relates to the
                                     audit of issuers and to note that,
                                     for different types of non-issuers,
                                     the Commission requires PCAOB
                                     auditing standards or GAAS or
                                     permits the use of either.
Rule 436(d)(4) of Regulation C and  Amend to replace the references to
 General Instruction G(f)(1) of      GAAS with ``the standards of the
 Form 20-F.                          Public Company Accounting Oversight
                                     Board (United States)
                                     (``PCAOB'')''. Replace the term
                                     ``examination'' with ``audit
                                     conducted.''
Instruction 2 to Item 8.A.2 of      Amend to state that financial
 Form 20-F.                          statements of entities other than
                                     the issuer must be audited in
                                     accordance with ``the standards of
                                     the Public Company Accounting
                                     Oversight Board (United States)
                                     (``PCAOB'').''
Rule 2-01(f)(7)(ii)(B) of           Amend to make language consistent
 Regulation S-X.                     with current auditing standards.
Rules 2-02(b)(1), 8-03, and 10-01   Amend to refer to ``applicable
 of Regulation S-X.                  professional standards'' instead of
                                     GAAS.
Rules 10A-1(b)(3) and 13b2-2(b)(2)  Amend to replace the references to
 of the Exchange Act.                GAAS with ``the standards of the
                                     Public Company Accounting Oversight
                                     Board (United States)
                                     (``PCAOB'').''
Instruction E(c)(3) of Form 20-F..  Amend to replace the reference to
                                     U.S. standards for auditor
                                     independence with ``qualified and
                                     independent in accordance with
                                     Article 2 of Regulation S-X.''
------------------------------------------------------------------------

b. Comments on Proposed Amendments
    Commenters generally supported these proposed amendments.\494\ Some 
commenters \495\ also recommended that the Commission clarify when a 
review of interim financial information in accordance with PCAOB 
standards is not required under Rules 10-01 or 8-03 of Regulation S-X. 
Further, one of these commenters requested that we adopt a rule that 
explains which professional standards apply to every circumstance where 
financial statements are filed with the Commission.\496\
---------------------------------------------------------------------------

    \494\ See letters from CAQ; Deloitte; E&Y; Grant; KPMG; PwC; and 
R.G. Associates.
    \495\ See letters from CAQ; and KPMG.
    \496\ See letter from KPMG.
---------------------------------------------------------------------------

c. Final Amendments
    We are adopting all of the amendments described in the table above 
as proposed. We are also eliminating the reference to U.S. standards 
for auditor independence from Instruction 2 to Item 8.A.2 of Form 20-F 
to be consistent with the amendments to Instruction E(c)(3) of Form 20-
F. We believe the reference to ``applicable professional standards'' in 
Rules 10-01 and 8-03 does not create significant confusion and 
therefore we are not adopting any amendments to clarify the application 
of these rules as suggested by commenters. Further, we are not adopting 
a rule that explains which professional standards apply to every 
circumstance where financial statements are filed with the Commission 
because that is beyond the scope of this rulemaking.
2. Other
    The table below describes each of the remaining superseded 
disclosure requirements that the Commission proposed to amend.\497\
---------------------------------------------------------------------------

    \497\ These proposed amendments are discussed in further detail 
in Section V.B. of the Proposing Release.

------------------------------------------------------------------------
                                    Commission
             Topic                  disclosure      Proposed amendments
                                  requirement(s)
------------------------------------------------------------------------
Published Report Regarding      Item 601(b)(22)    Delete requirement in
 Matters Submitted to Vote of    of Regulation S-   light of changes
 Security Holders.               K (including       made in 2009 to
                                 accompanying       disclose shareholder
                                 inclusion in the   voting results in
                                 Exhibit Table      Forms 10-K and 10-Q
                                 within Item        and Item 5.07 of
                                 601); Item 5 of    Form 8-K.\498\
                                 Form 10-D.
Selected Financial Data for     General            Amend (1) General
 Foreign Private Issuers that    Instruction G(c)   Instruction G(c) to
 Report under IFRS.              and Instruction    delete the
                                 2 to Item 3.A of   requirement to
                                 Form 20-F.         present selected
                                                    financial data in
                                                    accordance with U.S.
                                                    GAAP, and (2)
                                                    Instruction 2 to
                                                    Item 3.A to
                                                    explicitly state
                                                    that selected
                                                    financial data is
                                                    required only for
                                                    the periods for
                                                    which the issuer has
                                                    prepared financial
                                                    statements in
                                                    accordance with IFRS
                                                    because of
                                                    inconsistencies in
                                                    the Form 20-F
                                                    created by 2005
                                                    \499\ and 2007 \500\
                                                    amendments related
                                                    to foreign private
                                                    issuers that report
                                                    under IFRS.
Canadian Regulation A Issuers.  Forms 1-A and 1-   Amend references to
                                 SA.                Regulation S-X in
                                                    Forms 1-A and 1-SA
                                                    to apply only to
                                                    Regulation A issuers
                                                    that report under
                                                    U.S. GAAP as
                                                    Regulation A permits
                                                    Canadian issuers to
                                                    report under IFRS.
------------------------------------------------------------------------


[[Page 50185]]

    Commenters supported the proposed amendments,\501\ and no commenter 
specifically opposed the amendment. Accordingly, we are adopting all of 
the amendments described in the table above as proposed.
---------------------------------------------------------------------------

    \498\ See Proxy Disclosure Enhancements, Release No. 33-9089, 
(Dec. 16, 2009) [74 FR 68334 (Dec. 23, 2009)]. In addition, the Form 
8-K containing the voting results must be filed within four business 
days after the meeting at which the votes took place.
    \499\ See First-Time Application of International Financial 
Reporting Standards, Release No. 33-8567 (Apr. 12, 2005) [70 FR 
20674 (Apr. 20, 2005)].
    \500\ See Acceptance From Foreign Private Issuers of Financial 
Statements Prepared in Accordance With International Financial 
Reporting Standards Without Reconciliation to U.S. GAAP, Release No. 
33-8879, (Dec. 21, 2007) [73 FR 986 (Jan. 4, 2008)] and Instruction 
2 to Item 3.A of Form 20-F.
    \501\ See letters from CAQ; Deloitte; E&Y; Grant; KPMG; PwC; and 
R.G. Associates.
---------------------------------------------------------------------------

D. Non-Existent or Incorrect References and Typographical Errors

    Various Commission disclosure requirements contain incorrect 
references or references to rules that no longer exist. The table below 
describes each of the disclosure requirements that contain these 
references and the related proposed amendments.\502\
---------------------------------------------------------------------------

    \502\ These proposed amendments are discussed in further detail 
in Section V.B.16. of the Proposing Release.

------------------------------------------------------------------------
       Commission disclosure
          requirement(s)                     Proposed amendments
------------------------------------------------------------------------
Rule 5-02 of Regulation S-X,        Delete reference to Rule 4-05 of
 Balance sheets.                     Regulation S-X, which no longer
                                     exists.
Rule 5-02.22(a) of Regulation S-X,  Delete reference to Rule 4-06 of
 Bonds, mortgages and other long-    Regulation S-X, which no longer
 term debt, including capitalized    exists.
 leases.
Rule 7-04.9 of Regulation S-X,      Replace reference to Rule 4-08(g) of
 Income tax expense.                 Regulation S-X that relates to
                                     investments accounted for under the
                                     equity method of accounting with
                                     Rule 4-08(h) that addresses income
                                     tax expense.
Rule 9-03.7(e)(3) of Regulation S-  Delete reference to Rule 4-08(L)(3)
 X, Loans.                           of Regulation S-X, which no longer
                                     exists.
Item 512(a)(4) of Regulation S-K,   Replace reference to Rule 3-19 of
 Undertakings.                       Regulation S-X, which no longer
                                     exists, with Item 8.A of Form 20-F,
                                     similar to changes made in
                                     1999.\503\
Instruction J(1)(e) to Form 10-K..  Clarify that General Instruction
                                     J(1)(e) is reserved because it is
                                     currently blank.
Instruction J(1)(f) to Form 10-K..  Conform description in Instruction
                                     J(1)(f) to the title of Item 5 of
                                     Form 10-K: Market for Registrant's
                                     Common Equity, Related Stockholder
                                     Matters and Issuer Purchases of
                                     Equity Securities.
Paragraph (c)(1)(i) of Part F/S of  Delete reference to ``interim''
 Form 1-A.                           financial statements because this
                                     paragraph addresses the age of both
                                     interim and annual financial
                                     statements.
Forms F-1, F-3, F-4, F-6, F-7, F-   Replace references to the
 8, F-10, F-80, 20-F, and 40-F.      Commission's telephone numbers and
                                     offices with the correct
                                     references.
------------------------------------------------------------------------

    Commenters supported the amendments to correct these references and 
errors,\504\ and no commenter specifically opposed the amendments. 
Accordingly, we are adopting all of the amendments described in the 
table above as proposed.
---------------------------------------------------------------------------

    \503\ See International Disclosure Standards, Release No. 33-
7745 (Sept. 28, 1999) [64 FR 53900 (Oct. 5, 1999)].
    \504\ See letters from CAQ; Deloitte; E&Y; Grant; KPMG; PwC; and 
R.G. Associates.
---------------------------------------------------------------------------

    Subsequent to the Proposing Release, we identified additional 
incorrect references or references to rules that no longer exist that 
also need to be updated, as well as typographical errors. We are 
amending our rules to address these incorrect references and errors in 
this release. We describe those amendments in the table below.

------------------------------------------------------------------------
  Commission disclosure requirement(s)         Technical amendments
------------------------------------------------------------------------
Rule 1-02(w) of Regulation S-X,          Replace the term ``submitted''
 Significant Subsidiary.                  with ``substituted'' which was
                                          inadvertently changed in a
                                          prior technical
                                          amendment.\505\
Rule 9-03(12)(a) of Regulation S-X,      Replace reference to Rule 0-05,
 Deposits.                                which does not exist, with
                                          reference to Rule 9-05 of
                                          Regulation S-X, which provides
                                          disclosure requirements
                                          concerning foreign activities.
Rules 12-21 to 24 of Regulation S-X,     Replace superseded references
 For Face-Amount Certificate Investment   to Rule 6-21 of Regulation S-X
 Companies.                               with correct references to
                                          Rule 6-03 and superseded
                                          reference to Rule 6-21(f) with
                                          Rule 6-03(d).\506\
Rules 12-22 to 24 and 12-27 of           Replace superseded references
 Regulation S-X, For Face-Amount          to Rule 6-22 of Regulation S-X
 Certificate Investment Companies.        with correct references to
                                          Rule 6-06.\507\
Footnote 6 of Rule 12-22 of Regulation   Replace superseded references
 S-X, For Face-Amount Certificate         to Rule 6-23(a) of Regulation
 Investment Companies.                    S-X with correct references to
                                          Rule 6-07(1).\508\
Item 508(e) of Regulation S-K..........  Replace reference to National
                                          Association of Securities
                                          Dealers with successor entity,
                                          the Financial Industry
                                          Regulatory Authority
                                          (``FINRA''). In addition,
                                          replace reference to Rules of
                                          Fair Practice with FINRA
                                          rules.\509\
General Instruction I.C.2 and            Replace outdated reference to
 I.D.1.(c)(iv) of Form S-3.               the title of General
                                          Instruction B.2 of Form S-3.
Instruction 3 of the Instructions to     Remove Instruction 3 which
 the Signatures of Form S-3.              relates to a superseded
                                          transaction requirement.\510\
Item 17(c)(2)(v) and (vi) of Form 20-F   Replace reference to the
 \511\.                                   definition of a ``significant
                                          subsidiary'' in Rule 1-02(v)
                                          of Regulation S-X with correct
                                          reference to Rule 1-
                                          02(w).\512\
Rule 405, Definition of Terms,           Revise the definition of
 Significant Subsidiary.                  ``significant subsidiary'' to
                                          correct for inadvertent
                                          omissions of changes to the
                                          definition and conform to the
                                          updated definition in Rule 1-
                                          02(w) of Regulation S-X.\513\

[[Page 50186]]

 
Rule 12b-2, Definitions, Significant     Revise the definition of
 Subsidiary.                              ``significant subsidiary'' to
                                          correct for inadvertent
                                          omissions of changes to the
                                          definition and conform to the
                                          updated definition in Rule 1-
                                          02(w) of Regulation S-X.\514\
Rule 12g-3, Registration of securities   Revise Rules 3-04, 12g-3(a)(2),
 of successor issuers under section       12g-3(b)(2), and 12g-3(c)(2)
 12(b) or 12(g) of the Securities         for punctuation errors.
 Exchange Act of 1934 and Rule 3-04 of
 Regulation S-X.
Rule 3-04, Rule 4-08(m)(2)(ii), Rule 5-  Correct typographical errors.
 03(b)(1), Rule 7-03(13)(a)(2), Rule 6-
 09(4)(b), Rule 9-03(10)(3), Rule 9-
 03(10)(4)(a), Rule 10-01(b)(7), and
 Rule 12-24 of Regulation S-X.
Item 406(d) and Item 601(b)(14) of       Replace superseded references
 Regulation S-K.                          to Item 10 of Form 8-K with
                                          correct references to Item
                                          5.05 of Form 8-K.\515\
Form 10, Subpart C of Forms, Securities  Remove outdated reference to
 Exchange Act of 1934.                    Form 10-SB in Form 10 heading.
------------------------------------------------------------------------

VI. Other Matters
---------------------------------------------------------------------------

    \505\ See Technical Amendments to Rules, Forms, Schedules, and 
Codification of Financial Reporting Policies, Release No. 33-9026 
(Apr. 15, 2009) [74 FR 18612 (Apr. 23, 2009)].
    \506\ In 1982, the Commission replaced all prior Article 6 
provisions, including the ones referenced here, with revised Rules 
6-01 through 6-10 of Regulation S-X. However, the Commission did not 
also update the references to Article 6 rules in Article 12 of 
Regulation S-X. See Financial Statement Requirements for Registered 
Investment Companies, Release 33-6442 (Dec. 21, 1982) [47 FR 56835 
(Dec. 21, 1982] (``1982 Investment Company Release'').
     Reference to Rule 6-21(f) of Regulation S-X is made in Footnote 
4 of both Rule 12-21 and Rule 12-22, and Footnote 5 of Rule 12-24. 
Reference to Rule 6-21 of Regulation S-X is made in Footnote 9 of 
Rule 12-23.
    \507\ See 1982 Investment Company Release.
    \508\ See 1982 Investment Company Release.
    \509\ The Commission approved the creation of Financial Industry 
Regulatory Authority (``FINRA'') through the consolidation of the 
member firm regulatory functions of the NASD and NYSE Regulation, 
Inc., a wholly-owned subsidiary of New York Stock Exchange LLC in 
2007.
    See Self-Regulatory Organizations; National Association of 
Securities Dealers, Inc.; Order Approving Proposed Rule Change to 
Amend the By-Laws of NASD to Implement Governance and Related 
Changes to Accommodate the Consolidation of the Member Firm 
Regulatory Functions of NASD and NYSE Regulation, Inc., Release No. 
34-56145 (Jul. 26, 2007) [72 FR 42169 (Aug. 1, 2007]; File No. SR-
NASD-2007-023 (July 26, 2007).
    \510\ Instruction 3 of Form S-3 refers to eligibility based on 
the assignment of a securities rating pursuant to Transaction 
Requirement B.5. of Form S-3. The Transaction Requirements of Form 
S-3 no longer relate to securities ratings. See Asset-Backed 
Securities Disclosure and Registration, Release No. 33-9638 (Sept. 
4, 2014) [79 FR 57184 (Sept. 24, 2014)].
    \511\ Items 17(c)(2)(v) and (vi) include requirements for 
financial statements on a basis of accounting other than U.S. GAAP 
that are furnished pursuant to Rule 3-05 or 3-09 of Regulation S-X.
    \512\ Rule 1-02(v) defines the term ``share,'' while Rule 1-
02(w) defines ``significant subsidiary.''
    \513\ The definition of ``significant subsidiary'' in Rule 1-
02(w) of Regulation S-X, Securities Act Rule 405 and Exchange Act 
Rule 12b-2 are generally intended to be conformed to each other. 
See, e.g., Technical Amendments to Rules and Forms, Release No. 33-
6584 (Jun. 6, 1985) [50 FR 25214 (Jun. 18, 1985)]. Two releases 
inadvertently changed the definitions of ``significant subsidiary'' 
in some, but not all of these three rules, resulting in a lack of 
conformity. See Acceptance from Foreign Private Issuers of Financial 
Statements Prepared in Accordance with International Financial 
Reporting Standards Without Reconciliation to U.S. GAAP, Release No. 
33-8879 (Dec. 21, 2007) [73 FR 986 (Jan. 4, 2008)], and Technical 
Amendments to Rules, Forms, Schedules, and Codification of Financial 
Reporting Policies, Release No. 33-9026 (Apr. 15, 2009) [77 FR 18612 
(Apr. 23, 2009)]. Computational Note 3 to the definition of 
``significant subsidiary'' is only in Rule 1-02(w) of Regulation S-
X. See Financial Statements and Regulation S-X; Technical Amendments 
to Rules and Forms, Release No. 33-6612 (Nov. 21, 1985) [50 FR 49529 
(Dec. 3, 1985)]. Computational Note 3 relates solely to issues 
applicable to Regulation S-X and the use of Rule 1-02(w) therein and 
is not relevant to the uses of the definition in Rule 405 and Rule 
12b-2. We are therefore not including Computational Note 3 in Rule 
405 and Rule 12b-2.
    \514\ See supra note 513.
    \515\ See Additional Form 8-K Disclosure Requirements and 
Acceleration of Filing Date, Release No. 33-8400 (Mar. 16, 2004) [69 
FR 15594 (Mar. 25, 2004)].
---------------------------------------------------------------------------

    If any of the provisions of these rules, or the application of 
these provisions to any person or circumstance, is held to be invalid, 
such invalidity shall not affect other provisions or application of 
such provisions to other persons or circumstances that can be given 
effect without the invalid provision or application.

VII. Economic Analysis

    We are adopting amendments to certain of our disclosure 
requirements that have become redundant, duplicative, overlapping, 
outdated, or superseded, in light of other Commission disclosure 
requirements, U.S. GAAP, IFRS, or changes in the information 
environment. These amendments are the result of the staff's ongoing 
evaluation of our disclosure requirements \516\ and also are part of 
our efforts to implement Title LXXII, Section 72002(2) of the FAST Act.
---------------------------------------------------------------------------

    \516\ See supra note 12.
---------------------------------------------------------------------------

    We are sensitive to the costs and benefits of the amendments. In 
this section, we examine the current baseline, which consists of both 
the regulatory framework of disclosure requirements in existence today 
and the current use of such disclosure by investors and other users, 
and discuss the potential benefits and costs of the amendments, 
relative to this baseline, and their potential effects on efficiency, 
competition, and capital formation.\517\
---------------------------------------------------------------------------

    \517\ Section 2(b) of the Securities Act [15 U.S.C. 77b(b)], 
Section 3(f) of the Exchange Act [17 U.S.C. 78c(f)], and Section 
2(c) of the Investment Company Act [15 U.S.C. 80a-2(c), and 15 
U.S.C. 80b-2(c)] require the Commission, when engaging in rulemaking 
where it is required to consider or determine whether an action is 
necessary or appropriate in the public interest, to consider, in 
addition to the protection of investors, whether the action will 
promote efficiency, competition, and capital formation. Further, 
Section 23(a)(2) of the Exchange Act [17 U.S.C. 78w(a)(2)] requires 
the Commission, when making rules under the Exchange Act, to 
consider the impact that the rules would have on competition, and 
prohibits the Commission from adopting any rule that would impose a 
burden on competition not necessary or appropriate in furtherance of 
the Exchange Act.
---------------------------------------------------------------------------

    The Proposing Release requested comment on all aspects of the 
economic effects of the proposed amendments, including the costs and 
benefits and possible alternatives to the proposed amendments. The 
Commission also solicited comment in the Proposing Release on whether 
the proposed amendments, if adopted, would promote efficiency, 
competition, or capital formation, or have an impact or burden on 
competition. We received a number of comments addressing the potential 
economic impacts of the proposed amendments, which we discuss below.

A. Baseline and Affected Parties

    Our baseline includes the current disclosure requirements in 
Regulation S-K, Regulation S-X, and other Commission rules and forms 
promulgated under the Securities Act, the Exchange Act, and the 
Investment Company Act. The parties affected by the amendments include 
investors and other users, auditors, and issuers. Additionally, 
entities other than issuers may be affected (e.g., significant 
acquirees for which financial statements are required under Rule 3-05 
of Regulation S-X, significant equity method investees for which 
financial statements are required under Rule 3-09

[[Page 50187]]

of Regulation S-X, broker-dealers, and NRSROs).
    The amendments affect both domestic issuers and foreign private 
issuers.\518\ We estimate that approximately 7,570 issuers that file on 
domestic forms \519\ and 745 foreign private issuers that file on F-
forms will be affected by the amendments. Among the issuers that file 
on domestic forms, 25.6% are large accelerated filers, 18.6% are 
accelerated filers, 19.3% are non-accelerated filers, and 36.2% are 
SRCs. About 23.7% of issuers that file on domestic forms are EGCs.\520\ 
Among the foreign private issuers that file on F-forms, 40.4% are large 
accelerated filers, 22.6% are accelerated filers, and 37.0% are non-
accelerated filers.\521\ About 19.8% of foreign private issuers that 
file on Forms 20-F and 40-F are EGCs. With respect to foreign private 
issuer accounting standards, approximately 38.5% of foreign private 
issuers report under U.S. GAAP, 60.5% report under IFRS, and 
approximately 1% report under Another Comprehensive Body of Accounting 
Principles with a reconciliation to U.S. GAAP.
---------------------------------------------------------------------------

    \518\ The number of domestic and foreign private issuers 
affected by the proposals is estimated as the number of unique 
companies, identified by Central Index Key (CIK), that filed Forms 
10-K, Form 10-Q, Form 20-F, and Form 40-F or an amendment thereto 
with the Commission during calendar year 2017. The estimates for the 
percentages of SRCs, accelerated filers, large accelerated filers, 
and non-accelerated filers are based on information from Form 10-K, 
Form 20-F, and Form 40-F. The estimates for the percentages of 
foreign private issuers' basis of accounting used to prepare the 
financial statements are calculated from the information in Forms 
20-F and 40-F. These estimates do not include issuers that filed 
only initial registration statements during calendar year 2017, 
which will also be affected by the amendments.
    \519\ This number includes fewer than 25 foreign issuers that 
file on domestic forms, approximately 100 business development 
companies, and a portion of the approximately 12,000 investment 
advisers.
    \520\ Staff determined whether a registrant claimed EGC status 
by parsing several types of filings (e.g., Forms S-1, S-1/A, 10-K, 
10-Q, 8-K, 20-F/40-F, and 6-K) filed by that registrant, with 
supplemental data drawn from Ives Group Audit Analytics.
    \521\ Approximately 15.9% of foreign private issuers that file 
on F-forms are Canadian issuers that file on Form 40-F under the 
multijurisdictional disclosure system. Form 40-F does not require 
disclosure of large accelerated, accelerated, or non-accelerated 
filer status. Accordingly, these amounts exclude foreign private 
issuers that file on Form 40-F.
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    Certain amendments also affect requirements applicable to:
    <bullet> Fewer than 600 asset-backed issuing entities.\522\
---------------------------------------------------------------------------

    \522\ The number of asset-backed issuers is based on the number 
of unique companies with the SIC code of 6189 that filed Forms 10-K 
during calendar year 2017.
---------------------------------------------------------------------------

    <bullet> Issuers that rely on Regulation A exemptions.\523\
---------------------------------------------------------------------------

    \523\ Between June 19, 2015 and December 31, 2017, approximately 
182 Regulation A offerings have been qualified. Among these 
qualified offerings, 57 offerings are Tier I and 125 offerings are 
Tier II. Over the same time period, approximately 262 Regulation A 
offering statements have been filed. Among these filed offerings, 94 
offerings are Tier I and 168 offerings are Tier II. Withdrawals and 
post-qualification amendments are excluded. There are annual and 
semi-annual reporting requirements for Tier II offerings.
---------------------------------------------------------------------------

    <bullet> Approximately 4,100 investment companies, including 
approximately 100 business development companies, and the portion of 
the approximately 12,600 investment advisers to which Regulation S-X 
and Regulation S-K apply.\524\
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    \524\ The number of registered investment companies, excluding 
business development companies, is estimated from the number of 
registered active investment companies in EDGAR as of the end of 
December 2017. The number of business development companies is based 
on the number of unique companies that filed Forms 10-K and Forms 
10-Q whose reporting periods end in the last quarter of 2017, 
adjusted by the number of active business development companies that 
did not submit such filings and late filers. The number of 
investment advisers is based on data from Investment Adviser 
Registration Depository (IARD).
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    <bullet> Up to approximately 3,883 registered broker-dealers.\525\
---------------------------------------------------------------------------

    \525\ The amendments to Exchange Act Rules 17a-5, 17a-12, and 
17h-1T, and Part III of Form X-17A-5 collectively affect 
approximately 3,883 broker-dealers who must file periodic reports 
with the Commission. The amendments to Part II of Form X-17A-5 
affect up to approximately 467 broker-dealers, based on the number 
of broker-dealers who filed Part II as of December 31, 2017. The 
amendments to Part IIA of Form X-17A-5 affect approximately 3,413 
broker-dealers, based on the number of broker-dealers who filed Part 
IIA as of December 31, 2017. The amendments to Part IIB of Form X-
17A-5 affect approximately three broker-dealers, based on the number 
of broker-dealers who filed Part IIB as of March 31, 2018.
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    <bullet> 10 NRSROs.
    This release also considers certain Commission disclosure 
requirements that overlap with, but require information incremental to, 
U.S. GAAP and refers some of these incremental requirements to the FASB 
for potential incorporation into U.S. GAAP. While a referral alone has 
no effect on issuers, any changes to U.S. GAAP that may result from 
such a referral would potentially affect all entities that report under 
U.S. GAAP, including SRCs and issuers relying on Regulation A or 
Regulation Crowdfunding, as well as entities that are outside the scope 
of our regulatory authority.

B. Anticipated Benefits and Costs

    In this section, we discuss the anticipated economic benefits and 
costs of the amendments in each category of redundant, duplicative, 
overlapping, outdated, and superseded disclosure requirements.
1. Redundant or Duplicative Requirements
    We are eliminating certain Commission disclosure requirements that 
require substantially the same disclosures as U.S. GAAP, IFRS, or other 
Commission disclosure requirements. In response to commenters' 
suggestions, we are retaining some of the disclosure requirements that 
we proposed to modify or eliminate on the basis that they required 
redundant or duplicative disclosure and referring one of these 
disclosure requirements to the FASB for potential incorporation into 
U.S. GAAP.
    Elimination of Commission disclosure requirements that are 
redundant or duplicative with U.S. GAAP, IFRS, or other Commission 
disclosure requirements simplifies issuer compliance efforts by 
reducing the number of rules to consider. To the extent that the 
redundant or duplicative requirements result in substantially the same 
disclosures, elimination of these requirements also potentially 
benefits investors and other users. Academic research suggests that 
duplication is associated with less efficient price discovery \526\ and 
that individuals invest more in firms with more concise financial 
disclosures.\527\ Thus, to the extent that the amendments alleviate 
duplication and do not affect the completeness of financial 
disclosures,\528\ they could result in improved price discovery, 
enhance the allocative efficiency of the market, and facilitate capital 
formation.
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    \526\ See A. Cazier and R. Pfeiffer, Say Again? Assessing 
Redundancy in 10-K Disclosures, Journal of Financial Reporting, 
2(1), 2017 at 107-131.
    \527\ See A. Lawrence, Individual Investors and Financial 
Disclosure, Journal of Accounting and Economics 56, 2013 at 13-147.
    \528\ Recent academic research has suggested that more complete 
financial disclosures benefit investors and firms. See, e.g., C. 
Leuz and P. Wysocki, The Economics of Disclosure and Financial 
Reporting Regulation: Evidence and Suggestions for Future Research. 
Journal of Accounting Research 54.2, 2016 at 525-622.
---------------------------------------------------------------------------

    The potential adverse effects of the amendments on investors and 
other users are likely to be limited as these parties would continue to 
receive substantially the same information from issuers. However, 
potential costs to investors may arise if U.S. GAAP were to change in 
such a way that information previously required by Commission 
disclosure requirements is no longer provided under U.S. GAAP. The 
potential for such changes may be mitigated by the FASB's transparent, 
public standard-setting process and the Commission's oversight of the 
FASB and the ability of the Commission to require such information 
through

[[Page 50188]]

rulemaking.\529\ In addition, issuers remain liable for their 
disclosures, including the omission of any information required to make 
the disclosures not misleading.
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    \529\ See discussion in Section I.D.
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2. Overlapping Requirements
    The Proposing Release identified Commission disclosure requirements 
that are related to, but not the same as, U.S. GAAP, IFRS, or other 
Commission disclosure requirements. For certain of these overlapping 
requirements, we are: (a) Deleting the overlapping Commission 
disclosure requirements or (b) integrating them with other related 
Commission disclosure requirements. For certain other overlapping 
requirements, we are retaining the requirements and referring them to 
the FASB for potential incorporation into U.S. GAAP. We discuss below 
the economic effects of the amendments in this category and provide 
examples of requirements affected by the amendments.
    First, some changes may give rise to Disclosure Location 
Considerations. Where we proposed to relocate existing disclosure from 
outside the financial statements to within the financial statements, a 
number of commenters expressed reservations about the relocation 
because it would create additional audit requirements for issuers.\530\ 
Issuers may incur additional costs to comply with these audit and/or 
interim review and ICFR requirements, to the extent the relocation 
results in additional information included in the financial statements. 
A few commenters stated that investors would benefit from the annual 
audit and interim review of the disclosure.\531\ Investors and other 
users may consider the information more reliable because of the audit 
and/or interim review requirements.\532\
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    \530\ See e.g., letters from CGCIV; EEI and AGA; and USCC.
    \531\ See letters from CII and Ohio CPAs.
    \532\ In contrast, there are a few amendments that relocate 
disclosure from inside the financial statements to outside the 
financial statements. In this case, the potential economic effects 
would be opposite to the effects discussed above, reducing costs for 
issuers, but potentially decreasing benefits to users of the 
information to the extent that the information is considered less 
reliable.
---------------------------------------------------------------------------

    The relocation of existing disclosures may affect the extent of 
information that investors receive. Since the PSLRA does not provide a 
safe harbor for forward-looking information located within the 
financial statements, issuers may be less likely to voluntarily 
supplement those disclosures with forward-looking information in the 
financial statements as compared with disclosures made outside the 
audited financial statements. A number of commenters expressed concern 
regarding liability issues for preparers that would arise from the loss 
of safe harbor provisions.\533\ However, issuers retain the option of 
providing forward-looking information outside the financial statements 
and may be required to disclose the information in certain 
circumstances.\534\
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    \533\ See e.g., letters from CAQ; CalPERS; Crowe; Davis; E&Y; 
FEI; PwC; and R&G Associates.
    \534\ See Commission Guidance Regarding Management's Discussion 
and Analysis of Financial Condition and Results of Operations, 
Release No. 33-8350 (Dec. 19, 2003) [68 FR 75056]. For example, Item 
303 of Regulation S-K requires disclosure of other information when 
an issuer believes it to be necessary to an understanding of its 
financial condition, changes in financial condition, and results of 
operations.
---------------------------------------------------------------------------

    The relocation of existing disclosures from outside the financial 
statements to within the financial statements will also subject the 
disclosures to XBRL tagging requirements. Commenters expressed concern 
about XBRL tagging requirements because of additional administrative 
burdens and potential costs on issuers to comply with these 
requirements.\535\ A few commenters believed that XBRL tagging 
requirements would be of benefit to investors.\536\ Investors and other 
users may benefit from more readily-available information in structured 
formats because of the increased use of electronic data analysis and 
search tools. In general, we believe the costs of applying XBRL data 
tagging to additional information likely would be relatively low, as 
issuers already have implemented software enabled processes and 
controls to structure previously mandated disclosures.\537\
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    \535\ See e.g., letters from CGCIV; EEI and AGA; and USCC.
    \536\ See letters from CII and Ohio CPAs.
    \537\ According to a recently released AICPA and XBRL US survey, 
the total cost of XBRL preparation among small companies in 2017 
averaged $5,476 per year. See Research shows XBRL filing costs are 
lower than expected, AICPA, https://www.aicpa.org/InterestAreas/FRC/AccountingFinancialReporting/XBRL/DownloadableDocuments/XBRL%20Costs%20for%20Small%20Companies.pdf. The incremental costs of 
tagging additional information under the amendments would be much 
lower and depend on the mix of incremental disclosures (e.g., 
narrative and numeric). The tagging cost associated with narrative 
disclosures would be minimal since these disclosures are tagged at 
the block text level and registrants already block tag other 
narrative disclosures in their filings. Numeric disclosures would 
need to be individually tagged, and therefore, any incremental costs 
would be directly associated with the volume of incremental numeric 
disclosures.
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    Furthermore, the relocation of existing disclosures, for example, 
from outside the financial statements to within the financial 
statements or from the face of the financial statements to the notes to 
the financial statements, may also affect the prominence of the 
disclosures. Some academic research provides indirect evidence that 
users may treat information differently depending on the location of 
the disclosure. For instance, research shows a weaker relation between 
equity prices and disclosed items in the notes to the financial 
statements versus recognized items on the face of the financial 
statements.\538\ Additionally, experimental research on laboratory 
participants shows that positioning pro-forma (non-GAAP) earnings 
earlier than U.S. GAAP earnings in an earnings announcement influences 
a nonprofessional investor's judgment.\539\ Other research on the 
effect of disclosure location shows recognized and disclosed items are 
treated equivalently by investors.\540\

[[Page 50189]]

Commenters that provided feedback on relocation prominence 
considerations indicated that physical location of the disclosure is 
less relevant in today's environment, given the use of electronic data 
analysis and search tools.\541\
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    \538\ See, e.g., R. M. Harper Jr., W. G. Mister, and J. R. 
Strawser, The Impact of New Pension Disclosure Rules on Perceptions 
of Debt, Journal of Accounting Research 25, 1987 at 327 (showing 
that financial statement users do not treat pension information 
included in a note to the financial statements as they would a 
balance sheet liability); C. Viger, R. Belzile, and A. A. 
Anandarajan, Disclosure versus Recognition of Stock Option 
Compensation: Effect on the Credit Decisions of Loan Officers, 
Behavioral Research in Accounting 20, 2008 at 93-113 (showing that 
loan officers are more affected by the same earnings recognized in 
the income statement than disclosed in the notes to the financial 
statements); M. M[uuml]ller, E.J. Riedl, and T. Sellhorn, 
Recognition versus Disclosure of Fair Values, The Accounting Review 
90, 2015 at 2411-2447 (showing a lower association between equity 
prices and disclosed investment property fair values relative to 
recognized investment property fair values and finding that reduced 
information processing costs and higher readability mitigates the 
discount applied to disclosed fair values); D. Aboody, Recognition 
versus Disclosure in the Oil and Gas Industry, Journal of Accounting 
Research 34, 1996, at 21-32 (using the disclosure requirements for 
oil and gas companies, which requires the firm-specific effect of a 
macroeconomic event to be recognized in the financial statements for 
firms adopting the full cost method, but only requires disclosure in 
the notes to the financial statements for firms following the 
successful efforts method, to show that the effect of note 
disclosure on price differs from the effect of recognition on 
price); and H. Espahbodi, P. Espahbodi, Z. Rezaee, and H. Tehranian, 
Stock Price Reaction and Value Relevance of Recognition versus 
Disclosure: The Case of Stock-Based Compensation, Journal of 
Accounting and Economics 33 (3), 2002 at 343-373 (examining the 
equity price reaction to the announcements related to accounting for 
stock-based compensation to assess the value relevance of 
recognition on the face of the financial statements versus 
disclosure in the notes to the financial statements and concluding 
that recognition and disclosure are not substitutes).
    \539\ See, e.g. W. B. Elliot, Are Investors Influenced by Pro 
Forma Emphasis and Reconciliations in Earnings Announcements? The 
Accounting Review 81 (1), 2006 at 113-133.
    \540\ P. Y. Davis-Friday, L. B. Folami, C. S. Liu, and H. F. 
Mittelstaedt, The Value Relevance of Financial Statement Recognition 
vs. Disclosure: Evidence from SFAS No. 106, The Accounting Review. 
74 (4), 1999 at 403-423 (testing whether market agents treat 
disclosed and recognized amounts equivalently by examining firms' 
obligations for postretirement benefits other than pensions before 
and after formal recognition). This research focuses on a sample of 
229 firms that elected disclosure of the postretirement benefit 
liability in the year(s) prior to adoption of SFAS 106. The authors 
find that both post-retirement benefit liabilities disclosed prior 
to adoption of SFAS No. 106, Employers' Accounting for 
Postretirement Benefits Other than Pensions, and those recognized 
subsequent to adoption significantly contribute to explaining stock 
prices, thus suggesting that market agents treat disclosed and 
recognized amounts equivalently.
    \541\ See, e.g. letters from CAQ; Deloitte; and EY.
---------------------------------------------------------------------------

    Second, besides the Disclosure Location Considerations discussed 
above, some deletions may change the mix of information available to 
investors. An example of this is the revision to require dividend 
restriction and related disclosures when material, rather than using 
the bright line of when restricted net assets exceed a 25 percent 
threshold.\542\ Bright line thresholds set forth explicit quantitative 
criteria for disclosure and may result in more or less detail than a 
materiality standard. Several commenters were supportive of a more 
principles-based disclosure framework.\543\ These commenters stated 
that materiality is a better disclosure standard because certain of the 
existing thresholds result in disclosure that in their view is 
immaterial to investors and costly to provide. Other commenters opposed 
the amendment, indicating that removing bright line thresholds may 
result in the elimination of disclosure relevant to investors or 
diminish comparability.\544\
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    \542\ Rule 4-08(e)(3) of Regulation S-X.
    \543\ See, e.g. letters from CAQ; CGCIV; Clearing House; Davis; 
FEI; and USCC.
    \544\ See, e.g. letters from CalPERS; Public Citizen; and R.G. 
Associates.
---------------------------------------------------------------------------

    The economic effect of replacing a bright line threshold with a 
disclosure standard based on materiality depends on the preferences of 
investors and other users. The bright line threshold may be easier to 
apply and could enhance the comparability and verifiability of 
information; however, a materiality standard may permit more tailored 
information to be presented and potentially avoid certain distortions 
that can arise from the use of a bright line threshold.
a. Deletion of Commission Disclosure Requirements
    We are eliminating certain Commission disclosure requirements that 
we have determined: (1) Require disclosures that convey reasonably 
similar information to or are encompassed by the disclosures that 
result from compliance with the overlapping U.S. GAAP, IFRS, or 
Commission disclosure requirements or (2) require disclosures 
incremental to the overlapping U.S. GAAP or Commission disclosure 
requirements and are no longer useful to investors.
    The effects of the deletion of these overlapping disclosure 
requirements depend on the level of overlap between the requirements. 
For investors, eliminating overlapping requirements may reduce search 
costs and lead to more efficient information processing. This, in turn, 
may lead to better informed investment decisions and an increase in 
allocative efficiency. However, to the extent eliminating a requirement 
results in a loss of information incremental to the overlapping 
requirement, it could negatively impact investors that use the 
incremental information. For issuers, eliminating overlapping 
requirements may reduce the costs of preparation of the disclosure by 
reducing the need to reconcile similar requirements. Requirements that 
are clearer and less repetitive may additionally make the disclosure 
easier to prepare and result in disclosure that is more responsive and 
easier to understand.
    The examples below illustrate the potential effects of the 
elimination of Commission disclosure requirements on issuers, 
investors, and other users.
    An example of an overlapping disclosure requirement that we are 
deleting because it results in only incremental disclosure is Item 
101(d)(3) of Regulation S-K, which requires risk disclosures outside 
the financial statements relating to geographic areas. These 
disclosures are largely encompassed by the disclosures that result from 
compliance with other parts of Regulation S-K. More specifically, Item 
101(d)(3) requires disclosure of ``any'' risks associated with an 
issuer's foreign operations. Item 503(c) of Regulation S-K similarly 
requires disclosure of ``significant'' risk factors. Item 101(d)(3) 
also requires disclosures of a segment's dependence on foreign 
operations, which is similar to the requirement in Item 303(a) of 
Regulation S-K, requiring disclosure of trends and uncertainties by 
segment, if appropriate to an understanding of the issuer as a whole. 
We are also amending Item 303(a) to add an explicit reference to 
``geographic areas'' to reduce the likelihood of loss of information 
due to the deletion of Item 101(d)(3).
    Since Item 101(d)(3) is more expansive than the similar 
requirements in other parts of Regulation S-K, the economic effects of 
the deletion would depend on the nature of the incremental information 
required by Item 101(d)(3). Research shows that international corporate 
diversification may affect issuers' stock market performance \545\ and 
valuation.\546\ Therefore, some investors may want incremental 
information on foreign operations that is not covered by the amended 
Item 303(a) or the requirements of Item 503(c) to disclose 
``significant'' risk factors. Deletion of Item 101(d)(3) may adversely 
affect this group of investors. However, if the requirements in Item 
101(d)(3), such as the requirement to disclose ``any'' risk associated 
with foreign operations, tend to yield immaterial disclosures, deletion 
of Item 101(d)(3) will benefit investors by eliminating immaterial 
information, reducing search costs, and facilitating more efficient 
information processing.\547\ More efficient information processing 
could in turn result in improved price discovery and enhance the 
allocative efficiency of the capital markets. In addition, to the 
extent an issuer spends less time preparing its disclosures, investors 
will benefit from lower preparation costs although savings could be 
modest, if any.\548\
---------------------------------------------------------------------------

    \545\ See T. Agmon and D. R. Lessard, Investor Recognition of 
Corporate International Diversification, Journal of Finance 32(4), 
1977 at 1049-1055 (arguing that multinational firms have an 
advantage relative to single-country firms because of their ability 
to overcome the barriers to portfolio capital flows). The empirical 
results of the study support the notion that U.S. investors are 
attentive to international composition of the activities of U.S.-
based corporations.
    \546\ See V. Errunza and L. Senbet, International Corporate 
Diversification, Market Valuation and Size-Adjusted Evidence, 
Journal of Finance 34, 1984 at 727-745 (developing a model where 
international corporate intermediation through direct foreign 
investment can undo barriers to international capital flows faced by 
individual investors and lead to a positive valuation effect 
associated with the degree of international involvement). See also 
R. Morck and B. Yeung, Why Investors Value Multinationality, Journal 
of Business, 64 (2), 1991 at 165-187 (supporting the notion that 
multinational corporations have intangible assets that can be used 
internationally.)
    \547\ See D. Hirshleifer and S. Teoh, Limited Attention, 
Information Disclosure, and Financial Reporting, Journal of 
Accounting and Economics 36, 2003 at 337-386 (showing that with 
partially attentive investors, means of presenting information may 
have an impact on stock price reactions, mis-valuation, long-run 
abnormal returns, and corporate decisions.)
    \548\ See Section VIII.B.
---------------------------------------------------------------------------

    Another example of an overlapping disclosure requirement that 
involves incremental information is Item 303(b) of Regulation S-K. 
Instruction 5 to Item 303(b) requires seasonality disclosures outside 
of the financial statements in interim periods. U.S. GAAP similarly 
requires seasonality disclosures, but this disclosure is required in 
the notes to the

[[Page 50190]]

interim financial statements.\549\ Eliminating the specific seasonality 
disclosure requirements in Item 303(b) may result in the removal of 
this information from MD&A. Investors and other users will only have 
this disclosure available in the notes to the financial statements, 
unless issuers provide it in both locations either because the issuer 
views the seasonality disclosure as appropriate or necessary to an 
understanding of its business or financial condition under Item 303(a) 
or the issuer provides it voluntarily. In addition, investors may 
receive less supplemental forward-looking information about seasonality 
because the PSLRA safe harbor is not available for such information 
when it is disclosed in the notes to the financial statements. To the 
extent that the seasonality disclosures in MD&A and in the financial 
statements are redundant, eliminating the requirements in Item 303(b) 
would reduce search costs and facilitate more efficient information 
processing. In addition, to the extent an issuer spends less time 
preparing its disclosures, investors will benefit from lower 
preparation costs although savings could be modest, if any.\550\
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    \549\ ASC 270-10-45-11 states: Revenues of certain entities are 
subject to material seasonal variations. To avoid the possibility 
that interim results with material seasonal variations may be taken 
as fairly indicative of the estimated results for a full fiscal 
year, such entities are required to disclose the seasonal nature of 
their activities, and should consider supplementing their interim 
reports with information for 12-month periods ended at the interim 
date for the current and preceding years.
    \550\ See Section VIII.B.
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    In addition to the economic effects of changing disclosure location 
and bright line disclosure thresholds, potential costs to investors may 
arise if U.S. GAAP were to change in such a way that information 
previously required by Commission disclosure requirements is no longer 
provided under U.S. GAAP. As noted above, the potential for such 
changes may be mitigated by the FASB's transparent, public standard-
setting process and the Commission's oversight of the FASB.
b. Integration of Commission Disclosure Requirements
    We are amending and integrating certain Commission disclosure 
requirements that overlap with, but require information incremental to, 
other Commission disclosure requirements. In addition to the economic 
effects of changing disclosure location and bright line disclosure 
thresholds, integration of overlapping Commission disclosure 
requirements simplifies issuer compliance efforts by reducing the 
number of rules to consider and the extent of disclosures that need to 
be provided. Integration of these requirements should also facilitate 
more efficient information processing by investors.
    One example to illustrate the potential effects of the integration 
of Commission disclosure requirements is Item 101(d)(4) of Regulation 
S-K. Item 101(d)(4) requires, when interim financial statements are 
presented, a discussion of the facts that indicate that the three-year 
financial data for geographic performance may not be indicative of 
current or future operations. This requirement is similar to 
requirements in Instruction 3 to Item 303(a) of Regulation S-K and 
Instruction 4 to Item 303(b) of Regulation S-K to identify elements of 
income which are not necessarily indicative of the issuer's ongoing 
business, except that there is no explicit reference to ``geographic 
areas'' in the Item 303 instructions. To integrate the requirements 
into one location in Regulation S-K, we are eliminating Item 101(d)(4) 
and amending Item 303(a) to explicitly refer to ``geographic areas'' 
and clarify that the geographic discussion is required when management 
believes such discussion would be appropriate to an understanding of 
the business. A number of commenters supported the proposed 
amendment.\551\ As noted above, integration of these requirements 
should facilitate more efficient information processing by investors. 
However, some investors may be adversely affected if they prefer 
geographic performance information to be presented with other business 
description disclosures.
---------------------------------------------------------------------------

    \551\ See, e.g., letters from CAQ; Deloitte; E&Y; Grant; KPMG; 
and PwC.
---------------------------------------------------------------------------

c. FASB Referral of Commission Disclosure Requirements
    We are referring certain Commission disclosure requirements that 
overlap with, but require information incremental to, U.S. GAAP 
requirements to the FASB for potential incorporation into U.S. GAAP. 
While the referral alone has no direct impact on investors and issuers, 
any future FASB standard-setting activities, as well as any Commission 
rulemaking that may result from such a referral, could potentially 
affect investors, issuers, auditors, other users of financial 
statements, as well as other entities that report under U.S. GAAP. Any 
potential effects of standard-setting activities arising out of these 
referrals could be considered and taken into account by the Commission, 
and could be addressed through Commission rulemaking. Additionally, the 
potential effects may be mitigated by the FASB's transparent, public 
standard-setting process and the Commission's oversight of the FASB.
3. Outdated Requirements
    We are eliminating certain outdated Commission disclosure 
requirements that have become obsolete as a result of the passage of 
time or changes in the regulatory, business, or technological 
environment. Elimination of outdated disclosure requirements should 
simplify issuer compliance efforts by reducing the number of rules to 
consider and the extent of disclosures that need to be provided. In 
some cases, the amendments require additional disclosure of information 
to avoid any loss of information or decrease the burden for investors 
to retrieve such information from other sources. Such information is 
expected to be readily available at minimal to no cost to issuers.
    The effect of these amendments on investors depends on the use of 
the information. If investors do not use the deleted information to 
make investment and voting decisions, these amendments may have little 
to no effect on investors, or the amendments may have a positive effect 
on investors since elimination of such disclosures may reduce search 
costs and facilitate more efficient information processing. This, in 
turn, could enhance the allocative efficiency of the market and 
facilitate capital formation. If the information is used by investors 
but can be retrieved from alternative sources with little or no cost to 
investors (e.g., share prices),\552\ the effects of these amendments on 
investors should be minimal. In other cases where the information is 
less readily available from alternative sources (e.g., average exchange 
rates for each of the five most recent financial years and any 
subsequent interim period),\553\ these amendments may make it more 
burdensome for investors and other users to access the information, 
with a potentially adverse effect on the cost of capital of issuers. We 
do not expect these potential adverse effects to be significant as the 
amendments delete only requirements that call for information that is 
either no longer relevant or is readily available or can be derived 
from alternative sources, and which may, in fact, be more robust than 
the information currently required to be disclosed. As noted above, 
some amendments require disclosure of additional information (e.g., the 
issuer's

[[Page 50191]]

internet address, if available) to mitigate any loss of information or 
decrease the burden for investors.
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    \552\ Item 201(a)(1) of Regulation S-K.
    \553\ Item 3.A.3 of Form 20-F.
---------------------------------------------------------------------------

    One example of an outdated disclosure requirement is Item 201(a)(1) 
of Regulation S-K. Item 201(a)(1) requires the disclosure of historical 
market price information. We are substituting this disclosure with 
disclosure of the issuer's ticker symbol, which can be used to obtain 
current and historical information on stock price, among other 
information. This additional disclosure may help reduce any loss of 
information as well as facilitate access to additional information 
while imposing minimal or no cost on issuers and saving them the 
expense of disclosing information that is readily available in more up-
to-date form from alternative sources. Commenters were generally 
supportive of this initiative to delete outdated requirements,\554\ and 
specifically supported removing historical price information, noting 
that stock price information is readily available on commercial 
websites on a more current basis than what is required by existing 
disclosure requirements.\555\
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    \554\ See e.g., letters from CAQ; EEI and AGA; FedEx; R.G. 
Associates; and XBRL US.
    \555\ See letters from E&Y; EEI and AGA; FedEx; and KPMG.
---------------------------------------------------------------------------

4. Superseded Requirements
    We are amending certain Commission disclosure requirements to 
address inconsistencies that have arisen between existing Commission 
disclosure requirements and newer requirements, recent legislation, or 
more recently updated U.S. GAAP requirements.
    Eliminating or amending superseded Commission disclosure 
requirements may simplify issuer compliance efforts by resolving some 
confusion for issuers. Where there are superseded requirements, issuers 
may need to expend time and resources seeking advice from outside 
professionals or guidance from Commission staff as to compliance with 
such requirements. To the extent that, in practice, many issuers 
already comply with the more recently adopted requirements, we expect 
these benefits to be modest. In addition, investors may benefit from 
the reduction in the variation of disclosure practices that could 
result from confusion about the superseded requirements among issuers.
    One example of superseded disclosure is the requirement to report 
the cumulative effect of a change in accounting principle in the income 
statement, which the FASB eliminated from U.S. GAAP in 2005.\556\ 
Instead, U.S. GAAP now requires the cumulative effect of 
retrospectively-applied changes in accounting principle to be reflected 
in the opening balance of retained earnings for the earliest period 
presented. The Commission disclosure requirements, by contrast, 
continue to refer to a line on the income statement for a cumulative 
effect of a change in accounting principle. Eliminating references to 
the cumulative effect of a change in accounting principle in the income 
statement in the Commission disclosure requirements resolves this 
contradiction and removes any resulting issuer confusion.
---------------------------------------------------------------------------

    \556\ See SFAS No. 154, Accounting Changes and Error 
Corrections. This is now reflected in ASC 250, Accounting Changes 
and Error Corrections.
---------------------------------------------------------------------------

    As another example, Rule 10-01(b)(2) of Regulation S-X requires, 
for interim periods, the presentation of dividends per share applicable 
to common stock on the face of the income statement. These rules are 
inconsistent with U.S. GAAP, which prohibits presentation of dividends 
per share on the face of the income statement. We are deleting Rule 10-
01(b)(2) to conform to U.S. GAAP and simplify issuer compliance 
efforts.
    In connection with this amendment and to avoid any loss of 
disclosure, we are extending the annual disclosure requirement of 
changes in stockholders' equity in Rule 3-04 of Regulation S-X to 
interim periods, which also requires disclosure of the amount of 
dividends per share for each class of shares, rather than only for 
common stock. As suggested by a few commenters, the final amendments 
clarify that Rule 3-04 requires both the year-to-date information and 
subtotals for each interim period.\557\ Investors and other users may 
benefit from the additional information on dividends per share for each 
class of shares for interim periods. For example shareholders may use 
dividends to value an issuer.\558\ Information about dividends also can 
be material for debtholders.\559\ In addition, there may also be 
different dividend preferences based on an investor's 
characteristics.\560\
---------------------------------------------------------------------------

    \557\ See letters from CAQ and PwC.
    \558\ See M. Miller and F. Modigliani, Dividend Policy, Growth, 
and the Valuation of Shares, Journal of Business 34 (4), 1961 at 
411-433 (providing an early theory of the effects of dividend policy 
on share price). See also, F. Black, The Dividend Puzzle, The 
Journal of Portfolio Management 2(2), 1976 at 5-8 (discussing 
reasons why firms pay dividends).
    \559\ See P. Healy and K. Palepu, Effectiveness of Accounting-
Based Dividend Covenants, Journal of Accounting and Economics 12, 
1990 at 97-123 (examining the effectiveness of dividend covenants in 
mitigating conflicts of interests between stockholders and 
bondholders). See also, H. Fan and S. Sundaresan, Debt Valuation, 
Renegotiation, and Optimal Dividend Policy, Review of Financial 
Studies 13 (4), 2000 at 1057-1099 (developing a theoretical 
framework for optimal dividend policy and capital structure).
    \560\ See R. Pettit, Taxes, Transactions Costs and the Clientele 
Effect of Dividends, Journal of Financial Economics 5 (3), 1977 at 
419-436 (showing that individuals' preferences for dividends are 
influenced by their age and their tax rates on dividends and capital 
gains).
---------------------------------------------------------------------------

    These amendments may give rise to Disclosure Location 
Considerations, in that issuers will now disclose dividends either in 
the changes in stockholders' equity statement or the notes to the 
financial statements to comply with Regulation S-X instead of on the 
face of the income statement.\561\ Disclosing information on dividends 
issued and the relationship it has to stockholders' equity in one 
location may help investors understand some of the strategic decisions 
made by management, such as dividend payout versus share buyback. The 
extension of the disclosure requirement in Rule 3-04 of Regulation S-X 
may create some additional burden for issuers, including Regulation A 
issuers,\562\ because it requires disclosure of dividends per share for 
each class of shares, rather than only for common stock, and disclosure 
of changes in stockholders' equity in interim periods. However, such 
costs should be limited to the extent that the required information is 
already available from the preparation of other aspects of the interim 
financial statements. Disclosure of this additional information may 
also lead to additional costs for issuers to comply with ICFR, audit, 
and XBRL tagging requirements, as applicable.
---------------------------------------------------------------------------

    \561\ ASC 260-10-45-5 requires disclosure of dividends per share 
in the notes to the financial statements.
    \562\ The amendments to require interim disclosure of changes in 
stockholders' equity and dividends per share amounts are being made 
directly to Forms 1-A and 1-SA for Regulation A issuers.
---------------------------------------------------------------------------

    In the Proposing Release, we requested comments about other 
disclosure requirements that meet the criteria in any of the four 
sections of the release. Based on commenter responses and further 
internal review, we identified additional disclosure requirements that 
contained typographical errors, incorrect references, or references to 
rules that no longer exist. As a result, we are adopting additional 
conforming amendments, the majority of which are in the superseded 
category. These technical and conforming amendments should lower 
disclosure costs for issuers.

C. Anticipated Effects on Efficiency, Competition, and Capital 
Formation

    The rules may improve capital allocation efficiency by enabling

[[Page 50192]]

investors to make more efficient investment decisions. For example, the 
rules may reduce search costs for investors by eliminating information 
that is redundant, duplicative, overlapping, outdated, or superseded. 
Given that investors may have limited attention and limited information 
processing capabilities, elimination of such information may facilitate 
more efficient investment decision-making. In addition, elimination of 
these disclosure requirements may reduce issuer compliance costs and 
encourage capital formation. The reduction in compliance costs might be 
particularly beneficial for smaller and younger issuers that are 
resource constrained. A more efficient and less costly disclosure 
environment may make the public capital markets more competitive 
relative to private capital market alternatives and may additionally 
make the U.S. capital markets more competitive relative to markets in 
other countries. Although it is difficult to quantify these effects, to 
the extent that they are present, they may result in more public 
capital market investment opportunities for investors.
    Eliminating information could result in increased information 
asymmetries between issuers and investors. Such asymmetries may 
increase the cost of capital, reduce capital formation, and hamper 
efficient allocation of capital across companies. To the extent that 
certain disclosure is no longer required, issuers for which this 
disclosure would be unfavorable may be less likely to disclose such 
information voluntarily. Even if other issuers do disclose such 
information voluntarily, it will be difficult to estimate the relative 
quality of issuers without every issuer's disclosure. This will make it 
more difficult for higher quality issuers to distinguish their quality 
with respect to this metric even with voluntary disclosures. Such 
negative effects might be more pronounced among smaller and younger 
issuers that suffer more from information asymmetries. Overall, though, 
to the extent that we eliminate disclosure that we consider redundant, 
duplicative, overlapping, outdated, or superseded, we do not think 
these effects are likely to be significant.

D. Alternatives

    We considered reasonable alternatives to the amendments. For 
redundant, duplicative, outdated, or superseded disclosure requirements 
being eliminated, we considered the alternative of retaining these 
requirements. However, as a general matter, given the nature of these 
requirements, we believe retaining the requirements could result in 
inefficiencies for investors, issuers, and others. For certain of the 
disclosure requirements that we proposed to modify or delete, where 
commenters indicated that the requirements may provide beneficial 
incremental disclosures for investors and other users, we are retaining 
the requirements and also are referring some of them to the FASB for 
potential incorporation into U.S. GAAP.
    For overlapping disclosure requirements, we solicited comments in 
the Proposing Release on certain requirements to determine whether to 
retain, modify, eliminate, or refer them to the FASB for potential 
incorporation into U.S. GAAP. After further consideration based on our 
review of the issues and consideration of the comments received, we are 
retaining all of the requirements discussed in Section III.D and 
referring all except one to the FASB for potential incorporation.
    As an alternative to retaining these requirements, we could 
eliminate the Commission requirements and refer them to the FASB. This 
would deprive investors of any incremental disclosures elicited by the 
Commission requirements pending the FASB's deliberations. If the 
disclosure requirements are ultimately added to U.S. GAAP, some 
information would be relocated from outside the financial statements to 
within the financial statements, giving rise to Disclosure Location 
Considerations, potentially impacting issuers, investors, and other 
users.\563\ Another alternative to retaining these requirements is to 
simply eliminate the Commission requirements and forgo disclosure of 
the incremental information without FASB referral. Although such an 
alternative would simplify issuer compliance efforts, it also may 
result in less informed investment decisions and diminished investor 
protections.
---------------------------------------------------------------------------

    \563\ Any future consideration of amendments to these 
disclosures requirements will take into account the outcome of 
standard-setting activities undertaken by the FASB.
---------------------------------------------------------------------------

VIII. Paperwork Reduction Act

A. Background

    Certain provisions of our rules and forms that would be affected by 
the final amendments contain ``collection of information'' requirements 
within the meaning of the Paperwork Reduction Act of 1995 
(``PRA'').\564\ The Commission published a notice requesting comment on 
the collection of information requirements in the Proposing Release and 
has submitted these requirements to the Office of Management and Budget 
(``OMB'') for review in accordance with the PRA.\565\ The titles for 
the affected collections of information are:
---------------------------------------------------------------------------

    \564\ 44 U.S.C. 3501 et seq.
    \565\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.

------------------------------------------------------------------------
                                                             OMB Control
                           Title                                 No.
------------------------------------------------------------------------
Regulation S-X \566\......................................     3235-0009
Regulation S-K............................................     3235-0071
Rule 405 of Regulation C..................................     3235-0074
Rule 436 of Regulation C..................................     3235-0074
Form S-1..................................................     3235-0065
Form S-3..................................................     3235-0073
Form S-11.................................................     3235-0067
Form S-4..................................................     3235-0324
Form F-1..................................................     3235-0258
Form F-3..................................................     3235-0256
Form F-4..................................................     3235-0325
Form F-6..................................................     3235-0292
Form F-7..................................................     3235-0383
Form F-8..................................................     3235-0378
Form F-10.................................................     3235-0380
Form F-80.................................................     3235-0404
Form SF-1.................................................     3235-0707
Form SF-3.................................................     3235-0690
Form 1-A..................................................     3235-0286
Form 1-K..................................................     3235-0720
Form 1-SA.................................................     3235-0721
Exchange Act Rule 10A-1...................................     3235-0468
Exchange Act Rule 12b-2...................................     3235-0062
Schedule 14A..............................................     3235-0059
Schedule 14C..............................................     3235-0057
Exchange Act Rule 15c3-1g.................................     3235-0200
Exchange Act Rule 17a-5 and Form X-17A-5..................     3235-0123
Exchange Act Rule 17a-12..................................     3235-0498
Exchange Act Rule 17h-1T..................................     3235-0410
Form 10...................................................     3235-0064
Form 20-F.................................................     3235-0288
Form 40-F.................................................     3235-0381
Form 10-Q.................................................     3235-0070
Form 10-K.................................................     3235-0063
Form 11-K.................................................     3235-0082
Form 10-D.................................................     3235-0604
Form N-5..................................................     3235-0169
Form N-1A.................................................     3235-0307
Form N-2..................................................     3235-0026
Form N-3..................................................     3235-0316
Form N-4..................................................     3235-0318
Form N-6..................................................     3235-0503
Form N-8B-2...............................................     3235-0186
------------------------------------------------------------------------

    The majority of these regulations, schedules, and forms were 
adopted under the Securities Act, the Exchange Act, and/or the 
Investment Company Act and set forth the disclosure requirements for 
registration statements, periodic reports, and proxy and information 
statements filed by issuers to help investors make informed investment 
and voting decisions.

[[Page 50193]]

Certain other forms and reports are filed by broker-dealers, entities 
regulated by the Investment Company Act and the Investment Advisers 
Act, and NRSROs in connection with the Commission's oversight of such 
entities.
---------------------------------------------------------------------------

    \566\ The paperwork burdens from Regulation S-X and Regulation 
S-K are imposed through the forms that are subject to the disclosure 
requirements in both regulations and are reflected in the analysis 
of these forms. To avoid a Paperwork Reduction Act inventory 
reflecting duplicative burdens, for administrative convenience we 
estimate the burden imposed by Regulation S-X and Regulation S-K to 
be a total of one hour for each regulation.
---------------------------------------------------------------------------

    These amendments are the result of the staff's ongoing evaluation 
of our disclosure requirements \567\ and also are part of our efforts 
to implement Title LXXII, Section 72002(2) of the FAST Act.
---------------------------------------------------------------------------

    \567\ See supra note 12.
---------------------------------------------------------------------------

    The hours and costs associated with preparing, filing, and sending 
the schedules and forms constitute reporting and cost burdens imposed 
by each collection of information. An agency may not conduct or 
sponsor, and a person is not required to comply with, a collection of 
information unless it displays a currently valid OMB control number. 
Compliance with the information collections is mandatory. Responses to 
the information collections are not kept confidential, and there is no 
mandatory retention period for the information disclosed.

B. Summary of the Final Amendments

    As described in more detail above, we are adopting amendments to 
certain of our disclosure requirements that have become redundant, 
duplicative, overlapping, outdated, or superseded, in light of other 
Commission disclosure requirements, U.S. GAAP, IFRS, or changes in the 
information environment.
    By eliminating the redundancy, duplication, and overlap in current 
Commission disclosure requirements, we are enabling respondents to 
consider fewer rules and requirements in their compliance efforts even 
as they are preparing a substantially similar level of disclosures. As 
such, except for the amendment to eliminate the requirement to disclose 
the ratio of earnings to fixed charges, which may result in a modest 
decrease in the paperwork burden, we believe that the amendments to 
eliminate these redundant, duplicative, and overlapping Commission 
requirements would marginally reduce, if at all, respondents' overall 
paperwork burden.
    Similarly, we expect that the amendments to eliminate outdated 
requirements would marginally reduce the paperwork burden on 
respondents by eliminating any efforts that were undertaken to prepare 
these disclosures. With the exception of the amendments to require the 
disclosure of an issuer's website address and the ticker symbol of 
their common equity that is publicly traded, which will slightly 
increase the paperwork burden, the remaining amendments related to 
outdated requirements would have no change or only a modest reduction 
in the paperwork burden when respondents are providing information in 
response to Forms 10, 10-K, 20-F, S-1, and F-1.
    Finally, we believe that the amendments to update superseded 
Commission disclosure requirements would marginally reduce, if at all, 
respondents' paperwork burden, except for the extension of the 
application of Rule 3-04 of Regulation S-X to interim period 
disclosures,\568\ which we estimate will modestly increase the 
paperwork burden. While the amendments eliminate any existing confusion 
related to contradictory and inconsistent requirements, in many 
instances, we believe respondents are currently not providing 
information in response to the requirements that we are deleting. 
Instead, we believe respondents provide information in response to U.S. 
GAAP or other Commission disclosure requirements that have been updated 
more recently, rather than the superseded requirement covered by the 
amendments. As a result, we do not believe the majority of these 
amendments would result in a change to respondents' overall paperwork 
burden.
---------------------------------------------------------------------------

    \568\ The extension of Rule 3-04 of Regulation S-X addresses 
both overlapping and superseded disclosure issues and is discussed 
in both Sections III.C.16 and V.B.5 above.
---------------------------------------------------------------------------

    In light of the foregoing, our estimates for the paperwork burden 
for a number of the collections of information have not changed. The 
tables below therefore do not reflect any change in the paperwork 
burden for the following collections of information: Rules 405 and 436 
of Regulation C and Forms F-6, F-7, F-8, F-10, F-80, 1-K under the 
Securities Act; Exchange Rules 10A-1, 12b-2, 15c3-1g, 17a-5, 17h-1T and 
Forms 40-F, 11-K, 10-D, X-17A-5 under the Exchange Act; Forms N-5, N-
1A, N-2, N-3, N-4, N-6, N-8B-2 under the Investment Company Act; and 
Schedules 14A and 14C under the Exchange Act.

C. Summary of Comment Letters and Revisions to Proposals

    In the Proposing Release, we requested comment on our PRA burden 
hour and cost estimates and the analysis used to derive such estimates. 
We did not receive any comments that addressed our PRA analysis of the 
proposed amendments.
    We did make some changes to the proposed amendments as a result of 
comments received, but we do not expect any of those changes to affect 
the compliance burdens of the existing collections of information, and 
therefore we are not revising our PRA burden hour and cost estimates as 
a result of these changes.

D. Burden and Cost Estimates

    As noted above, we do not believe that the overwhelming majority of 
the amendments will result in a change to respondents' overall 
paperwork burden. In this subsection we discuss the few amendments that 
will result in a change to respondents' overall paperwork burden.
1. Forms 10, 10-K, 10-Q, 20-F, and 1-SA
    We anticipate that the amendments to eliminate the requirement to 
disclose the market prices for an issuer's common equity for the two 
most recent fiscal years will modestly reduce affected issuers' current 
paperwork burdens. We estimate that issuers currently expend an average 
of two hours internally preparing the market price disclosure for 
inclusion in their Forms 10-K and 20-F. As such, we estimate that 
affected issuers would experience a two hour reduction in their annual 
paperwork burden.\569\ We also estimate that there are 8,862 annual 
responses made in connection with Forms 10-K and 20-F. The table below 
illustrates the overall impact on respondents filing Forms 10-K and 20-
F as a result of these amendments.
---------------------------------------------------------------------------

    \569\ In the Proposing Release we included estimates for the 
minimal paperwork burden increase associated with the proposed 
amendments to require disclosure of an issuer's ticker symbol and 
internet address. Upon further consideration, we are not making a 
separate burden adjustment for these two amendments. We believe the 
burdens for these amendments will be mostly incurred upon initial 
disclosure and not in subsequent periods. In addition, any increases 
in burden associated with the disclosure of the ticker symbol and 
internet address would be fully offset by the reduction in burden 
associated with the elimination of two years' worth of market price 
disclosure. Accordingly, we believe the two-hour reduction in burden 
hours associated with the elimination of the market price disclosure 
requirement will encompass the combined effect of these related 
changes.

[[Page 50194]]



                                                     Table 1
----------------------------------------------------------------------------------------------------------------
                                                                 Reduction in        Total
                                                 Number of       incremental      incremental        Internal
                                                 responses      burden hours/     burden hours     company time
                                                                     form          reduction        reduction
                                                          (A)              (B)  (C) = (A) * (B)        (D) = (C)
----------------------------------------------------------------------------------------------------------------
Form 10-K...................................            8,137              (2)         (16,274)         (16,274)
Form 20-F...................................              725              (2)          (1,450)          (1,450)
----------------------------------------------------------------------------------------------------------------

    The amendments will extend to interim periods the requirements 
under Rule 3-04 of Regulation S-X to disclose changes in stockholders' 
equity and dividends per share for each class of shares, rather than 
only for common stock. Prior to these amendments, these disclosures 
were not required for interim periods. While this creates a new 
disclosure requirement for respondents, the information being required 
is generally readily available from respondents' preparation of other 
aspects of the interim financial statements. As a result, we estimate 
that this amendment will increase the average paperwork burdens by 0.5 
hours each time such disclosure is required.\570\ We also estimate that 
there are 23,159 annual responses in connection with Forms 10, 10-Q, 
and 1-SA. The table below illustrates the overall impact on respondents 
filing Forms 10, 10-Q, and 1-SA as a result of the proposed application 
of Rule 3-04 to interim period disclosures.\571\
---------------------------------------------------------------------------

    \570\ As Form 10-Q is filed for the first three quarters of an 
issuer's fiscal year, the annual burden increase is estimated to be 
1.5 hours annually. As such, there is no increase to the paperwork 
burdens associated with preparing annual reports filed on Forms 10-K 
or 20-F. However, for registration statements filed on Form 10s and 
20-F, to the extent that interim period disclosures are made, the 
issuer would experience an increase in paperwork burden.
    \571\ While this amendment will not impact foreign private 
issuers that file a Form 20-F as an annual report, it may impact 
those that file the form to register a class of securities when they 
would be required to provide interim period disclosures. However, 
the staff has observed that this occurs so infrequently that we 
estimate no change in the burden estimate for Form 20-F.

                                                     Table 2
----------------------------------------------------------------------------------------------------------------
                                                                 Increase in         Total
                                                 Number of       incremental      incremental        Internal
                                                 responses      burden hours/     burden hours     company time
                                                                     form           increase         increase
                                                          (A)              (B)  (C) = (A) * (B)        (D) = (C)
----------------------------------------------------------------------------------------------------------------
Form 10.....................................              216              0.5              108              108
Form 10-Q...................................           22,907              0.5         11,453.5         11,453.5
Form 1-SA...................................               36              0.5               18               18
----------------------------------------------------------------------------------------------------------------

2. Forms S-1, S-3, S-4, S-11, SF-1, SF-3, F-1, F-3, F-4, and 1-A
    We anticipate that the amendments to eliminate the market prices 
disclosure will have the same paperwork burden reduction for Forms S-1, 
S-4, S-11, F-1, and F-4 as for Forms 10-K and 20-F.\572\ As such, we 
estimate that there will be a corresponding reduction in the burden 
estimate for these forms.\573\ We estimate that there are approximately 
1,618 annual responses made in connection with the referenced forms. 
The table below illustrates the overall impact on respondents filing 
the referenced forms as a result of these amendments.
---------------------------------------------------------------------------

    \572\ The information subject to the amendments discussed in 
this paragraph is incorporated by reference into Forms S-3 and F-3 
and not provided in direct response to a form item requirement. As 
such, the amendments do not affect the paperwork burdens associated 
with Forms S-3 and F-3.
    \573\ See supra note 570.

                                                     Table 3
----------------------------------------------------------------------------------------------------------------
                                                                 Reduction in        Total
                                                 Number of       incremental      incremental        Internal
                                                 responses      burden  hours/    burden hours     company time
                                                                     form          reduction        reduction
                                                          (A)              (B)  (C) = (A) * (B)        (D) = (C)
----------------------------------------------------------------------------------------------------------------
Form S-1....................................              901              (2)          (1,802)          (1,802)
Form S-4....................................              551              (2)          (1,102)          (1,102)
Form S-11...................................               64              (2)            (128)            (128)
Form F-1....................................               63              (2)            (126)            (126)
Form F-4....................................               39              (2)             (78)             (78)
----------------------------------------------------------------------------------------------------------------

    The amendments to extend Rule 3-04 of Regulation S-X to interim 
periods will also impact the paperwork burdens of registration 
statements filed on Forms 1-A, S-1, S-4, S-11, F-1, and F-4 because 
such forms require interim period financial disclosures, when 
applicable.\574\ We believe that the

[[Page 50195]]

estimated burden increase of 0.5 hours discussed above similarly 
applies to the referenced registration statements. We estimate that 
there are approximately 1,730 annual responses made in connection with 
the referenced forms. The table below illustrates the overall impact on 
respondents filing the referenced forms as a result of these 
amendments.
---------------------------------------------------------------------------

    \574\ Filers of the referenced forms may have to provide interim 
period financial disclosures in order to comply with Rule 3-12 of 
Regulation S-X. While the timing of the effectiveness of the 
registration statement or qualification of the offering statement 
may not trigger the requirement for interim period financial 
disclosure, we have used the full population of responses for our 
estimate to be conservative.

----------------------------------------------------------------------------------------------------------------
                                                                 Increase in         Total
                                                 Number of       incremental      incremental        Internal
                                                 responses      burden  hours/    burden hours     company time
                                                                     form           increase         increase
                                                          (A)              (B)  (C) = (A) * (B)        (D) = (C)
----------------------------------------------------------------------------------------------------------------
Form S-1....................................              901              0.5            450.5            450.5
Form S-4....................................              551              0.5            275.5            275.5
Form S-11...................................               64              0.5               32               32
Form F-1....................................               63              0.5             31.5             31.5
Form F-4....................................               39              0.5             19.5             19.5
Form 1-A....................................              112              0.5               56               56
----------------------------------------------------------------------------------------------------------------

    The amendment to eliminate the requirements to disclose the ratio 
of earnings to fixed charges, when an issuer registers debt securities, 
and the ratio of combined fixed charges and preference dividends to 
earnings, when an issuer registers preference securities, will reduce 
the current paperwork burden for issuers registering such securities on 
Forms S-1, S-3, S-4, S-11, F-1, F-3 and F-4. Depending on the size and 
complexity of the issuer, the paperwork burden associated with 
preparing this information for inclusion in the aforementioned 
registration statements can vary greatly. We estimate that issuers 
expend an average of four hours preparing this disclosure for inclusion 
in their registration statements. For the purposes of this analysis, we 
assume that the ratio is prepared internally, and we have estimated 
that there are approximately 1,722 annual responses made in connection 
with the referenced forms. Based on this average, the table below 
illustrates the overall impact on respondents filing the referenced 
forms as a result of the amendments.

----------------------------------------------------------------------------------------------------------------
                                                                 Reduction in        Total
                                                 Number of       incremental      incremental        Internal
                                                 responses      burden  hours/    burden hours    company  time
                                                                     form          reduction        reduction
                                                    (A) \575\              (B)  (C) = (A) * (B)        (D) = (C)
----------------------------------------------------------------------------------------------------------------
Form S-1....................................              450              (4)          (1,800)          (1,800)
Form S-3....................................              800              (4)          (3,200)          (3,200)
Form S-4....................................              300              (4)          (1,200)          (1,200)
Form S-11...................................               32              (4)            (128)            (128)
Form F-1....................................               32              (4)            (128)            (128)
Form F-3....................................               78              (4)            (312)            (312)
Form F-4....................................               30              (4)            (120)            (120)
----------------------------------------------------------------------------------------------------------------

IX. Final Regulatory Flexibility Act Analysis

    This Final Regulatory Flexibility Analysis (``FRFA'') has been 
prepared in accordance with the Regulatory Flexibility Act 
(``RFA'').\576\ This FRFA relates to final amendments that will 
eliminate certain Commission disclosure requirements that have become 
redundant, duplicative, overlapping, outdated, or superseded, in light 
of other Commission disclosure requirements, U.S. GAAP, IFRS, or 
changes in the information environment. These amendments are the result 
of the staff's ongoing evaluation of our disclosure requirements \577\ 
and also are part of our efforts to implement Title LXXII, Section 
72002(2) of the FAST Act.
---------------------------------------------------------------------------

    \575\ The portion of registration statements filed on each 
referenced form that actually registers debt or preference 
securities varies from year to year. As a result, the numbers in 
this column are based on staff estimates using data samples obtained 
from EDGAR.
    \576\ 5 U.S.C. 601 et seq.
    \577\ See supra note 12.
---------------------------------------------------------------------------

A. Need for, and Objectives of, the Amendments

    The main purpose of the amendments is to update and simplify the 
Commission's current disclosure requirements. Specifically, the 
amendments will:
    <bullet> Eliminate certain Commission disclosure requirements that 
are redundant or duplicative of requirements in U.S. GAAP, IFRS, or 
other Commission disclosure requirements.
    <bullet> Streamline certain overlapping Commission disclosure 
requirements by deleting or integrating provisions that address 
disclosure topics covered elsewhere in our rules or regulations.
    <bullet> Revise certain Commission disclosure requirements that are 
outdated.
    <bullet> Revise certain superseded Commission disclosure 
requirements to update and conform these provisions with recent 
legislation, more recently updated Commission disclosure requirements, 
or more recently updated U.S. GAAP requirements.
    The need for, and objectives of, the final amendments are discussed 
in more detail throughout this release, particularly in Section I, 
above.

[[Page 50196]]

B. Significant Issues Raised by Public Comments

    In the Proposing Release we requested comment on any aspect of the 
Initial Regulatory Flexibility Analysis (``IRFA''), including the 
number of small entities that would be affected by the proposed 
amendments, the nature of the impact, how to quantify the number of 
small entities that would be affected, and how to quantify the impact 
of the proposed amendments. We did not receive comments specifically 
addressing the IRFA or the proposed amendments' impact on small 
entities.

C. Small Entities Subject to the Amendments

    The amendments will affect some small entities that file 
registration statements under the Securities Act, the Exchange Act, and 
the Investment Company Act and periodic reports, proxy and information 
statements, or other reports under the Exchange Act and the Investment 
Company Act. In addition, the amendments will affect some small 
entities that are not reporting companies and that issue securities 
under Regulation A exemption. The RFA defines ``small entity'' to mean 
``small business,'' ``small organization,'' or ``small governmental 
jurisdiction.'' \578\
---------------------------------------------------------------------------

    \578\ 5 U.S.C. 601(6).
---------------------------------------------------------------------------

    For purposes of the RFA, under 17 CFR 230.157 (``Securities Act 
Rule 157''), an issuer, other than an investment company, is a ``small 
business'' or ``small organization'' if it had total assets of $5 
million or less on the last day of its most recent fiscal year and is 
engaged or proposing to engage in an offering of securities not 
exceeding $5 million. Under 17 CFR 240.0-10(a) (``Exchange Act Rule 0-
10(a)''), an issuer, other than an investment company, is a ``small 
business'' or ``small organization'' if it had total assets of $5 
million or less on the last day of its most recent fiscal year. In 
total, we estimate that there are approximately 1,233 issuers, other 
than investment companies, that may be considered small entities and 
will be subject to the amendments.\579\
---------------------------------------------------------------------------

    \579\ This estimate includes 1,163 reporting companies and 70 
Regulation A issuers estimated to be small entities (1,233 = 1,163 + 
70). The reporting company small entity estimate is based on staff 
analysis of XBRL data submitted by filers, other than co-
registrants, with EDGAR filings of Forms 10-K, 20-F, and 40-F and 
amendments filed during the calendar year 2017. The Regulation A 
small entity estimate is based on staff analysis of Form 1-A data 
from EDGAR filings of Forms 1-A qualified during the calendar year 
2017, excluding issuers in subsequently withdrawn offerings and 
issuers that became reporting companies during the calendar year 
2017.
---------------------------------------------------------------------------

    An investment company, including a business development company, is 
considered to be a ``small business,'' for the purposes of the RFA, if 
it, together with other investment companies in the same group of 
related investment companies, has net assets of $50 million or less as 
of the end of its most recent fiscal year.\580\ We estimate that there 
are approximately 112 investment companies, including 18 business 
development companies, that will be subject to the amendments that may 
be considered small entities.\581\
---------------------------------------------------------------------------

    \580\ See 17 CFR 270.0-10(a).
    \581\ The estimate of small investment companies is derived from 
an analysis of data obtained from Morningstar Direct as well as data 
reported on Forms N-SAR filed with the Commission for the period 
ending December 31, 2017. The number of small business development 
companies is derived from data obtained from Forms 10-K and Forms 
10-Q for reporting periods ended in the last quarter of 2017, 
adjusted by the number of active business development companies that 
do not submit such filings and late filers.
---------------------------------------------------------------------------

    For the purposes of the RFA, an investment adviser generally is a 
small entity if it: (1) Has assets under management having a total 
value of less than $25 million; (2) did not have total assets of $5 
million or more on the last day of the most recent fiscal year; and (3) 
does not control, is not controlled by, and is not under common control 
with another investment adviser that has assets under management of $25 
million or more, or any person (other than a natural person) that had 
total assets of $5 million or more on the last day of its most recent 
fiscal year.\582\ We estimate that there are approximately 447 
investment advisers that will be subject to the amendments that may be 
considered small entities.\583\
---------------------------------------------------------------------------

    \582\ See 17 CFR 275.0-7.
    \583\ The estimate is based on SEC-registered investment adviser 
responses to Items 5.F. and 12 of Form ADV.
---------------------------------------------------------------------------

    For the purposes of the RFA, a broker-dealer is considered to be a 
``small business'' if its total capital (net worth plus subordinated 
liabilities) is less than $500,000 on the date in the prior fiscal year 
as of which its audited financial statements were prepared pursuant to 
Rule 17a-5(d) under the Exchange Act,\584\ or, if not required to file 
such statements, a broker-dealer with total capital (net worth plus 
subordinated liabilities) of less than $500,000 on the last day of the 
preceding fiscal year (or in the time that it has been in business, if 
shorter); and that is not affiliated with any person (other than a 
natural person) that is not a small business or small 
organization.\585\ We estimate there are approximately 1,042 broker-
dealers that may be considered small entities. Of these, nine were Part 
II filers and 1,033 were Part IIA filers.\586\
---------------------------------------------------------------------------

    \584\ See 17 CFR 240.17a-5(d).
    \585\ See 17 CFR 240.0-10(c).
    \586\ This estimate is based on the FOCUS Reports, or 
``Financial and Operational Combined Uniform Single'' Reports, which 
broker-dealers are generally required to file with the Commission 
and/or SROs pursuant to Exchange Act Rule 17a-5. The estimate is 
based on the FOCUS Reports data as of December 31, 2017. The 
information on Part IIB and Part III filers are not available from 
this data source.
---------------------------------------------------------------------------

    The Commission has previously stated, and we continue to believe, 
that an NRSRO with total assets of $5 million or less would qualify as 
a ``small'' entity for purposes of the RFA.\587\ Currently, there are 
10 NRSROs and, based on their most recently filed annual reports 
pursuant to Rule 17g-3, two NRSROs are small entities under the above 
definition and will be subject to the amendments.
---------------------------------------------------------------------------

    \587\ See, e.g., Final Rules: Nationally Recognized Statistical 
Rating Organizations, Release No. 34-72936 (Aug. 27, 2014) [79 FR 
55077 (Sep. 15, 2014)].
---------------------------------------------------------------------------

D. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements

    As noted above, the final amendments update and simplify the 
Commission's disclosure requirements and do not impose any significant 
new disclosure obligations. While there are no particular professional 
skills that are required to comply with the amendments, the 
professional skills necessary for complying with an issuer's disclosure 
obligations as a whole may include legal, accounting, or information 
technology skills. As adopted, the amendments address requirements that 
have become redundant, duplicative, overlapping, outdated, or 
superseded in light of other Commission disclosure requirements, U.S. 
GAAP, IFRS, or changes in the information environment. We expect these 
amendments to reduce slightly the existing reporting, recordkeeping, 
and other compliance burdens for all issuers, including small entities.
    The amendments are discussed in detail in Sections II, III, IV, and 
V, above. We discuss the economic impact, including the estimated 
compliance costs and burdens, of the amendments in Section VII 
(Economic Analysis) and Section VIII (Paperwork Reduction Act) above.

E. Agency Action To Minimize Effect on Small Entities

    The Regulatory Flexibility Act directs us to consider alternatives 
that would accomplish our stated objectives, while minimizing any 
significant adverse impact on small entities. In connection with the 
final amendments, we considered the following alternatives: (1) 
Establishing different compliance or

[[Page 50197]]

reporting requirements or timetables that take into account the 
resources available to small entities; (2) clarifying, consolidating, 
or simplifying compliance and reporting requirements for small 
entities; (3) using performance rather than design standards; and (4) 
exempting small entities from coverage of all or part of the proposed 
amendments.
    With respect to clarification, consolidation, and simplification of 
compliance and reporting requirements for small entities, the 
amendments do not impose any significant new disclosure obligations, 
and they reduce other disclosure obligations. As noted above, the 
amendments address certain of our disclosure requirements that have 
become redundant, duplicative, overlapping, outdated, or superseded, in 
light of other Commission disclosure requirements, U.S. GAAP, IFRS, or 
changes in the information environment. The amendments will clarify, 
consolidate, and simplify compliance for all issuers, including small 
entities.
    For similar reasons, we do not believe it is necessary, and indeed 
would be contrary to the stated objectives of the amendments, to 
establish different compliance or reporting requirements or timetables 
or to exempt small entities from all or part of the amendments.\588\ 
The Commission's existing disclosure requirements provide for scaled 
disclosure requirements and other accommodations for SRCs and EGCs, and 
the amendments would not alter these existing accommodations.
---------------------------------------------------------------------------

    \588\ The amendment discussed in Section V.B.2 that extends the 
disclosure requirement in Rule 3-04 of Regulation S-X to interim 
periods will apply to all issuers, including small entities. As the 
required information would be readily available from the preparation 
of the interim financial statements, the Commission expects the 
additional burdens to be limited. The new disclosure would better 
facilitate investor understanding of stockholders' equity, as 
dividends are distributed from stockholders' equity. As such, we do 
not believe it is necessary to scale this specific amendment for 
small entities.
---------------------------------------------------------------------------

    Finally, with respect to use of performance rather than design 
standards, the amendments to eliminate certain prescriptive Commission 
rules that call for information that overlaps with information required 
by U.S. GAAP or revise certain prescriptive rules to streamline our 
disclosure requirements may result in issuers, including small 
entities, being provided with additional flexibility when preparing 
their disclosures. For instance, existing Rule 4-08(e)(3) requires 
disclosure of dividend restrictions and related disclosures when 
restricted net assets exceed 25 percent. As amended, the rule will 
require such disclosure when it is material and not based on a bright 
line threshold. While not all amendments use performance standards, 
many would have a similar effect--namely, to provide issuers, including 
small entities, with additional flexibility to present more tailored 
disclosures without meaningfully reducing the total mix of information 
provided to investors.

X. Statutory Authority

    The amendments contained in this document are being adopted under 
the authority set forth in Sections 7, 10, 19(a), and 28 of the 
Securities Act, Sections 3(b), 12, 13, 15, 23(a), and 36 of the 
Exchange Act, Sections 8, 24(a), 24(g), 30, and 38 of the Investment 
Company Act, and Title LXXII, Section 72002(2) of the FAST Act.

Text of the Final Amendments

List of Subjects

17 CFR Part 210

    Accountants, Accounting, Banks, Banking, Employee benefit plans, 
Holding companies, Insurance companies, Investment companies, Oil and 
gas exploration, Reporting and recordkeeping requirements, Securities, 
Utilities.

17 CFR Part 229

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 230

    Investment companies, Reporting and recordkeeping requirements, 
Securities.

17 CFR Part 239

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 240

    Brokers, Fraud, Reporting and recordkeeping requirements, 
Securities.

17 CFR Part 249

    Brokers, Reporting and recordkeeping requirements, Securities.

17 CFR Part 274

    Investment companies, Reporting and recordkeeping requirements, 
Securities.

    For the reasons stated in the preamble, the Commission is amending 
Title 17, Chapter II, of the Code of the Federal Regulations as 
follows:

PART 210--FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL 
STATEMENTS, SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 
1934, INVESTMENT COMPANY ACT OF 1940, INVESTMENT ADVISERS ACT OF 
1940, AND ENERGY POLICY AND CONSERVATION ACT OF 1975

0
1. The authority citation for part 210 continues to read as follows:

    Authority:  15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 
77aa(25), 77aa(26), 77nn(25), 77nn(26), 78c, 78j-1, 78l, 78m, 78n, 
78o(d), 78q, 78u-5, 78w, 78ll, 78mm, 80a-8, 80a-20, 80a-29, 80a-30, 
80a-31, 80a-37(a), 80b-3, 80b-11, 7202 and 7262, and sec. 102(c), 
Pub L. 112-106, 126 Stat. 310 (2012), unless otherwise noted.


0
2. Amend Sec.  210.1-02 by:
0
a. Revising paragraphs (d) and (w)(3);
0
b. Redesignating the Computational note as Computational note 1 to 
paragraph (w)(3);
0
c. Revising paragraph 2 of the newly redesignated Computational note 1 
to paragraph (w)(3);
0
d. Revising paragraph (bb)(1)(ii); and
0
e. Adding paragraphs (cc) and (dd).
    The revisions and additions read as follows:


Sec.  210.1-02  Definitions of terms used in Regulation S-X (17 CFR 
part 210).

* * * * *
    (d) Audit (or examination). The term audit (or examination), when 
used in regard to financial statements of issuers as defined by Section 
2(a)(7) of the Sarbanes-Oxley Act of 2002, means an examination of the 
financial statements by an independent accountant in accordance with 
the standards of the Public Company Accounting Oversight Board (United 
States) (``PCAOB'') for the purpose of expressing an opinion thereon. 
When used in regard to financial statements of entities that are not 
issuers as defined by Section 2(a)(7) of the Sarbanes-Oxley Act of 
2002, the term means an examination of the financial statements by an 
independent accountant in accordance with either the standards of the 
PCAOB or U.S. generally accepted auditing standards (``U.S. GAAS'') as 
specified or permitted in the regulations and forms applicable to those 
entities for the purpose of expressing an opinion thereon. The 
standards of the PCAOB and U.S. GAAS may be modified or supplemented by 
the Commission.
* * * * *
    (w) * * *
    (3) The registrant's and its other subsidiaries' equity in the 
income from continuing operations before income taxes of the subsidiary 
exclusive of amounts attributable to any

[[Page 50198]]

noncontrolling interests exceeds 10 percent of such income of the 
registrant and its subsidiaries consolidated for the most recently 
completed fiscal year.

    Note to paragraph (w):  * * *


    Computational note 1 to paragraph (w)(3):  * * *

* * * * *
    2. If income of the registrant and its subsidiaries consolidated 
exclusive of amounts attributable to any noncontrolling interests for 
the most recent fiscal year is at least 10 percent lower than the 
average of the income for the last five fiscal years, such average 
income should be substituted for purposes of the computation. Any loss 
years should be omitted for purposes of computing average income.
* * * * *
    (bb) * * *
    (1) * * *
    (ii) Net sales or gross revenues, gross profit (or, alternatively, 
costs and expenses applicable to net sales or gross revenues), income 
or loss from continuing operations, net income or loss, and net income 
or loss attributable to the entity (for specialized industries, other 
information may be substituted for sales and related costs and expenses 
if necessary for a more meaningful presentation); and
* * * * *
    (cc) Statement(s) of comprehensive income. The term statement(s) of 
comprehensive income means a financial statement that includes all 
changes in equity during a period except those resulting from 
investments by owners and distributions to owners. Comprehensive income 
comprises all components of net income and all components of other 
comprehensive income. The statement of comprehensive income may be 
presented either in a single continuous financial statement or in two 
separate but consecutive financial statements. A statement(s) of 
operations or variations thereof may be used in place of a statement(s) 
of comprehensive income if there was no other comprehensive income 
during the period(s).
    (dd) Restricted net assets. The term restricted net assets shall 
mean that amount of the registrant's proportionate share of net assets 
of consolidated subsidiaries (after intercompany eliminations) which as 
of the end of the most recent fiscal year may not be transferred to the 
parent company by subsidiaries in the form of loans, advances or cash 
dividends without the consent of a third party (i.e., lender, 
regulatory agency, foreign government, etc.). Not all limitations on 
transferability of assets are considered to be restrictions for 
purposes of this rule, which considers only specific third party 
restrictions on the ability of subsidiaries to transfer funds outside 
of the entity. For example, the presence of subsidiary debt which is 
secured by certain of the subsidiary's assets does not constitute a 
restriction under this rule. However, if there are any loan provisions 
prohibiting dividend payments, loans or advances to the parent by a 
subsidiary, these are considered restrictions for purposes of computing 
restricted net assets. When a loan agreement requires that a subsidiary 
maintain certain working capital, net tangible asset, or net asset 
levels, or where formal compensating arrangements exist, there is 
considered to be a restriction under the rule because the lender's 
intent is normally to preclude the transfer by dividend or otherwise of 
funds to the parent company. Similarly, a provision which requires that 
a subsidiary reinvest all of its earnings is a restriction, since this 
precludes loans, advances or dividends in the amount of such 
undistributed earnings by the entity. Where restrictions on the amount 
of funds which may be loaned or advanced differ from the amount 
restricted as to transfer in the form of cash dividends, the amount 
least restrictive to the subsidiary shall be used. Redeemable preferred 
stocks (Sec.  210.5-02.27) and noncontrolling interests shall be 
deducted in computing net assets for purposes of this test.

0
3. Amend Sec.  210.2-01 by revising paragraph (f)(7)(ii)(B) to read as 
follows:


Sec.  210.2-01  Qualifications of accountants.

* * * * *
    (f) * * *
    (7) * * *
    (ii) * * *
    (B) The partner conducting a quality review under applicable 
professional standards and any applicable rules of the Commission to 
evaluate the significant judgments and the related conclusions reached 
in forming the overall conclusion on the audit or review engagement 
(``Engagement Quality Reviewer'' or ``Engagement Quality Control 
Reviewer'');
* * * * *

0
4. Amend Sec.  210.2-02 by revising paragraph (b)(1) to read as 
follows:


Sec.  210.2-02  Accountants' reports and attestation reports.

* * * * *
    (b) * * *
    (1) Shall state the applicable professional standards under which 
the audit was conducted; and
* * * * *

0
5. Amend Sec.  210.3-01 by revising paragraphs (c)(2) and (3) to read 
as follows:


Sec.  210.3-01  Consolidated balance sheets.

* * * * *
    (c) * * *
    (2) For the most recent fiscal year for which audited financial 
statements are not yet available the registrant reasonably and in good 
faith expects to report income attributable to the registrant, after 
taxes; and
    (3) For at least one of the two fiscal years immediately preceding 
the most recent fiscal year the registrant reported income attributable 
to the registrant, after taxes.
* * * * *

0
6. Amend Sec.  210.3-02 by revising the section heading and paragraphs 
(a) and (b) to read as follows:


Sec.  210.3-02  Consolidated statements of comprehensive income and 
cash flows.

    (a) There shall be filed, for the registrant and its subsidiaries 
consolidated and for its predecessors, audited statements of 
comprehensive income and cash flows for each of the three fiscal years 
preceding the date of the most recent audited balance sheet being filed 
or such shorter period as the registrant (including predecessors) has 
been in existence. A registrant that is an emerging growth company, as 
defined in Sec.  230.405 of this chapter (Rule 405 of the Securities 
Act) or Sec.  240.12b-2 of this chapter (Rule 12b-2 of the Exchange 
Act), may, in a Securities Act registration statement for the initial 
public offering of the emerging growth company's equity securities, 
provide audited statements of comprehensive income and cash flows for 
each of the two fiscal years preceding the date of the most recent 
audited balance sheet (or such shorter period as the registrant has 
been in existence).
    (b) In addition, for any interim period between the latest audited 
balance sheet and the date of the most recent interim balance sheet 
being filed, and for the corresponding period of the preceding fiscal 
year, statements of comprehensive income and cash flows shall be 
provided. Such interim financial statements may be unaudited and need 
not be presented in greater detail than is required by Sec.  210.10-01.
* * * * *

0
7. Amend Sec.  210.3-03 by
0
a. Revising the section heading and paragraphs (b) and (d); and

[[Page 50199]]

0
b. Removing paragraph (e).
    The revisions read as follows:


Sec.  210.3-03  Instructions to statement of comprehensive income 
requirements.

* * * * *
    (b) If the registrant is engaged primarily--
    (1) In the generation, transmission or distribution of electricity, 
the manufacture, mixing, transmission or distribution of gas, the 
supplying or distribution of water, or the furnishing of telephone or 
telegraph service; or
    (2) In holding securities of companies engaged in such businesses, 
it may at its option include statements of comprehensive income and 
cash flows (which may be unaudited) for the twelve-month period ending 
on the date of the most recent balance sheet being filed, in lieu of 
the statements of comprehensive income and cash flows for the interim 
periods specified.
* * * * *
    (d) Any unaudited interim financial statements furnished shall 
reflect all adjustments which are, in the opinion of management, 
necessary to a fair statement of the results for the interim periods 
presented. A statement to that effect shall be included. If all such 
adjustments are of a normal recurring nature, a statement to that 
effect shall be made; otherwise, there shall be furnished information 
describing in appropriate detail the nature and amount of any 
adjustments other than normal recurring adjustments entering into the 
determination of the results shown.

0
8. Revise Sec.  210.3-04 to read as follows:


Sec.  210.3-04  Changes in stockholders' equity and noncontrolling 
interests.

    An analysis of the changes in each caption of stockholders' equity 
and noncontrolling interests presented in the balance sheets shall be 
given in a note or separate statement. This analysis shall be presented 
in the form of a reconciliation of the beginning balance to the ending 
balance for each period for which a statement of comprehensive income 
is required to be filed with all significant reconciling items 
described by appropriate captions with contributions from and 
distributions to owners shown separately. Also, state separately the 
adjustments to the balance at the beginning of the earliest period 
presented for items which were retroactively applied to periods prior 
to that period. With respect to any dividends, state the amount per 
share and in the aggregate for each class of shares. Provide a separate 
schedule in the notes to the financial statements that shows the 
effects of any changes in the registrant's ownership interest in a 
subsidiary on the equity attributable to the registrant.

0
9. Amend Sec.  210.3-05 by revising paragraph (b)(4)(iii) to read as 
follows:


Sec.  210.3-05  Financial statements of businesses acquired or to be 
acquired.

* * * * *
    (b) * * *
    (4) * * *
    (iii) Separate financial statements of the acquired business need 
not be presented once the operating results of the acquired business 
have been reflected in the audited consolidated financial statements of 
the registrant for a complete fiscal year unless such financial 
statements have not been previously filed or unless the acquired 
business is of such significance to the registrant that omission of 
such financial statements would materially impair an investor's ability 
to understand the historical financial results of the registrant. For 
example, if, at the date of acquisition, the acquired business met at 
least one of the conditions in the definition of significant subsidiary 
in Sec.  210.1-02 at the 80 percent level, the statements of 
comprehensive income of the acquired business should normally continue 
to be furnished for such periods prior to the purchase as may be 
necessary when added to the time for which audited statements of 
comprehensive income after the purchase are filed to cover the 
equivalent of the period specified in Sec.  210.3-02.
* * * * *

0
10. Amend Sec.  210.3-12 by revising paragraph (a) to read as follows:


Sec.  210.3-12  Age of financial statements at effective date of 
registration statement or at mailing date of proxy statement.

    (a) If the financial statements in a filing are as of a date the 
number of days specified in paragraph (g) of this section or more 
before the date the filing is expected to become effective, or proposed 
mailing date in the case of a proxy statement, the financial statements 
shall be updated, except as specified in the following paragraphs, with 
a balance sheet as of an interim date within the number of days 
specified in paragraph (g) of this section and with statements of 
comprehensive income and cash flows for the interim period between the 
end of the most recent fiscal year and the date of the interim balance 
sheet provided and for the corresponding period of the preceding fiscal 
year. Such interim financial statements may be unaudited and need not 
be presented in greater detail than is required by Sec.  210.10-01. 
Notwithstanding the above requirements, the most recent interim 
financial statements shall be at least as current as the most recent 
financial statements filed with the Commission on Form 10-Q.
* * * * *

0
11. Amend Sec.  210.3-14 by:
0
a. Revising paragraph (a) introductory text; and
0
b. Redesignating the Note following paragraph (a)(1)(iii) as Note 1 to 
paragraph (a)(1).
    The revision reads as follows:


Sec.  210.3-14   Special instructions for real estate operations to be 
acquired.

    (a) If, during the period for which statements of comprehensive 
income are required, the registrant has acquired one or more properties 
which in the aggregate are significant, or since the date of the latest 
balance sheet required has acquired or proposes to acquire one or more 
properties which in the aggregate are significant, the following shall 
be furnished with respect to such properties:
* * * * *


Sec.  210.3-15  [Amended]

0
12. Amend Sec.  210.3-15 by removing and reserving paragraphs (a) and 
(b).

0
13. Amend Sec.  210.3-17 by revising paragraph (a) to read as follows:


Sec.  210.3-17  Financial statements of natural persons.

    (a) In lieu of the financial statements otherwise required, a 
natural person may file an unaudited balance sheet as of a date within 
90 days of date of filing and unaudited statements of comprehensive 
income for each of the three most recent fiscal years.
* * * * *

0
14. Amend Sec.  210.3-20 by:
0
a. Revising the section heading;
0
b. Redesignating paragraph (a) as paragraph (a)(1);
0
c. Adding paragraph (a)(2);
0
d. Redesignating paragraph (b) as paragraph (b)(1) and adding paragraph 
(b)(2); and
0
e. Revising paragraph (d).
    The additions and revisions read as follows:


Sec.  210.3-20   Currency for financial statements.

    (a)(1) * * *
    (2) An issuer that is not a foreign private issuer shall present 
its financial statements in U.S. dollars.
    (b)(1) * * *
    (2) If there are material exchange restrictions or controls 
relating to the

[[Page 50200]]

currency of a subsidiary's domicile, the currency held by a subsidiary, 
or the currency in which a subsidiary will pay dividends or transfer 
funds to the issuer or other subsidiaries, prominent disclosure of this 
fact shall be made in the financial statements.
* * * * *
    (d) Notwithstanding the currency used for reporting purposes, the 
issuer shall measure separately its own transactions, and those of each 
of its material operations (e.g., branches, divisions, subsidiaries, 
joint ventures, and similar entities) that is included in the issuer's 
consolidated financial statements and not located in a 
hyperinflationary environment, using the particular currency of the 
primary economic environment in which the issuer or the operation 
conducts its business. Assets and liabilities so determined shall be 
translated into the reporting currency at the exchange rate at the 
balance sheet date; all revenues, expenses, gains, and losses shall be 
translated at the exchange rate existing at the time of the transaction 
or, if appropriate, a weighted average of the exchange rates during the 
period; and all translation effects of exchange rate changes shall be 
included as a separate component (``cumulative translation 
adjustment'') of shareholder's equity. For purposes of this paragraph, 
the currency of an operation's primary economic environment is normally 
the currency in which cash is primarily generated and expended; a 
hyperinflationary environment is one that has cumulative inflation of 
approximately 100% or more over the most recent three year period. 
Departures from the methodology presented in this paragraph shall be 
quantified pursuant to Item 17(c)(2) of Form 20-F (Sec.  249.220f of 
this chapter).


Sec.  210.3A-01  [Removed and Reserved]

0
15. Remove and reserve Sec.  210.3A-01.

0
16. Revise Sec.  210.3A-02 to read as follows:


Sec.  210.3A-02  Consolidated financial statements of the registrant 
and its subsidiaries.

    In deciding upon consolidation policy, the registrant must consider 
what financial presentation is most meaningful in the circumstances and 
should follow in the consolidated financial statements principles of 
inclusion or exclusion which will clearly exhibit the financial 
position and results of operations of the registrant. There is a 
presumption that consolidated financial statements are more meaningful 
than separate financial statements and that they are usually necessary 
for a fair presentation when one entity directly or indirectly has a 
controlling financial interest in another entity. Other particular 
facts and circumstances may require combined financial statements, an 
equity method of accounting, or valuation allowances in order to 
achieve a fair presentation.
    (a) Majority ownership: Among the factors that the registrant 
should consider in determining the most meaningful presentation is 
majority ownership. Generally, registrants shall consolidate entities 
that are majority owned and shall not consolidate entities that are not 
majority owned. The determination of majority ownership requires a 
careful analysis of the facts and circumstances of a particular 
relationship among entities. In rare situations, consolidation of a 
majority owned subsidiary may not result in a fair presentation, 
because the registrant, in substance, does not have a controlling 
financial interest (for example, when the subsidiary is in legal 
reorganization or in bankruptcy). In other situations, consolidation of 
an entity, notwithstanding the lack of technical majority ownership, is 
necessary to present fairly the financial position and results of 
operations of the registrant, because of the existence of a parent-
subsidiary relationship by means other than record ownership of voting 
stock.
    (b) [Reserved].

0
17. Amend Sec.  210.3A-03 by removing and reserving paragraph (a) and 
revising paragraph (b).
    The revision reads as follows:


Sec.  210.3A-03  Statement as to principles of consolidation or 
combination followed.

* * * * *
    (b) As to each consolidated financial statement and as to each 
combined financial statement, if there has been a change in the persons 
included or excluded in the corresponding statement for the preceding 
fiscal period filed with the Commission that has a material effect on 
the financial statements, the persons included and the persons excluded 
shall be disclosed.


Sec.  210.3A-04   [Removed and Reserved]

0
18. Remove and reserve Sec.  210.3A-04.


Sec.  210.4-01   [Amended]

0
19. Amend Sec.  210.4-01 by removing paragraph (a)(3).

0
20. Amend Sec.  210.4-08 by:
0
 a. Revising the introductory text;
0
b. Removing and reserving paragraph (a);
0
c. Redesignating paragraph (d)(1) as paragraph (d) and removing 
paragraph (d)(2);
0
d. Revising paragraphs (e)(1) and (e)(3) introductory text;
0
e. Revising paragraphs (f) and (h)(1) introductory text;
0
f. Redesignating the Note following paragraph (h)(1) as Note 1 to 
paragraph (h)(1);
0
g. Revising paragraph (h)(2);
0
h. Removing paragraph (h)(3);
0
i. Removing and reserving paragraph (i);
0
j. Revising paragraph (k); and
0
k. Revising paragraphs (m)(2)(ii) and (n).
    The revisions read as follows:


Sec.  210.4-08  General notes to financial statements.

    If applicable to the person for which the financial statements are 
filed, the following shall be set forth on the face of the appropriate 
statement or in appropriately captioned notes. The information shall be 
provided for each statement required to be filed, except that the 
information required by paragraphs (b), (c), (d), (e), and (f) of this 
section shall be provided as of the most recent audited balance sheet 
being filed and for paragraph (j) of this section as specified therein. 
When specific statements are presented separately, the pertinent notes 
shall accompany such statements unless cross-referencing is 
appropriate.
* * * * *
    (e) * * *
    (1) Describe the most significant restrictions on the payment of 
dividends by the registrant, indicating their sources, their pertinent 
provisions, and the amount of retained earnings or net income 
restricted or free of restrictions.
* * * * *
    (3) The disclosures in paragraphs (e)(3)(i) and (ii) of this 
section shall be provided when material.
* * * * *
    (f) Significant changes in bonds, mortgages and similar debt. Any 
significant changes in the authorized amounts of bonds, mortgages and 
similar debt since the date of the latest balance sheet being filed for 
a particular person or group shall be stated.
* * * * *
    (h) Income tax expense. (1) Disclosure shall be made in the 
statement of comprehensive income or a note thereto, of the components 
of income (loss) before income tax expense (benefit) as either domestic 
or foreign.
* * * * *
    (2) In the reconciliation between the amount of reported total 
income tax expense (benefit) and the amount computed by multiplying the 
income (loss) before tax by the applicable

[[Page 50201]]

statutory Federal income tax rate, if no individual reconciling item 
amounts to more than five percent of the amount computed by multiplying 
the income before tax by the applicable statutory Federal income tax 
rate, and the total difference to be reconciled is less than five 
percent of such computed amount, no reconciliation need be provided 
unless it would be significant in appraising the trend of earnings. 
Reconciling items that are individually less than five percent of the 
computed amount may be aggregated in the reconciliation. Where the 
reporting person is a foreign entity, the income tax rate in that 
person's country of domicile should normally be used in making the 
above computation, but different rates should not be used for 
subsidiaries or other segments of a reporting entity. When the rate 
used by a reporting person is other than the United States Federal 
corporate income tax rate, the rate used and the basis for using such 
rate shall be disclosed.
* * * * *
    (k) Related party transactions that affect the financial 
statements. (1) Amounts of related party transactions should be stated 
on the face of the balance sheet, statement of comprehensive income, or 
statement of cash flows.
    (2) In cases where separate financial statements are presented for 
the registrant, certain investees, or subsidiaries, any intercompany 
profits or losses resulting from transactions with related parties and 
the effects thereof shall be disclosed.
* * * * *
    (m) * * *
    (2) Reverse repurchase agreements (assets purchased under 
agreements to resell). (i) If, as of the most recent balance sheet 
date, the aggregate carrying amount of ``reverse repurchase 
agreements'' (securities or other assets purchased under agreements to 
resell) exceeds 10% of total assets:
    (A) Disclose separately such amount in the balance sheet; and
    (B) Disclose in an appropriately captioned footnote:
    (1) The registrant's policy with regard to taking possession of 
securities or other assets purchased under agreements to resell; and
    (2) Whether or not there are any provisions to ensure that the 
market value of the underlying assets remains sufficient to protect the 
registrant in the event of default by the counterparty and if so, the 
nature of those provisions.
    (ii) If, as of the most recent balance sheet date, the amount at 
risk under reverse repurchase agreements with any individual 
counterparty or group of related counterparties exceeds 10% of 
stockholders' equity (or in the case of investment companies, net asset 
value), disclose the name of each such counterparty or group of related 
counterparties, the amount at risk with each, and the weighted average 
maturity of the reverse repurchase agreements with each. The amount at 
risk under reverse repurchase agreements is defined as the excess of 
the carrying amount of the reverse repurchase agreements over the 
market value of assets delivered pursuant to the agreements by the 
counterparty to the registrant (or to a third party agent that has 
affirmatively agreed to act on behalf of the registrant) and not 
returned to the counterparty, except in exchange for their approximate 
market value in a separate transaction.
    (n) Accounting policies for certain derivative instruments. 
Disclosures regarding accounting policies shall include, to the extent 
material, where in the statement of cash flows derivative financial 
instruments, and their related gains and losses, as defined by U.S. 
generally accepted accounting principles, are reported.

0
21. Amend Sec.  210.4-10 by revising paragraph (c)(7)(i) to read as 
follows:


Sec.  210.4-10  Financial accounting and reporting for oil and gas 
producing activities pursuant to the Federal securities laws and the 
Energy Policy and Conservation Act of 1975.

* * * * *
    (c) * * *
    (7) * * *
    (i) For each cost center for each year that a statement of 
comprehensive income is required, disclose the total amount of 
amortization expense (per equivalent physical unit of production if 
amortization is computed on the basis of physical units or per dollar 
of gross revenue from production if amortization is computed on the 
basis of gross revenue).
* * * * *

0
22. Amend Sec.  210.5-02 by:
0
a. Removing ``[See Sec.  210.4-05]'' immediately below the undesignated 
heading ``Current Assets, when appropriate'' and immediately above 
paragraph 1;
0
b. Revising paragraphs 6.(a)(2) and (3);
0
c. Revising the undesignated heading immediately above paragraph 19;
0
d. Revising paragraphs 22.(a) introductory text, 27.(c)(3), 28, and 29; 
and
0
e. Revising paragraph 30.(a).
    The revisions read as follows:


Sec.  210.5-02  Balance sheets.

* * * * *
    6. * * *
    (a) * * *
    (2) inventoried costs relating to long-term contracts or programs 
(see paragraph (d) of this section);
    (3) work in process;
* * * * *

Current Liabilities, When Appropriate

    19. * * *
* * * * *
    22. * * *
    (a) State separately, in the balance sheet or in a note thereto, 
each issue or type of obligation and such information as will indicate:
* * * * *
    27. * * *
    (c) * * *
    (3) the changes in each issue for each period for which a statement 
of comprehensive income is required to be filed. (See also Sec.  210.4-
08(d).)
* * * * *
    28. Preferred stocks which are not redeemable or are redeemable 
solely at the option of the issuer. State on the face of the balance 
sheet, or if more than one issue is outstanding state in a note, the 
title of each issue and the dollar amount thereof. Show also the dollar 
amount of any shares subscribed but unissued, and show the deduction of 
subscriptions receivable therefrom. State on the face of the balance 
sheet or in a note, for each issue, the number of shares authorized and 
the number of shares issued or outstanding, as appropriate (see Sec.  
210.4-07). Show in a note or separate statement the changes in each 
class of preferred shares reported under this caption for each period 
for which a statement of comprehensive income is required to be filed. 
(See also Sec.  210.4-08(d).)
* * * * *
    29. Common stocks. For each class of common shares state, on the 
face of the balance sheet, the number of shares issued or outstanding, 
as appropriate (see Sec.  210.4-07), and the dollar amount thereof. If 
convertible, this fact should be indicated on the face of the balance 
sheet. For each class of common shares state, on the face of the 
balance sheet or in a note, the title of the issue, the number of 
shares authorized, and, if convertible, the basis of conversion (see 
also Sec.  210.4-08(d)). Show also the dollar amount of any common 
shares subscribed but unissued, and show the deduction of subscriptions 
receivable therefrom. Show in a note or statement the changes in each 
class of common shares for each period for which a

[[Page 50202]]

statement of comprehensive income is required to be filed.
* * * * *
    30. Other stockholders' equity.
    (a) Separate captions shall be shown for (1) additional paid-in 
capital, (2) other additional capital, (3) retained earnings, (i) 
appropriated and (ii) unappropriated (See Sec.  210.4-08(e)), and (4) 
accumulated other comprehensive income.

    Note 1 to paragraph 30.(a). Additional paid-in capital and other 
additional capital may be combined with the stock caption to which 
it applies, if appropriate.

* * * * *

0
23. Amend Sec.  210.5-03 by:
0
a. Revising the section heading and paragraphs (a), (b)1, 7, and 9;
0
b. Removing and reserving paragraphs (b)15, 16, and 17;
0
c. Redesignating paragraph (b)21 as (b)25; and
0
d. Adding new paragraph (b)21 and paragraphs (b)22, 23, and 24.
    The revisions and additions read as follows:


Sec.  210.5-03  Statements of comprehensive income.

    (a) The purpose of this rule is to indicate the various line items 
which, if applicable, and except as otherwise permitted by the 
Commission, should appear on the face of the statements of 
comprehensive income filed for the persons to whom this article 
pertains (see Sec.  210.4-01(a)).
    (b) * * *
    1. Net sales and gross revenues. State separately:
    (a) Net sales of tangible products (gross sales less discounts, 
returns and allowances), (b) operating revenues of public utilities or 
others; (c) income from rentals; (d) revenues from services; and (e) 
other revenues. Amounts earned from transactions with related parties 
shall be disclosed as required under Sec.  210.4-08(k). A public 
utility company using a uniform system of accounts or a form for annual 
report prescribed by federal or state authorities, or a similar system 
or report, shall follow the general segregation of operating revenues 
and operating expenses reported under Sec.  210.5-03.2 prescribed by 
such system or report. If the total of sales and revenues reported 
under this caption includes excise taxes in an amount equal to 1 
percent or more of such total, the amount of such excise taxes shall be 
shown on the face of the statement parenthetically or otherwise.
* * * * *
    7. Non-operating income. State separately in the statement of 
comprehensive income or in a note thereto amounts earned from (a) 
dividends, (b) interest on securities, (c) profits on securities (net 
of losses), and (d) miscellaneous other income. Amounts earned from 
transactions in securities of related parties shall be disclosed as 
required under Sec.  210.4-08(k). Material amounts included under 
miscellaneous other income shall be separately stated in the statement 
of comprehensive income or in a note thereto, indicating clearly the 
nature of the transactions out of which the items arose.
* * * * *
    9. Non-operating expenses. State separately in the statement of 
comprehensive income or in a note thereto amounts of (a) losses on 
securities (net of profits) and (b) miscellaneous income deductions. 
Material amounts included under miscellaneous income deductions shall 
be separately stated in the statement of comprehensive income or in a 
note thereto, indicating clearly the nature of the transactions out of 
which the items arose.
* * * * *
    21. Other comprehensive income. State separately the components of 
and the total for other comprehensive income. Present the components 
either net of related tax effects or before related tax effects with 
one amount shown for the aggregate income tax expense or benefit. State 
the amount of income tax expense or benefit allocated to each 
component, including reclassification adjustments, in the statement of 
comprehensive income or in a note.
    22. Comprehensive income.
    23. Comprehensive income attributable to the noncontrolling 
interest.
    24. Comprehensive income attributable to the controlling interest.
    25. Earnings per share data.

0
24. Amend Sec.  210.5-04 by revising paragraph (a)(2); and Schedule I 
to read as follows:


Sec.  210.5-04  What schedules are to be filed.

    (a) * * *
    (2) Schedule II of this section shall be filed for each period for 
which an audited statement of comprehensive income is required to be 
filed for each person or group.
* * * * *
    Schedule I--Condensed financial information of registrant. The 
schedule prescribed by Sec.  210.12-04 shall be filed when the 
restricted net assets (Sec.  210.1.02(dd)) of consolidated subsidiaries 
exceed 25 percent of consolidated net assets as of the end of the most 
recently completed fiscal year.
* * * * *

0
25. Amend Sec.  210.6-03 by revising paragraph (c)(1) introductory text 
and removing and reserving paragraph (c)(1)(i).
    The revision reads as follows:


Sec.  210.6-03  Special rules of general application to registered 
investment companies and business development companies.

* * * * *
    (c) * * *
    (1) Consolidated and combined statements filed for registered 
investment companies and business development companies shall be 
prepared in accordance with Sec. Sec.  210.3A-02 and 210.3A-03 (Article 
3A), except that:
* * * * *

0
26. Amend Sec.  210.6-04 by revising the paragraph 17 heading, its 
introductory text, and paragraph 17.(a) to read as follows:


Sec.  210.6-04  Balance sheets.

* * * * *
    17. Total distributable earnings (loss). Disclose total 
distributable earnings (loss), which generally comprise:
    (a) Accumulated undistributed investment income-net,
* * * * *

0
27. Amend Sec.  210.6-07 by revising the introductory text to read as 
follows:


Sec.  210.6-07  Statements of operations.

    Statements of operations, or statements of comprehensive income, 
where applicable, filed by registered investment companies, other than 
issuers of face-amount certificates, subject to the special provisions 
of Sec.  210.6-08, and business development companies, shall comply 
with the following provisions:
* * * * *

0
28. Amend Sec.  210.6-09 by revising paragraphs 3, 4.(b), and 7 to read 
as follows:


Sec.  210.6-09  Statements of changes in net assets.

* * * * *
    3. Distributions to shareholders. State total distributions to 
shareholders which generally come from: (a) Investment income-net; (b) 
realized gain from investment transactions-net; and (c) other sources, 
except tax return of capital distributions, which shall be disclosed 
separately.
    4. * * *
    (b) Disclose in the body of the statements or in the notes, for 
each class

[[Page 50203]]

of the person's shares, the number and value of shares issued in 
reinvestment of dividends as well as the number and dollar amounts 
received for shares sold and paid for shares redeemed.
* * * * *
    7. Net assets at the end of the period.

0
29. Amend Sec.  210.6A-04 by revising the section heading and 
introductory text to read as follows:


Sec.  210.6A-04  Statements of comprehensive income and changes in plan 
equity.

    Statements of comprehensive income and changes in plan equity filed 
under this rule shall comply with the following provisions:
* * * * *

0
30. Amend Sec.  210.6A-05 by revising paragraph (a) introductory text 
and Schedule III to read as follows:


Sec.  210.6A-05  What schedules are to be filed.

    (a) Schedule I of this section shall be filed as of the most recent 
audited statement of financial condition and any subsequent unaudited 
statement of financial condition being filed. Schedule II of this 
section shall be filed as of the date of each statement of financial 
condition being filed. Schedule III of this section shall be filed for 
each period for which a statement of comprehensive income and changes 
in plan equity is filed. All schedules shall be audited if the related 
statements are audited.
* * * * *
    Schedule III--Allocation of plan income and changes in plan equity 
to investment programs. If the plan provides for separate investment 
programs with separate funds, and if the allocation of income and 
changes in plan equity to the several funds is not shown in the 
statement of comprehensive income and changes in plan equity in 
columnar form or by the submission of separate statements for each 
fund, a schedule shall be submitted showing the allocation of each 
caption of each statement of comprehensive income and changes in plan 
equity filed to the applicable fund.
* * * * *

0
31. Amend Sec.  210.7-03 by:
0
a. Revising paragraphs (a)6, (a)11, and (a)13.(a)(2); and
0
b. Removing and reserving paragraph (a)13.(b);
0
c. Removing paragraph (a)13.(c); and
0
d. Revising paragraphs (a)23.(a)(3) and (a)23.(c)(2).
    The revisions read as follows:


Sec.  210.7-03  Balance sheets.

    (a) * * *
    6. Reinsurance recoverable.
* * * * *
    11. Separate account assets. Include under this caption the portion 
of separate account-assets representing contract holder funds required 
to be reported in an insurance entity's financial statements as a 
summary total. An equivalent summary total for the related liability 
shall be included under caption 18.
* * * * *
    13. * * *
    (a) * * *
    (2) unearned premiums and
    (3) * * *
* * * * *
    23. * * *
    (a) * * *
    (3) accumulated other comprehensive income,
* * * * *
    (c) * * *
    (2) property and liability insurance legal entities: The amount of 
statutory stockholders' equity as of the date of each balance sheet 
presented and the amount of statutory net income or loss for each 
period for which a statement of comprehensive income is presented.
* * * * *

0
32. Amend Sec.  210.7-04 by:
0
a. Revising the section heading;
0
b. Revising the introductory text;
0
c. Revising paragraph 3.(b);
0
d. Removing and reserving paragraph 3.(c);
0
e. Revising paragraphs 3.(d), 7, and 9;
0
f. Removing and reserving paragraphs 13, 14, and 15;
0
g. Redesignating paragraph 19 as paragraph 23; and
0
h. Adding new paragraph 19 and paragraphs 20, 21, and 22.
    The revisions and additions read as follows:


Sec.  210.7-04  Statements of comprehensive income.

    The purpose of this section is to indicate the various items which, 
if applicable, should appear on the face of the statements of 
comprehensive income and in the notes thereto filed for persons to whom 
this article pertains. (See Sec.  210.4-01(a).)
* * * * *
    3. * * *
    (b) Indicate in a footnote the registrant's policy with respect to 
whether investment income and realized gains and losses allocable to 
policyholders and separate accounts are included in the investment 
income and realized gain and loss amounts reported in the statement of 
comprehensive income. If the statement of comprehensive income includes 
investment income and realized gains and losses allocable to 
policyholders and separate accounts, indicate the amounts of such 
allocable investment income and realized gains and losses and the 
manner in which the insurance enterprise's obligation with respect to 
allocation of such investment income and realized gains and losses is 
otherwise accounted for in the financial statements.
* * * * *
    (d) For each period for which a statement of comprehensive income 
is filed, include in a note an analysis of realized and unrealized 
investment gains and losses on fixed maturities and equity securities. 
For each period, state separately for fixed maturities [see Sec.  
210.7-03.1(a)] and for equity securities [see Sec.  210.7-03.1(b)] the 
following amounts:
* * * * *
    7. Underwriting, acquisition and insurance expenses. State 
separately in the statement of comprehensive income or in a note 
thereto (a) the amount included in this caption representing deferred 
policy acquisition costs amortized to income during the period, and (b) 
the amount of other operating expenses. State separately in the 
statement of comprehensive income any material amount included in all 
other operating expenses.
* * * * *
    9. Income tax expense. Include under this caption only taxes based 
on income (See Sec.  210.4-08(h).)
* * * * *
    19. Other comprehensive income. State separately the components of 
and the total for other comprehensive income. Present the components 
either net of related tax effects or before related tax effects with 
one amount shown for the aggregate income tax expense or benefit. State 
the amount of income tax expense or benefit allocated to each 
component, including reclassification adjustments, in the statement of 
comprehensive income or in a note.
    20. Comprehensive income.
    21. Comprehensive income attributable to the noncontrolling 
interest.
    22. Comprehensive income attributable to the controlling interest.
    23. Earnings per share data.

0
33. Amend Sec.  210.7-05 by revising paragraph (a)(2) and Schedules II 
and III to read as follows:


Sec.  210.7-05   What schedules are to be filed.

    (a) * * *
    (2) The schedules specified in this section as Schedule IV and V 
shall be

[[Page 50204]]

filed for each period for which an audited statement of comprehensive 
income is required to be filed for each person or group.
* * * * *
    Schedule II--Condensed financial information of registrant. The 
schedule prescribed by Sec.  210.12-04 shall be filed when the 
restricted net assets (Sec.  210.1.02(dd)) of consolidated subsidiaries 
exceed 25 percent of consolidated net assets as of the end of the most 
recently completed fiscal year.
    Schedule III--Supplementary insurance information. The schedule 
prescribed by Sec.  210.12-16 shall be filed giving segment detail in 
support of various balance sheet and statement of comprehensive income 
captions. The required balance sheet information shall be presented as 
of the date of each audited balance sheet filed, and the statement of 
comprehensive income information shall be presented for each period for 
which an audited statement of comprehensive income is required to be 
filed, for each person or group.
* * * * *

0
34. Amend Sec.  210.8-01 by revising paragraph a. of Note 2 to Sec.  
210.8 and removing Note 6 to Sec.  210.8.
    The revision reads as follows:


Sec.  210.8-01  Preliminary Notes to Article 8.

* * * * *

    Note 2 to Sec.  210.8.  * * *
    a. The report and qualifications of the independent accountant 
shall comply with the requirements of Sec. Sec.  210.2-01 through 
210.2-07 (Article 2 of this part); and

* * * * *

0
35. Revise Sec.  210.8-02 to read as follows:


Sec.  210.8-02   Annual financial statements.

    Smaller reporting companies shall file an audited balance sheet as 
of the end of each of the most recent two fiscal years, or as of a date 
within 135 days if the issuer has existed for a period of less than one 
fiscal year, and audited statements of comprehensive income, cash flows 
and changes in stockholders' equity for each of the two fiscal years 
preceding the date of the most recent audited balance sheet (or such 
shorter period as the registrant has been in business).

0
36. Amend Sec.  210.8-03 by:
0
 a. Revising the introductory text;
0
b. Revising paragraph (a)(2);
0
c. Adding paragraph (a)(5);
0
d. Removing and reserving paragraph (b)(2);
0
e. Revising paragraphs (b)(4) and (5);
0
f. Removing paragraph (b)(6); and
0
g. Revising Instruction 1 to Sec.  210.8-03.
    The revisions and addition read as follows:


Sec.  210.8-03  Interim financial statements.

    Interim financial statements may be unaudited; however, before 
filing, interim financial statements included in quarterly reports on 
Form 10-Q (Sec.  249.308(a) of this chapter) must be reviewed by an 
independent public accountant using applicable professional standards 
and procedures for conducting such reviews, as may be modified or 
supplemented by the Commission. If, in any filing, the issuer states 
that interim financial statements have been reviewed by an independent 
public accountant, a report of the accountant on the review must be 
filed with the interim financial statements. Interim financial 
statements shall include a balance sheet as of the end of the issuer's 
most recent fiscal quarter, a balance sheet as of the end of the 
preceding fiscal year, and statements of comprehensive income and 
statements of cash flows for the interim period up to the date of such 
balance sheet and the comparable period of the preceding fiscal year.
    (a) * * *
    (2) Statements of comprehensive income (or the statement of net 
income if comprehensive income is presented in two separate but 
consecutive financial statements) should include net sales or gross 
revenue, each cost and expense category presented in the annual 
financial statements that exceeds 20% of sales or gross revenues, 
provision for income taxes, and discontinued operations. (Financial 
institutions should substitute net interest income for sales for 
purposes of determining items to be disclosed.)
* * * * *
    (5) Provide the information required by Sec.  210.3-04 for the 
current and comparative year-to-date periods, with subtotals for each 
interim period.
    (b) * * *
    (4) Significant dispositions. If a significant disposition has 
occurred during the most recent interim period and the transaction 
required the filing of a Form 8-K (Sec.  249.308 of this chapter), pro 
forma data must be presented that reflects revenue, income from 
continuing operations, net income, net income attributable to the 
registrant and income per share for the current interim period and the 
corresponding interim period of the preceding fiscal year.
    (5) Material accounting changes. The registrant's independent 
accountant must provide a letter in the first Form 10-Q (Sec.  249.308a 
of this chapter) filed after the change indicating whether or not the 
change is to a preferable method. Disclosure must be provided of any 
retroactive change to prior period financial statements, including the 
effect of any such change on income and income per share.
    Instruction 1 to Sec.  210.8-03. Where Sec. Sec.  210.8-01 through 
210.8-08 (Article 8 of this part) are applicable to a Form 10-Q (Sec.  
249.308a of this chapter) and the interim period is more than one 
quarter, statements of comprehensive income must also be provided for 
the most recent interim quarter and the comparable quarter of the 
preceding fiscal year.
* * * * *

0
37. Amend Sec.  210.8-04 by revising paragraph (b)(3) to read as 
follows:


Sec.  210.8-04   Financial statements of businesses acquired or to be 
acquired.

* * * * *
    (b) * * *
    (3) Compare the smaller reporting company's equity in the income 
from continuing operations before income taxes of the acquiree 
exclusive of amounts attributable to any noncontrolling interests to 
such consolidated income of the smaller reporting company for the most 
recently completed fiscal year.
* * * * *

0
38. Amend Sec.  210.8-05 by revising paragraphs (b)(1) and (2) to read 
as follows:


Sec.  210.8-05   Pro forma financial information.

* * * * *
    (b) * * *
    (1) If the transaction was consummated during the most recent 
fiscal year or subsequent interim period, pro forma statements of 
comprehensive income reflecting the combined operations of the entities 
for the latest fiscal year and interim period, if any; or
    (2) If consummation of the transaction has occurred or is probable 
after the date of the most recent balance sheet required by Sec.  
210.8-02 or Sec.  210.8-03, a pro forma balance sheet giving effect to 
the combination as of the date of the most recent balance sheet. For a 
purchase, pro forma statements of comprehensive income reflecting the 
combined operations of the entities for the latest fiscal year and 
interim period, if any, are required.

0
39. Amend Sec.  210.8-06 by revising the introductory text to read as 
follows:


Sec.  210.8-06   Real estate operations acquired or to be acquired.

    If, during the period for which statements of comprehensive income 
are required, the smaller reporting company has acquired one or more 
properties that

[[Page 50205]]

in the aggregate are significant, or since the date of the latest 
balance sheet required by Sec.  210.8-02 or Sec.  210.8-03, has 
acquired or proposes to acquire one or more properties that in the 
aggregate are significant, the following shall be furnished with 
respect to such properties:
* * * * *

0
40. Amend Sec.  210.9-03 by:
0
 a. Revising paragraph 3;
0
b. Removing paragraph 6.(a) and removing and reserving paragraph 7.(d); 
and
0
c. Revising paragraphs 7.(e)(3), 10, and 12.(a).
    The revisions read as follows:


Sec.  210.9-03   Balance sheets.

* * * * *
    3. Federal funds sold and securities purchased under resale 
agreements or similar arrangements.
* * * * *
    7. * * *
    (e) * * *
    (3) Notwithstanding the aggregate disclosure called for by 
paragraph (e)(1) of this section, if any loans were not made in the 
ordinary course of business during any period for which a statement of 
comprehensive income is required to be filed, provide an appropriate 
description of each such loan.
* * * * *
    10. Other assets. Disclose separately on the balance sheet or in a 
note thereto any of the following assets or any other asset the amount 
of which exceeds thirty percent of stockholders equity. The remaining 
assets may be shown as one amount.
    (1) Goodwill.
    (2) Other intangible assets (net of amortization).
    (3) Investments in and indebtedness of affiliates and other 
persons.
    (4) Other real estate.
    (a) Disclose in a note the basis at which other real estate is 
carried. A reduction to fair market value from the carrying value of 
the related loan at the time of acquisition shall be accounted for as a 
loan loss. Any allowance for losses on other real estate which has been 
established subsequent to acquisition should be deducted from other 
real estate. For each period for which a statement of comprehensive 
income is required, disclosures should be made in a note as to the 
changes in the allowances, including balance at beginning and end of 
period, provision charged to income, and losses charged to the 
allowance.
* * * * *
    12. * * *
    (a) The amount of noninterest bearing deposits and interest bearing 
deposits in foreign banking offices must be presented if the disclosure 
provided by Sec.  210.9-05 is required.
* * * * *

0
41. Amend Sec.  210.9-04 by:
0
 a. Revising the section heading and introductory text;
0
b. Revising paragraph 13.(h);
0
c. Removing and reserving paragraphs 14.(c), 17, 18, and 19;
0
d. Redesignating paragraph 23 as paragraph 27; and
0
e. Adding new paragraph 23 and paragraphs 24, 25, and 26.
    The revisions and additions read as follows:


Sec.  210.9-04   Statements of comprehensive income.

    The purpose of this section is to indicate the various items which, 
if applicable, should appear on the face of the statement of 
comprehensive income or in the notes thereto.
* * * * *
    13. * * *
    (h) Investment securities gains or losses. Related income taxes 
shall be disclosed.
* * * * *
    23. Other comprehensive income. State separately the components of 
and the total for other comprehensive income. Present the components 
either net of related tax effects or before related tax effects with 
one amount shown for the aggregate income tax expense or benefit. State 
the amount of income tax expense or benefit allocated to each 
component, including reclassification adjustments, in the statement of 
comprehensive income or in a note.
    24. Comprehensive income.
    25. Comprehensive income attributable to the noncontrolling 
interest.
    26. Comprehensive income attributable to the controlling interest.
* * * * *

0
42. Amend Sec.  210.9-05 by revising paragraph (b)(2) to read as 
follows:


Sec.  210.9-05   Foreign activities.

* * * * *
    (b) * * *
    (2) For each period for which a statement of comprehensive income 
is filed, state the amount of revenue, income (loss) before taxes, and 
net income (loss) associated with foreign activities. Disclose 
significant estimates and assumptions (including those related to the 
cost of capital) used in allocating revenue and expenses to foreign 
activities; describe the nature and effects of any changes in such 
estimates and assumptions which have a significant impact on 
interperiod comparability.
* * * * *

0
43. Revise Sec.  210.9-06 to read as follows:


Sec.  210.9-06   Condensed financial information of registrant.

    The information prescribed by Sec.  210.12-04 shall be presented in 
a note to the financial statements when the restricted net assets 
(Sec.  210.1-02(dd)) of consolidated subsidiaries exceed 25 percent of 
consolidated net assets as of the end of the most recently completed 
fiscal year. The investment in and indebtedness of and to bank 
subsidiaries shall be stated separately in the condensed balance sheet 
from amounts for other subsidiaries; the amount of cash dividends paid 
to the registrant for each of the last three years by bank subsidiaries 
shall be stated separately in the condensed statement of comprehensive 
income from amounts for other subsidiaries.

0
44. Amend Sec.  210.10-01 by:
0
 a. Revising paragraphs (a)(3), (5), and (7);
0
b. Revising paragraphs (b)(1) through (3);
0
c. Removing and reserving paragraphs (b)(4) and (5); and
0
d. Revising paragraphs (b)(6) through (8), (c)(2) and (4), and (d).
    The revisions read as follows:


Sec.  210.10-01   Interim financial statements.

    (a) * * *
    (3) Interim statements of comprehensive income shall also include 
major captions prescribed by the applicable sections of part 210 of 
this chapter (Regulation S-X). When any major statement of 
comprehensive income (or statement of net income if comprehensive 
income is presented in two separate but consecutive financial 
statements) caption is less than 15% of average net income for the most 
recent three fiscal years and the amount in the caption has not 
increased or decreased by more than 20% as compared to the 
corresponding interim period of the preceding fiscal year, the caption 
may be combined with others. In calculating average net income, loss 
years should be excluded. If losses were incurred in each of the most 
recent three years, the average loss shall be used for purposes of this 
test. Notwithstanding these tests, Sec.  210.4-02 applies and de 
minimis amounts therefore need not be shown separately, except that 
registrants reporting under Sec.  210.9 shall show investment 
securities gains or losses separately regardless of size.
* * * * *

[[Page 50206]]

    (5) The interim financial information shall include disclosures 
either on the face of the financial statements or in accompanying 
footnotes sufficient so as to make the interim information presented 
not misleading. Registrants may presume that users of the interim 
financial information have read or have access to the audited financial 
statements for the preceding fiscal year and that the adequacy of 
additional disclosure needed for a fair presentation may be determined 
in that context. Accordingly, footnote disclosure which would 
substantially duplicate the disclosure contained in the most recent 
annual report to security holders or latest audited financial 
statements, such as a statement of significant accounting policies and 
practices, details of accounts which have not changed significantly in 
amount or composition since the end of the most recently completed 
fiscal year, and detailed disclosures prescribed by Sec.  210.4-08 may 
be omitted.
* * * * *
    (7) Provide the information required by Sec.  210.3-04 for the 
current and comparative year-to-date periods, with subtotals for each 
interim period.
    (b) * * *
    (1) Summarized statement of comprehensive income information shall 
be given separately as to each subsidiary not consolidated or 50 
percent or less owned persons or as to each group of such subsidiaries 
or fifty percent or less owned persons for which separate individual or 
group statements would otherwise be required for annual periods. Such 
summarized information, however, need not be furnished for any such 
unconsolidated subsidiary or person which would not be required 
pursuant to Sec.  240.13a-13 or Sec.  240.15d-13 of this chapter to 
file quarterly financial information with the Commission if it were a 
registrant.
    (2) The basis of the earnings per share computation shall be stated 
together with the number of shares used in the computation.
    (3) If, during the most recent interim period presented, the 
registrant or any of its consolidated subsidiaries entered into a 
combination between entities under common control, supplemental 
disclosure of the separate results of the combined entities for periods 
prior to the combination shall be given, with appropriate explanations.
* * * * *
    (6) For filings on Form 10-Q (Sec.  249.308(a) of this chapter), a 
letter from the registrant's independent accountant shall be filed as 
an exhibit (in accordance with the provisions of 17 CFR 229.601 (Item 
601 of Regulation S-K)) in the first Form 10-Q after the date of an 
accounting change indicating whether or not the change is to an 
alternative principle which, in the accountant's judgment, is 
preferable under the circumstances; except that no letter from the 
accountant need be filed when the change is made in response to a 
standard adopted by the Financial Accounting Standards Board that 
requires such change.
    (7) Any material retroactive prior period adjustment made during 
any period covered by the interim financial statements shall be 
disclosed, together with the effect thereof upon net income--total and 
per share--of any prior period included and upon the balance of 
retained earnings. If results of operations for any period presented 
have been adjusted retroactively by such an item subsequent to the 
initial reporting of such period, similar disclosure of the effect of 
the change shall be made.
    (8) Any unaudited interim financial statements furnished shall 
reflect all adjustments which are, in the opinion of management, 
necessary to a fair statement of the results for the interim periods 
presented. A statement to that effect shall be included. If all such 
adjustments are of a normal recurring nature, a statement to that 
effect shall be made; otherwise, there shall be furnished information 
describing in appropriate detail the nature and amount of any 
adjustments other than normal recurring adjustments entering into the 
determination of the results shown.
    (c) * * *
    (2) Interim statements of comprehensive income shall be provided 
for the most recent fiscal quarter, for the period between the end of 
the preceding fiscal year and the end of the most recent fiscal 
quarter, and for the corresponding periods of the preceding fiscal 
year. Such statements may also be presented for the cumulative twelve 
month period ended during the most recent fiscal quarter and for the 
corresponding preceding period.
* * * * *
    (4) Registrants engaged in seasonal production and sale of a 
single-crop agricultural commodity may provide interim statements of 
comprehensive income and cash flows for the twelve month period ended 
during the most recent fiscal quarter and for the corresponding 
preceding period in lieu of the year-to-date statements specified in 
paragraphs (c)(2) and (3) of this section.
    (d) Interim review by independent public accountant. Prior to 
filing, interim financial statements included in quarterly reports on 
Form 10-Q (17 CFR 249.308(a)) must be reviewed by an independent public 
accountant using applicable professional standards and procedures for 
conducting such reviews, as may be modified or supplemented by the 
Commission. If, in any filing, the company states that interim 
financial statements have been reviewed by an independent public 
accountant, a report of the accountant on the review must be filed with 
the interim financial statements.
* * * * *

0
45. Amend Sec.  210.11-02 by:
0
 a. Revising paragraphs (b)(1) and (3) and (b)(5) through (7);
0
b. Redesignating the Instructions following paragraph (b)(8) 
consecutively as Instruction 1 to paragraph (b), Instruction 2 to 
paragraph (b), Instruction 3 to paragraph (b), Instruction 4 to 
paragraph (b), Instruction 5 to paragraph (b), Instruction 6 to 
paragraph (b), and Instruction 7 to paragraph (b);
0
c. Revising newly redesignated Instruction 1 to paragraph (b), 
Instruction 2 to paragraph (b), Instruction 5 to paragraph (b), and 
Instruction 7 to paragraph (b); and
0
d. Revising paragraphs (c)(2) through (4).
    The revisions read as follows:


Sec.  210.11-02  Preparation requirements.

* * * * *
    (b) * * *
    (1) Pro forma financial information shall consist of a pro forma 
condensed balance sheet, pro forma condensed statements of 
comprehensive income, and accompanying explanatory notes. In certain 
circumstances (i.e., where a limited number of pro forma adjustments 
are required and those adjustments are easily understood), a narrative 
description of the pro forma effects of the transaction may be 
furnished in lieu of the statements described herein.
* * * * *
    (3) The pro forma condensed financial information need only include 
major captions (i.e., the numbered captions) prescribed by the 
applicable sections of part 210 of this chapter (Regulation S-X). Where 
any major balance sheet caption is less than 10 percent of total 
assets, the caption may be combined with others. When any major 
statement of comprehensive income caption is less than 15 percent of 
average net income attributable to the registrant for the most recent 
three fiscal years, the caption may be combined with others. In 
calculating average net income

[[Page 50207]]

attributable to the registrant, loss years should be excluded unless 
losses were incurred in each of the most recent three years, in which 
case the average loss shall be used for purposes of this test. 
Notwithstanding these tests, de minimis amounts need not be shown 
separately.
* * * * *
    (5) The pro forma condensed statement of comprehensive income shall 
disclose income (loss) from continuing operations before nonrecurring 
charges or credits directly attributable to the transaction. Material 
nonrecurring charges or credits and related tax effects which result 
directly from the transaction and which will be included in the income 
of the registrant within the 12 months succeeding the transaction shall 
be disclosed separately. It should be clearly indicated that such 
charges or credits were not considered in the pro forma condensed 
statement of comprehensive income. If the transaction for which pro 
forma financial information is presented relates to the disposition of 
a business, the pro forma results should give effect to the disposition 
and be presented under an appropriate caption.
    (6) Pro forma adjustments related to the pro forma condensed 
statement of comprehensive income shall be computed assuming the 
transaction was consummated at the beginning of the fiscal year 
presented and shall include adjustments which give effect to events 
that are directly attributable to the transaction, expected to have a 
continuing impact on the registrant, and factually supportable. Pro 
forma adjustments related to the pro forma condensed balance sheet 
shall be computed assuming the transaction was consummated at the end 
of the most recent period for which a balance sheet is required by 
Sec.  210.3-01 and shall include adjustments which give effect to 
events that are directly attributable to the transaction and factually 
supportable regardless of whether they have a continuing impact or are 
nonrecurring. All adjustments should be referenced to notes which 
clearly explain the assumptions involved.
    (7) Historical primary and fully diluted per share data based on 
continuing operations (or net income if the registrant does not report 
discontinued operations) for the registrant, and primary and fully 
diluted pro forma per share data based on continuing operations before 
nonrecurring charges or credits directly attributable to the 
transaction shall be presented on the face of the pro forma condensed 
statement of comprehensive income together with the number of shares 
used to compute such per share data. For transactions involving the 
issuance of securities, the number of shares used in the calculation of 
the pro forma per share data should be based on the weighted average 
number of shares outstanding during the period adjusted to give effect 
to shares subsequently issued or assumed to be issued had the 
particular transaction or event taken place at the beginning of the 
period presented. If a convertible security is being issued in the 
transaction, consideration should be given to the possible dilution of 
the pro forma per share data.
    (8) * * *
    Instruction 1 to paragraph (b). The historical statement of 
comprehensive income used in the pro forma financial information shall 
not report discontinued operations. If the historical statement of 
comprehensive income includes such items, only the portion of the 
statement of comprehensive income through ``income from continuing 
operations'' (or the appropriate modification thereof) should be used 
in preparing pro forma results.
    Instruction 2 to paragraph (b). For a business combination, pro 
forma adjustments for the statement of comprehensive income shall 
include amortization, depreciation and other adjustments based on the 
allocated purchase price of net assets acquired. In some transactions, 
such as in financial institution acquisitions, the purchase adjustments 
may include significant discounts of the historical cost of the 
acquired assets to their fair value at the acquisition date. When such 
adjustments will result in a significant effect on earnings (losses) in 
periods immediately subsequent to the acquisition which will be 
progressively eliminated over a relatively short period, the effect of 
the purchase adjustments on reported results of operations for each of 
the next five years should be disclosed in a note.
* * * * *
    Instruction 5 to paragraph (b). Adjustments to reflect the 
acquisition of real estate operations or properties for the pro forma 
statement of comprehensive income shall include a depreciation charge 
based on the new accounting basis for the assets, interest financing on 
any additional or refinanced debt, and other appropriate adjustments 
that can be factually supported. See also Instruction 4 to this 
paragraph (b).
* * * * *
    Instruction 7 to paragraph (b). Tax effects, if any, of pro forma 
adjustments normally should be calculated at the statutory rate in 
effect during the periods for which pro forma condensed statements of 
comprehensive income are presented and should be reflected as a 
separate pro forma adjustment.
    (c) * * *
    (2)(i) Pro forma condensed statements of comprehensive income shall 
be filed for only the most recent fiscal year and for the period from 
the most recent fiscal year end to the most recent interim date for 
which a balance sheet is required. A pro forma condensed statement of 
comprehensive income may be filed for the corresponding interim period 
of the preceding fiscal year. A pro forma condensed statement of 
comprehensive income shall not be filed when the historical statement 
of comprehensive income reflects the transaction for the entire period.
    (ii) For combinations between entities under common control, the 
pro forma statements of comprehensive income (which are in effect a 
restatement of the historical statements of comprehensive income as if 
the combination had been consummated) shall be filed for all periods 
for which historical statements of comprehensive income of the 
registrant are required.
    (3) Pro forma condensed statements of comprehensive income shall be 
presented using the registrant's fiscal year end. If the most recent 
fiscal year end of any other entity involved in the transaction differs 
from the registrant's most recent fiscal year end by more than 93 days, 
the other entity's statement of comprehensive income shall be brought 
up to within 93 days of the registrant's most recent fiscal year end, 
if practicable. This updating could be accomplished by adding 
subsequent interim period results to the most recent fiscal year-end 
information and deducting the comparable preceding year interim period 
results. Disclosure shall be made of the periods combined and of the 
sales or revenues and income for any periods which were excluded from 
or included more than once in the condensed pro forma statements of 
comprehensive income (e.g., an interim period that is included both as 
part of the fiscal year and the subsequent interim period). For 
investment companies subject to Sec. Sec.  210.6-01 through 210.6-10, 
the periods covered by the pro forma statements must be the same.
    (4) Whenever unusual events enter into the determination of the 
results shown for the most recently completed fiscal year, the effect 
of such unusual events should be disclosed and consideration should be 
given to presenting a pro forma condensed

[[Page 50208]]

statement of comprehensive income for the most recent twelve-month 
period in addition to those required in paragraph (c)(2)(i) of this 
section if the most recent twelve-month period is more representative 
of normal operations.

0
46. Amend Sec.  210.11-03 by revising paragraphs (a) introductory text 
and (a)(2) to read as follows:


Sec.  210.11-03   Presentation of financial forecast.

    (a) A financial forecast may be filed in lieu of the pro forma 
condensed statements of comprehensive income required by Sec.  210.11-
02(b)(1).
* * * * *
    (2) The forecasted statement of comprehensive income shall be 
presented in the same degree of detail as the pro forma condensed 
statement of comprehensive income required by Sec.  210.11-02(b)(3).
* * * * *

0
47. Amend Sec.  210.12-16 by revising footnotes 4 and 5 to read as 
follows:


Sec.  210.12-16   Supplementary insurance information.

* * * * *
    \4\ The total of columns I and J should agree with the amount 
shown for statement of comprehensive income caption 7.
    \5\ Totals should agree with the indicated balance sheet and 
statement of comprehensive income caption amounts, where a caption 
number is shown.

0
48. Amend Sec.  210.12-17 by revising footnote 2 to read as follows:


Sec.  210.12-17   Reinsurance.

* * * * *
    \2\ This Column represents the total of column B less column C 
plus column D. The total premiums in this column should represent 
the amount of premium revenue on the statement of comprehensive 
income (or statement of net income if comprehensive income is 
presented in two separate but consecutive financial statements).
* * * * *

0
49. Amend Sec.  210.12-18 by revising footnote 1 to read as follows:


Sec.  210.12-18  Supplemental information (for property-casualty 
insurance underwriters).

* * * * *
    \1\ Information included in audited financial statements, 
including other schedules, need not be repeated in this schedule. 
Columns B, C, D, and E are as of the balance sheet dates, columns F, 
G, H, I, J, and K are for the same periods for which statements of 
comprehensive income are presented in the registrant's audited 
consolidated financial statements.
* * * * *

0
50. Amend Sec.  210.12-21 by revising footnote 4 to read as follows:


Sec.  210.12-21   Investments in securities of unaffiliated issuers.

* * * * *
    \4\ If any investments have been written down or reserved 
against by such companies pursuant to Sec.  210.6-03(d), indicate 
each such item by means of an appropriate symbol and explain in a 
footnote.
* * * * *

0
51. Amend Sec.  210.12-22 by revising footnotes 1(a), 4(b), and 6 to 
read as follows:


Sec.  210.12-22   Investments in and advances to affiliates and income 
thereon.

* * * * *
    \1\ * * *
    (a) The required information is to be given as to all 
investments in affiliates as of the close of the period. See 
Sec. Sec.  210.6-06(1), 210.6-06(5)(b), 210.6-06(8)(a)(2), and 
210.6-06(8)(a)(3). List each issue and group separately (1) 
investments in majority-owned subsidiaries, segregating subsidiaries 
consolidated; (2) other controlled companies; and (3) other 
affiliates. Give totals for each group. If operations of any 
controlled companies are different in character from those of the 
registrant, group such affiliates within divisions (1) and (2) by 
type of activities.
* * * * *
    \4\ * * *
    (b) If any investments have been written down or reserved 
against by such companies pursuant to Sec.  210.6-03(d), indicate 
each such item by means of an appropriate symbol and explain in a 
footnote.
* * * * *
    \6\ Show in column E(1) as to each issue held at close of 
period, the dividends or interest included in caption 1 of the 
profit and loss or income statement. In addition, show as the final 
item in column E(1) the aggregate dividends and interest included in 
the profit and loss or income statement in respect of investments in 
affiliates not held at the close of the period. The total of this 
column should agree with the amounts shown under such caption. 
Include in column E(2) all other dividends and interest. Explain 
briefly in an appropriate footnote the treatment accorded each item. 
Identify by an appropriate symbol all non-cash dividends and explain 
the circumstances in a footnote. See Sec. Sec.  210.6-06(3)(a)(2), 
210.6-03(g), and 210.6-07(1).
* * * * *

0
52. Amend Sec.  210.12-23 by revising footnotes 9 and 12 to read as 
follows:


Sec.  210.12-23   Mortgage loans on real estate and interest earned on 
mortgages.\1\

* * * * *
    \9\ If any item of mortgage loans on real estate investments has 
been written down or reserved against pursuant to Sec.  210.6-03 
describe the item and explain the basis for the write-down or 
reserve.
* * * * *
    \12\ Summarize the aggregate amounts for each column applicable 
to Sec.  210.6-06(1) and 6-06(5)(a).

0
53. Amend Sec.  210.12-24 by revising the column headings to the first 
table and by revising footnotes 5 and 8 to read as follows:


Sec.  210.12-24   Real estate owned and rental income.\1\

* * * * *

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                     Part 1--Real estate owned at end of period                                                                  Part 2--Rental income
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
  Column A-- List                                                               Column E-- Amount                                                               Column I--
 classification of                                                               at which carried      Column F--      Column G-- Rents   Column H-- Total     Expended for      Column J-- Net
    property as      Column B-- Amount  Column C-- Initial  Column D-- Cost of     at close of        Reserve for      due and accrued     rental income     interest, taxes,  income applicable
  indicated below     of incumbrances     cost to company   improvements, etc.    period \4\ \5\      depreciation     at end of period    applicable to       repairs and         to period
      \2\ \3\                                                                        \6\ \7\                                                   period            expenses
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
           * * *               * * *               * * *               * * *              * * *              * * *              * * *              * * *              * * *              * * *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ All money columns shall be totaled.

* * * * *
    \5\ If any item of real estate investments has been written down 
or reserved against pursuant to Sec.  210.6-03(d), describe the item 
and explain the basis for the write-down or reserve.
* * * * *
    \8\ Summarize the aggregate amounts for each column applicable 
to Sec.  210.6-06(1) and 6-06(5)(a).

0
54. Amend Sec.  210.12-27 by revising footnote 3 to read as follows:


Sec.  210.12-27  Qualified assets on deposit.\1\

* * * * *
    \1\ All money columns shall be totaled.
* * * * *
    \3\ Total of column F shall agree with note required by Sec.  
210.6-06(4) as to total amount of qualified Assets on Deposit.

0
55. Amend Sec.  210.12-28 by revising the heading in Column I of the 
table to read ``Life on which depreciation in latest statements of 
comprehensive income is computed'' and by revising the first sentence 
of footnote 4.
    The revision reads as follows:

[[Page 50209]]

Sec.  210.12-28   Real estate and accumulated depreciation.\1\

* * * * *
    \1\ All money columns shall be totaled.
* * * * *
    \4\ In a note to this schedule, furnish a reconciliation, in the 
following form, of the total amount at which real estate was carried 
at the beginning of each period for which statements of 
comprehensive income are required, with the total amount shown in 
column E:
* * * * *

0
56. Amend Sec.  210.12-29 by revising footnote 6 introductory text to 
read as follows:


Sec.  210.12-29   Mortgage loans on real estate.\1\

* * * * *
    \1\ All money columns shall be totaled.
* * * * *
    \6\ In a note to this schedule, furnish a reconciliation, in the 
following form, of the carrying amount of mortgage loans at the 
beginning of each period for which statements of comprehensive 
income are required, with the total amount shown in column G:
* * * * *

PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES 
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND 
CONSERVATION ACT OF 1975--REGULATION S-K

0
57. The authority citation for part 229 continues to read as follows:

    Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 
77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 
77nnn, 77sss, 78c, 78i, 78j, 78j-3, 78l, 78m, 78n, 78n-1, 78o, 78u-
5, 78w, 78ll, 78 mm, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-
31(c), 80a-37, 80a-38(a), 80a-39, 80b-11 and 7201 et seq.; 18 U.S.C. 
1350; sec. 953(b), Pub. L. 111-203, 124 Stat. 1904 (2010); and sec. 
102(c), Pub. L. 112-106, 126 Stat. 310 (2012).

0
58. Amend Sec.  229.10 by revising paragraphs (b)(2) and (e)(2)(i) to 
read as follows:


Sec.  229.10   (Item 10) General.

* * * * *
    (b) * * *
    (2) Format for projections. In determining the appropriate format 
for projections included in Commission filings, consideration must be 
given to, among other things, the financial items to be projected, the 
period to be covered, and the manner of presentation to be used. 
Although traditionally projections have been given for three financial 
items generally considered to be of primary importance to investors 
(revenues, net income (loss) and earnings (loss) per share), projection 
information need not necessarily be limited to these three items. 
However, management should take care to assure that the choice of items 
projected is not susceptible of misleading inferences through selective 
projection of only favorable items. Revenues, net income (loss) and 
earnings (loss) per share usually are presented together in order to 
avoid any misleading inferences that may arise when the individual 
items reflect contradictory trends. There may be instances, however, 
when it is appropriate to present earnings (loss) from continuing 
operations in addition to or in lieu of net income (loss). It generally 
would be misleading to present sales or revenue projections without one 
of the foregoing measures of income. The period that appropriately may 
be covered by a projection depends to a large extent on the particular 
circumstances of the company involved. For certain companies in certain 
industries, a projection covering a two or three year period may be 
entirely reasonable. Other companies may not have a reasonable basis 
for projections beyond the current year. Accordingly, management should 
select the period most appropriate in the circumstances. In addition, 
management, in making a projection, should disclose what, in its 
opinion, is the most probable specific amount or the most reasonable 
range for each financial item projected based on the selected 
assumptions. Ranges, however, should not be so wide as to make the 
disclosures meaningless. Moreover, several projections based on varying 
assumptions may be judged by management to be more meaningful than a 
single number or range and would be permitted.
* * * * *
    (e) * * *
    (2) * * *
    (i) Excludes amounts, or is subject to adjustments that have the 
effect of excluding amounts, that are included in the most directly 
comparable measure calculated and presented in accordance with GAAP in 
the statement of comprehensive income, balance sheet or statement of 
cash flows (or equivalent statements) of the issuer; or
* * * * *

0
59. Amend Sec.  229.101 by:
0
a. Removing and reserving paragraphs (b), (c)(1)(xi), and (d);
0
b. Revising paragraphs (e) introductory text and (e)(2) and (3);
0
c. Removing and reserving paragraph (h)(4)(x); and
0
d. Revising paragraph (h)(5)(iii).
    The revisions read as follows:


Sec.  229.101   (Item 101) Description of business.

* * * * *
    (e) Available information. Disclose the information in paragraphs 
(e)(1), (e)(2) and (e)(3) of this section in any registration statement 
you file under the Securities Act (15 U.S.C. 77a et seq.), and disclose 
the information in paragraph (e)(3) of this section in your annual 
report on Form 10-K (Sec.  249.310 of this chapter). Further disclose 
the information in paragraph (e)(4) of this section if you are an 
accelerated filer or a large accelerated filer (as defined in Sec.  
240.12b-2 of this chapter) filing an annual report on Form 10-K (Sec.  
249.310 of this chapter):
* * * * *
    (2) State that the SEC maintains an internet site that contains 
reports, proxy and information statements, and other information 
regarding issuers that file electronically with the SEC and state the 
address of that site (http://www.sec.gov).
    (3) Disclose your internet address, if you have one.
* * * * *
    (h) * * *
    (5) * * *
    (iii) State that the Commission maintains an internet site that 
contains reports, proxy and information statements, and other 
information regarding issuers that file electronically with the 
Commission and state the address of that site (http://www.sec.gov). 
Disclose your internet address, if available.
* * * * *

0
60. Amend Sec.  229.201 by:
0
a. Revising paragraph (a)(1);
0
b. Removing and reserving paragraphs (a)(2)(i) and (c)(1);
0
c. Removing the text and reserving Instruction 1 to the Instructions to 
Item 201;
0
d. Redesignating Instructions 1 through 5 to Item 201 consecutively as 
Instruction 1 to Item 201, Instruction 2 to Item 201, Instruction 3 to 
Item 201, Instruction 4 to Item 201 and Instruction 5 to Item 201; and
0
e. Revising newly redesignated Instruction 2 to Item 201.
    The revisions read as follows:


Sec.  229.201   (Item 201) Market price of and dividends on the 
registrant's common equity and related stockholder matters.

    (a) * * *
    (1)(i) Identify the principal United States market(s) and the 
corresponding trading symbol(s) for each class of the registrant's 
common equity. In the case of foreign registrants, also identify the 
principal foreign public trading market(s), if any, and the 
corresponding

[[Page 50210]]

trading symbol(s) for each class of the registrant's common equity.
    (ii) If the principal United States market for such common equity 
is not an exchange, indicate, as applicable, that any over-the-counter 
market quotations reflect inter-dealer prices, without retail mark-up, 
mark-down or commission and may not necessarily represent actual 
transactions.
    (iii) Where there is no established public trading market for a 
class of common equity, furnish a statement to that effect and, if 
applicable, state the range of high and low bid information for each 
full quarterly period within the two most recent fiscal years and any 
subsequent interim period for which financial statements are included, 
or are required to be included by 17 CFR 210.3-01 through 210.3-20 
(Article 3 of Regulation S-X), indicating the source of such 
quotations. Reference to quotations shall be qualified by appropriate 
explanation. For purposes of this Item the existence of limited or 
sporadic quotations should not of itself be deemed to constitute an 
``established public trading market.''
* * * * *
    Instruction 1 to Item 201. [Reserved]
    Instruction 2 to Item 201. Bid information reported pursuant to 
this Item shall be adjusted to give retroactive effect to material 
changes resulting from stock dividends, stock splits and reverse stock 
splits.
* * * * *

0
61. Amend Sec.  229.302 by:
0
a. Revising paragraphs (a)(1) and (3);
0
b. Redesignating the Instructions to paragraph (b) consecutively as 
Instruction 1 to paragraph (b), Instruction 2 to paragraph (b), and 
Instruction 3 to paragraph (b); and
0
c. Revising paragraphs (a) and (c) of newly redesignated Instruction 1 
to paragraph (b).
    The revisions read as follows:


Sec.  229.302   (Item 302) Supplementary financial information.

    (a) * * *
    (1) Disclosure shall be made of net sales, gross profit (net sales 
less costs and expenses associated directly with or allocated to 
products sold or services rendered), income (loss) from continuing 
operations, per share data based upon income (loss) from continuing 
operations, net income (loss), per share data based upon net income 
(loss) and net income (loss) attributable to the registrant, for each 
full quarter within the two most recent fiscal years and any subsequent 
interim period for which financial statements are included or are 
required to be included by 17 CFR 210.3-01 through 210.3-20 (Article 3 
of Regulation S-X).
* * * * *
    (3) Describe the effect of any discontinued operations and unusual 
or infrequently occurring items recognized in each full quarter within 
the two most recent fiscal years and any subsequent interim period for 
which financial statements are included or are required to be included 
by 17 CFR 210.3-01 through 210.3-20 (Article 3 of Regulation S-X), as 
well as the aggregate effect and the nature of year-end or other 
adjustments which are material to the results of that quarter.
* * * * *
    (b) * * *
    Instruction 1 to paragraph (b). (a) FASB ASC Subtopic 932-235 
disclosures that relate to annual periods shall be presented for each 
annual period for which a statement of comprehensive income (as defined 
in Sec.  210.1-02 of Regulation S-X) is required,
* * * * *
    (c) FASB ASC Subtopic 932-235 disclosures required as of the 
beginning of an annual period shall be presented as of the beginning of 
each annual period for which a statement of comprehensive income (as 
defined in Sec.  210.1-02 of Regulation S-X) is required.
* * * * *

0
62. Amend Sec.  229.303 by:
0
 a. Revising the paragraphs (a) introductory text and (b)(2);
0
b. Redesignating paragraphs 1 through 7 of the Instructions to 
paragraph (b) of Item 303 as Instruction 1 to paragraph (b), 
Instruction 2 to paragraph (b), Instruction 3 to paragraph (b), 
Instruction 4 to paragraph (b), Instruction 5 to paragraph (b), 
Instruction 6 to paragraph (b), and Instruction 7 to paragraph (b), 
consecutively.
0
c. Removing and reserving newly redesignated Instruction 5 to paragraph 
(b); and
0
d. Adding an Instruction 8 to paragraph (b).
    The revisions and addition read as follows:


Sec.  229.303   (Item 303) Management's discussion and analysis of 
financial condition and results of operations.

    (a) Full fiscal years. Discuss registrant's financial condition, 
changes in financial condition and results of operations. The 
discussion shall provide information as specified in paragraphs (a)(1) 
through (5) of this Item and also shall provide such other information 
that the registrant believes to be necessary to an understanding of its 
financial condition, changes in financial condition and results of 
operations. Discussions of liquidity and capital resources may be 
combined whenever the two topics are interrelated. Where in the 
registrant's judgment a discussion of segment information and/or of 
other subdivisions (e.g., geographic areas) of the registrant's 
business would be appropriate to an understanding of such business, the 
discussion shall focus on each relevant, reportable segment and/or 
other subdivision of the business and on the registrant as a whole.
* * * * *
    (b) * * *
    (2) Material changes in results of operations. Discuss any material 
changes in the registrant's results of operations with respect to the 
most recent fiscal year-to-date period for which a statement of 
comprehensive income (or statement of operations if comprehensive 
income is presented in two separate but consecutive financial 
statements or if no other comprehensive income) is provided and the 
corresponding year-to-date period of the preceding fiscal year. If the 
registrant is required to or has elected to provide a statement of 
comprehensive income (or statement of operations if comprehensive 
income is presented in two separate but consecutive financial 
statements or if no other comprehensive income) for the most recent 
fiscal quarter, such discussion also shall cover material changes with 
respect to that fiscal quarter and the corresponding fiscal quarter in 
the preceding fiscal year. In addition, if the registrant has elected 
to provide a statement of comprehensive income (or statement of 
operations if comprehensive income is presented in two separate but 
consecutive financial statements or if no other comprehensive income) 
for the twelve-month period ended as of the date of the most recent 
interim balance sheet provided, the discussion also shall cover 
material changes with respect to that twelve-month period and the 
twelve-month period ended as of the corresponding interim balance sheet 
date of the preceding fiscal year. Notwithstanding the above, if for 
purposes of a registration statement a registrant subject to Sec.  
210.3-03(b) of Regulation S-X of this chapter provides a statement of 
comprehensive income (or statement of operations if comprehensive 
income is presented in two separate but consecutive financial 
statements or if no other comprehensive income) for the twelve-month 
period ended as of the date of the most recent interim balance sheet 
provided in lieu

[[Page 50211]]

of the interim statements of comprehensive income (or statement of 
operations if comprehensive income is presented in two separate but 
consecutive financial statements or if no other comprehensive income) 
otherwise required, the discussion of material changes in that twelve-
month period will be in respect to the preceding fiscal year rather 
than the corresponding preceding period.
* * * * *
    Instruction 8 to paragraph (b). The term statement of comprehensive 
income shall mean a statement of comprehensive income as defined in 
Sec.  210.1-02 of Regulation S-X of this chapter.
* * * * *

0
63. Amend Sec.  229.406 by revising paragraph (d) to read as follows:


Sec.  229.406   (Item 406) Code of ethics.

* * * * *
    (d) If the registrant intends to satisfy the disclosure requirement 
under Item 5.05 of Form 8-K regarding an amendment to, or a waiver 
from, a provision of its code of ethics that applies to the 
registrant's principal executive officer, principal financial officer, 
principal accounting officer or controller, or persons performing 
similar functions and that relates to any element of the code of ethics 
definition enumerated in paragraph (b) of this Item by posting such 
information on its internet website, disclose the registrant's internet 
address and such intention.
* * * * *

0
64. Amend Sec.  229.503 by:
0
 a. Revising the section heading;
0
b. Removing paragraph (d) and the instructions to paragraph (d); and
0
c. Removing paragraph (e).
    The revision reads as follows:


Sec.  229.503   (Item 503) Prospectus summary and risk factors.

* * * * *

0
65. Amend Sec.  229.504 by revising Instruction 3 to the Instructions 
to Item 504 to read as follows:


Sec.  229.504   (Item 504) Use of proceeds.

* * * * *
    Instructions to Item 504: * * *
0
3. If any material amounts of other funds are necessary to accomplish 
the specified purposes for which the proceeds are to be obtained, state 
the amounts of such other funds needed for each such specified purpose 
and the sources thereof.
* * * * *

0
66. Amend Sec.  229.508 by revising paragraph (e) introductory text to 
read as follows:


Sec.  229.508   (Item 508) Plan of distribution.

* * * * *
    (e) Underwriter's compensation. Provide a table that sets out the 
nature of the compensation and the amount of discounts and commissions 
to be paid to the underwriter for each security and in total. The table 
must show the separate amounts to be paid by the company and the 
selling shareholders. In addition, include in the table all other items 
considered by the Financial Industry Regulatory Authority (``FINRA'') 
to be underwriting compensation for purposes of FINRA rules.
* * * * *

0
67. Amend Sec.  229.512 by revising paragraph (a)(4) to read as 
follows:


Sec.  229.512   (Item 512) Undertakings.

* * * * *
    (a) * * *
    (4) If the registrant is a foreign private issuer, to file a post-
effective amendment to the registration statement to include any 
financial statements required by Item 8.A of Form 20-F (Sec.  249.220f 
of this chapter) at the start of any delayed offering or throughout a 
continuous offering. Financial statements and information otherwise 
required by Section 10(a)(3) of the Act (15 U.S.C. 77j(a)(3)) need not 
be furnished, provided that the registrant includes in the prospectus, 
by means of a post-effective amendment, financial statements required 
pursuant to this paragraph (a)(4) and other information necessary to 
ensure that all other information in the prospectus is at least as 
current as the date of those financial statements. Notwithstanding the 
foregoing, with respect to registration statements on Form F-3 (Sec.  
239.33 of this chapter), a post-effective amendment need not be filed 
to include financial statements and information required by Section 
10(a)(3) of the Act or Item 8.A of Form 20-F if such financial 
statements and information are contained in periodic reports filed with 
or furnished to the Commission by the registrant pursuant to section 13 
or section 15(d) of the Securities Exchange Act of 1934 that are 
incorporated by reference in the Form F-3.
* * * * *

0
68. Amend Sec.  229.601 by:
0
 a. Removing and reserving entries (11) and (12) from the exhibit table 
in paragraph (a);
0
b. In entry (13) in the exhibit table in paragraph (a), adding an X in 
the column labelled ``10-Q'';
0
c. Removing and reserving entries (19), (22), and (26) from the exhibit 
table in paragraph (a);
0
d. Removing and reserving paragraphs (b)(11) and (12);
0
e. Revising paragraph (b)(14);
0
f. Removing and reserving paragraphs (b)(19), (22), and (26); and
0
g. Removing paragraph (c).
    The revision reads as follows:


Sec.  229.601   (Item 601) Exhibits.

* * * * *
    (b) * * *
    (14) Code of ethics. Any code of ethics, or amendment thereto, that 
is the subject of the disclosure required by Sec.  229.406 (Item 406 of 
Regulation S-K) or Item 5.05 of Form 8-K (Sec.  249.308 of this 
chapter), to the extent that the registrant intends to satisfy the Item 
406 or Item 5.05 requirements through filing of an exhibit.
* * * * *

0
69. Amend Sec.  229.1010 by:
0
 a. Revising paragraph (a)(2);
0
b. Removing and reserving paragraph (a)(3);
0
c. Revising paragraph (b)(2); and
0
d. Removing and reserving paragraph (c)(4).
    The revisions read as follows:


Sec.  229.1010   (Item 1010) Financial statements.

    (a) * * *
    (2) Unaudited balance sheets, comparative year-to-date statements 
of comprehensive income (as defined in Sec.  210.1-02 of Regulation S-X 
of this chapter) and related earnings per share data and statements of 
cash flows required to be included in the company's most recent 
quarterly report filed under the Exchange Act; and
* * * * *
    (b) * * *
    (2) The company's statement of comprehensive income and earnings 
per share for the most recent fiscal year and the latest interim period 
provided under paragraph (a)(2) of this section; and
* * * * *

0
70. Amend Sec.  229.1118 by revising paragraph (b)(2) to read as 
follows:


Sec.  229.1118   (Item 1118) Reports and additional information.

* * * * *
    (b) * * *
    (2) State that the Commission maintains an internet site that 
contains reports, proxy and information statements, and other 
information regarding issuers that file electronically with the 
Commission and state the address of that site (http://www.sec.gov).
* * * * *

[[Page 50212]]

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

0
71. The authority citation for part 230 continues to read in part as 
follows:

    Authority:  15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h, 
77j, 77r, 77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o-
7 note, 78t, 78w, 78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 80a-29, 80a-
30, and 80a-37, and Pub. L. 112-106, sec. 201(a), sec. 401, 126 
Stat. 313 (2012), unless otherwise noted.
* * * * *

0
72. Amend Sec.  230.158 by:
0
a. Revising paragraph (a)(1) introductory text; and
0
b. Designating as Note 1 to paragraph (a) the undesignated text between 
paragraphs (a)(2)(ii) and (b) and revising it.
    The revisions read as follows:


Sec.  230.158   Definitions of certain terms in the last paragraph of 
section 11(a).

    (a) * * *
    (1) There is included the information required for statements of 
comprehensive income (as defined in Sec.  210.1-02 of Regulation S-X of 
this chapter) contained either:
* * * * *

    Note 1 to paragraph (a). A subsidiary issuing debt securities 
guaranteed by its parent will be deemed to have met the requirements 
of this paragraph (a) if the parent's statements of comprehensive 
income (as defined in Sec.  210.1-02 of Regulation S-X) satisfy the 
criteria of this paragraph and information respecting the subsidiary 
is included to the same extent as was presented in the registration 
statement. An ``earning statement'' not meeting the requirements of 
this paragraph (a) may otherwise be sufficient for purposes of the 
last paragraph of section 11(a) of the Act.

* * * * *

0
73. Amend Sec.  230.405, in the definition of ``Significant 
subsidiary'' by:
0
a. Revising paragraphs (1) and (3);
0
b. Adding a Note 1 following paragraph (3) before the Computational 
note;
0
c. Redesignating the Computational note as Computational note 1 to 
paragraph (3) and revising it.
    The revisions and addition read as follows:


Sec.  230.405   Definitions of terms.

* * * * *
    Significant subsidiary. * * *
    (1) The registrant's and its other subsidiaries' investments in and 
advances to the subsidiary exceed 10 percent of the total assets of the 
registrant and its subsidiaries consolidated as of the end of the most 
recently completed fiscal year (for a proposed combination between 
entities under common control, this condition is also met when the 
number of common shares exchanged or to be exchanged by the registrant 
exceeds 10 percent of its total common shares outstanding at the date 
the combination is initiated); or
* * * * *
    (3) The registrant's and its other subsidiaries' equity in the 
income from continuing operations before income taxes of the subsidiary 
exclusive of amounts attributable to any noncontrolling interests 
exceeds 10 percent of such income of the registrant and its 
subsidiaries consolidated for the most recently completed fiscal year.

    Note 1: A registrant that files its financial statements in 
accordance with or provides a reconciliation to U.S. Generally 
Accepted Accounting Principles shall make the prescribed tests using 
amounts determined under U.S. Generally Accepted Accounting 
Principles. A foreign private issuer that files its financial 
statements in accordance with IFRS as issued by the IASB shall make 
the prescribed tests using amounts determined under IFRS as issued 
by the IASB.


    Computational note 1 to paragraph (3): For purposes of making 
the prescribed income test the following guidance should be applied:
    1. When a loss exclusive of amounts attributable to any 
noncontrolling interests has been incurred by either the parent and 
its subsidiaries consolidated or the tested subsidiary, but not 
both, the equity in the income or loss of the tested subsidiary 
exclusive of amounts attributable to any noncontrolling interests 
should be excluded from such income of the registrant and its 
subsidiaries consolidated for purposes of the computation.
    2. If income of the registrant and its subsidiaries consolidated 
exclusive of amounts attributable to any noncontrolling interests 
for the most recent fiscal year is at least 10 percent lower than 
the average of the income for the last five fiscal years, such 
average income should be substituted for purposes of the 
computation. Any loss years should be omitted for purposes of 
computing average income.

* * * * *

0
74. Amend Sec.  230.436 by revising paragraph (d)(4) to read as 
follows:


Sec.  230.436   Consents required in special cases.

* * * * *
    (d) * * *
    (4) A statement that a review of interim financial information is 
substantially less in scope than an audit conducted in accordance with 
the standards of the Public Company Accounting Oversight Board (United 
States) (``PCAOB''), the objective of which is an expression of an 
opinion regarding the financial statements taken as a whole, and, 
accordingly, no such opinion is expressed; and
* * * * *

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

0
75. The authority citation for part 239 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 
77sss, 78c, 78l, 78m, 78n, 78o(d), 78o-7 note, 78u-5, 78w(a), 78ll, 
78mm, 80a-2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-13, 80a-24, 80a-26, 
80a-29, 80a-30, and 80a-37; and sec. 107, Pub. L. 112-106, 126 Stat. 
312, unless otherwise noted.
* * * * *

0
76. Amend Form S-1 (referenced in Sec.  239.11) by revising the heading 
of Item 3 and revising Item 12.(c)(2)(ii) to read as follows:

    Note:  The text of Form S-1 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

PART I--INFORMATION REQUIRED IN PROSPECTUS

* * * * *

Item 3. Summary Information and Risk Factors.

* * * * *

Item 12. Incorporation of Certain Information by Reference.

* * * * *
    (c) * * *
    (2) * * *
    (ii) State that the SEC maintains an internet site that contains 
reports, proxy and information statements, and other information 
regarding issuers that file electronically with the SEC and state the 
address of that site (http://www.sec.gov).
* * * * *

0
77. Amend Form S-3 (referenced in Sec.  239.13) by:
0
a. Revising General Instruction I.B.2;
0
b. Revising General Instruction I.C.2 and I.D.1.(c)(iv) to remove the 
text, ``(Primary Offerings of Non-Convertible Investment Grade 
Securities)'' and add, in its place, the words ``(Primary Offerings of 
Non-Convertible Securities Other than Common Equity)'';
0
c. Revising the heading of Item 3;
0
d. Revising Item 12.(c)(2)(ii); and
0
e. Removing Instruction 3 to the Instructions to Signatures.
    The revisions read as follows:

    Note:  The text of Form S-3 does not, and this amendment will 
not, appear in the Code of Federal Regulations.


[[Page 50213]]



FORM S-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

GENERAL INSTRUCTIONS

I. Eligibility Requirements for Use of Form S-3

* * * * *

B. Transaction Requirements. * * *

    2. Primary Offerings of Non-Convertible Securities Other than 
Common Equity. Non-convertible securities, other than common equity, to 
be offered for cash by or on behalf of a registrant, provided the 
registrant:
    (i) Has issued (as of a date within 60 days prior to the filing of 
the registration statement) at least $1 billion in non-convertible 
securities, other than common equity, in primary offerings for cash, 
not exchange, registered under the Securities Act, over the prior three 
years; or
    (ii) has outstanding (as of a date within 60 days prior to the 
filing of the registration statement) at least $750 million of non-
convertible securities, other than common equity, issued in primary 
offerings for cash, not exchange, registered under the Securities Act; 
or
    (iii) is a wholly-owned subsidiary of a well-known seasoned issuer 
(as defined in 17 CFR 230.405); or
    (iv) is a majority-owned operating partnership of a real estate 
investment trust that qualifies as a well-known seasoned issuer (as 
defined in 17 CFR 230.405).
* * * * *

C. Majority-Owned Subsidiaries. * * *

    2. the parent of the registrant-subsidiary meets the Registrant 
Requirements and the conditions of Transaction Requirements B.2. 
(Primary Offerings of Non-Convertible Securities Other than Common 
Equity) are met;
* * * * *

D. Automatic Shelf Offerings by Well-Known Seasoned Issuers. * * *

    1. * * *
    (c) * * *
    (iv) Securities of a majority-owned subsidiary that meet the 
conditions of Transaction Requirement I.B.2. of this Form (Primary 
Offerings of Non-Convertible Securities Other than Common Equity).
* * * * *

PART I

INFORMATION REQUIRED IN PROSPECTUS

* * * * *

Item 3. Summary Information and Risk Factors.

* * * * *

Item 12. Incorporation of Certain Information by Reference.

* * * * *
    (c) * * *
    (2) * * *
    (ii) State that the SEC maintains an internet site that contains 
reports, proxy and information statements, and other information 
regarding issuers that file electronically with the SEC and state the 
address of that site (http://www.sec.gov). Disclose your internet 
address, if available.
* * * * *

0
78. Amend Form S-11 (referenced in Sec.  239.18) by revising the 
heading of Item 3 and revising Item 29.(b)(2)(ii) to read as follows:

    Note: The text of Form S-11 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM S-11

FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF 
CERTAIN REAL ESTATE COMPANIES

* * * * *
PART I. INFORMATION REQUIRED IN PROSPECTUS
* * * * *

Item 3. Summary Information and Risk Factors.

* * * * *

Item 29. Incorporation of Certain Information by Reference.

* * * * *
    (b) * * *
    (2) * * *
    (ii) State that the SEC maintains an internet site that contains 
reports, proxy and information statements, and other information 
regarding issuers that file electronically with the SEC and state the 
address of that site (http://www.sec.gov).
* * * * *

0
79. Amend Form S-4 (referenced in Sec.  239.25) by revising the heading 
of Item 3 and revising Items 11.(c)(2) and 13.(d)(2) to read as 
follows:

    Note:  The text of Form S-4 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM S-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

PART I

INFORMATION REQUIRED IN THE PROSPECTUS

* * * * *

Item 3. Risk Factors and Other Information.

* * * * *

Item 11. Incorporation of Certain Information by Reference.

* * * * *
    (c) * * *
    (2) State that the SEC maintains an internet site that contains 
reports, proxy and information statements, and other information 
regarding issuers that file electronically with the SEC and state the 
address of that site (http://www.sec.gov). Disclose your internet 
address, if available.
* * * * *

Item 13. Incorporation of Certain Information by Reference.

* * * * *
    (d) * * *
    (2) State that the SEC maintains an internet site that contains 
reports, proxy and information statements, and other information 
regarding issuers that file electronically with the SEC and state the 
address of that site (http://www.sec.gov). Disclose your internet 
address, if available.
* * * * *

0
80. Amend Form F-1 (referenced in Sec.  239.31) by:
0
a. Revising General Instruction II.C;
0
b. Revising the heading of Item 3;
0
c. Revising Item 4.b;
0
d. Removing and reserving Item 4.c;
0
e. Revising Item 4.d;
0
f. Adding Item 4.e;
0
 g. Removing Instruction 2 to Item 4;
0
h. Revising Item 4A.(b)1.iii.;
0
i. Revising the Instruction to Item 4A; and
0
j. Revising Item 5.(b)2.ii.
    The revisions and addition read as follows:

    Note:  The text of Form F-1 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM F-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

GENERAL INSTRUCTIONS

* * * * *

[[Page 50214]]

II. Application of General Rules and Regulations

* * * * *
    C. A registrant must file the Form F-1 registration statement in 
electronic format via the Commission's Electronic Data Gathering and 
Retrieval System (EDGAR) in accordance with the EDGAR rules set forth 
in Regulation S-T (17 CFR part 232), except that a registrant that has 
obtained a hardship exception under Regulation S-T Rule 201 or 202 (17 
CFR 232.201 or 232.202) may file the registration statement in paper. 
For assistance with EDGAR questions, call the Filer Support Office at 
(202) 551-8900.
* * * * *

PART I--INFORMATION REQUIRED IN PROSPECTUS

* * * * *

Item 3. Summary Information and Risk Factors.

* * * * *

Item 4. Information with Respect to the Registrant and the Offering.

* * * * *
    b. Information required by Item 18 of Form 20-F (Schedules required 
under Regulation S-X shall be filed as ``Financial Statement Schedules 
Pursuant to Item 8, Exhibit and Financial Statement Schedules, of this 
Form), as well as any information required by Rule 3-05 and Article 11 
of Regulation S-X (part 210 of this chapter).
* * * * *
    d. Information required by Item 16F of Form 20-F.
    e. State that the SEC maintains an internet site that contains 
reports, proxy and information statements, and other information 
regarding issuers that file electronically with the SEC and state the 
address of that site (http://www.sec.gov). Disclose your internet 
address, if available.

Item 4A. Material Changes.

* * * * *
    (b)
    1. * * *
    iii. Restated financial statements where a combination of entities 
under common control has been consummated subsequent to the most recent 
fiscal year and the transferred businesses, considered in the 
aggregate, are significant under Rule 11-01(b) (Sec.  210.11-01(b) of 
this chapter); or
* * * * *
    Instruction. Financial statements or information required to be 
furnished by this Item shall be reconciled pursuant to Item 18 of Form 
20-F.
* * * * *

Item 5. Incorporation of Certain Information by Reference.

* * * * *
    (b) * * *
    2. * * *
    ii. State that the SEC maintains an internet site that contains 
reports, proxy and information statements, and other information 
regarding issuers that file electronically with the SEC and state the 
address of that site (http://www.sec.gov).
* * * * *

0
81. Amend Form F-3 (referenced in Sec.  239.33) by:
0
a. Revising General Instructions I.B.2, I.B.3, I.B.4 and II.D;
0
b. Revising the heading of Item 3;
0
c. Revising Item 5 Instructions 1 and 2; and
0
d. Revising Item 6.(e)(2).
    The revisions read as follows:

    Note:  The text of Form F-3 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM F-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *
GENERAL INSTRUCTIONS
I. Eligibility Requirements for Use of Form F-3
* * * * *
B. Transaction Requirements
* * * * *
    2. Primary Offerings of Non-Convertible Securities Other than 
Common Equity. Non-convertible securities, other than common equity, to 
be offered for cash by or on behalf of a registrant, provided the 
registrant:
    (i) Has issued (as of a date within 60 days prior to the filing of 
the registration statement) at least $1 billion in non-convertible 
securities, other than common equity, in primary offerings for cash, 
not exchange, registered under the Securities Act, over the prior three 
years; or
    (ii) has outstanding (as of a date within 60 days prior to the 
filing of the registration statement) at least $750 million of non-
convertible securities, other than common equity, issued in primary 
offerings for cash, not exchange, registered under the Securities Act; 
or
    (iii) is a wholly-owned subsidiary of a well-known seasoned issuer 
(as defined in 17 CFR 230.405); or
    (iv) is a majority-owned operating partnership of a real estate 
investment trust that qualifies as a well-known seasoned issuer (as 
defined in 17 CFR 230.405).
* * * * *
    3. Transactions Involving Secondary Offerings. Outstanding 
securities to be offered for the account of any person other than the 
issuer, including securities acquired by standby underwriters in 
connection with the call or redemption by the issuer of warrants or a 
class of convertible securities. The financial statements included in 
this registration statement must comply with Item 18 of Form 20-F. In 
addition, Form F-3 may be used by affiliates to register securities for 
resale pursuant to the conditions specified in General Instruction C to 
Form S-8 (Sec.  239.16b of this chapter). In the case of such 
securities, the financial statements included in this registration 
statement must comply with Item 18 of Form 20-F (Sec.  249.220f of this 
chapter).
    4. Rights Offerings, Dividend or Interest Reinvestment Plans, and 
Conversions or Warrants. Securities to be offered: (a) Upon the 
exercise of outstanding rights granted by the issuer of the securities 
to be offered, if such rights are granted pro rata to all existing 
security holders of the class of securities to which the rights attach; 
or (b) pursuant to a dividend or interest reinvestment plan; or (c) 
upon the conversion of outstanding convertible securities or upon the 
exercise of outstanding transferable warrants issued by the issuer of 
the securities to be offered, or by an affiliate of such issuer. The 
financial statements included in this registration statement must 
comply with Item 18 of Form 20-F. The registration of securities to be 
offered or sold in a standby underwriting in the United States or 
similar arrangement is not permitted pursuant to this paragraph. See 
paragraphs B.1., B.2., and B.3. of this Instruction.
* * * * *
II. Application of General Rules and Regulations
* * * * *
    D. A registrant must file the Form F-3 registration statement in 
electronic format via the Commission's Electronic Data Gathering and 
Retrieval System (EDGAR) in accordance with the EDGAR rules set forth 
in Regulation S-T (17 CFR part 232), except that a registrant that has 
obtained a hardship exception under Regulation S-T Rule 201 or 202 (17 
CFR 232.201 or 232.202) may file the registration statement in paper. 
For assistance with EDGAR

[[Page 50215]]

questions, call the Filer Support Office at (202) 551-8900.
* * * * *
PART I--INFORMATION REQUIRED IN PROSPECTUS
* * * * *
Item 3. Summary Information and Risk Factors.
* * * * *
Item 5. Material Changes.
* * * * *
Instructions
    1. Financial statements or information required to be furnished by 
this Item shall be reconciled pursuant to Item 18 of Form 20-F.
    2. Material changes to be disclosed pursuant to Item 5(a) include 
changes in and disagreements with registrant's certifying accountant. 
Disclosure pursuant to Item 16F of Form 20-F should be provided as of 
the date of the registration statement or prospectus.
Item 6. Incorporation of Certain Information by Reference.
* * * * *
    (e) * * *
    (2) state that the SEC maintains an internet site that contains 
reports, proxy and information statements, and other information 
regarding issuers that file electronically with the SEC and state the 
address of that site (http://www.sec.gov). Disclose your internet 
address, if available.
* * * * *

0
82. Amend Form F-4 (referenced in Sec.  239.34) by:
0
a. Revising General Instruction D.4;
0
b. Revising the heading of Item 3;
0
c. Revising Instruction 1 of the instructions to paragraphs (e) and (f) 
of Item 3;
0
d. Revising Item 10.(c)(3);
0
e. Revising paragraph 1 of the Instructions between Items 11(a) and 
(b);
0
f. Revising Item 11.(c)(2);
0
g. Revising the introductory text of Items 12 and 12.(b)(2)
0
h. Revising Items 12.(b)(2)(iv) and 12.(b)(3)(vii) and (ix);
0
i. Revising paragraph 1 of the Instructions between Items 13.(b) and 
(c);
0
j. Revising Item 13.(c)(2); and
0
k. Revising Items 14.(h) and 14.(j).
    The revisions read as follows:

    Note: The text of Form F-4 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM F-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

GENERAL INSTRUCTIONS

* * * * *

D. Application of General Rules and Regulations.

* * * * *
    4. A registrant must file the Form F-4 registration statement in 
electronic format via the Commission's Electronic Data Gathering and 
Retrieval System (EDGAR) in accordance with the EDGAR rules set forth 
in Regulation S-T (17 CFR part 232), except that a registrant that has 
obtained a hardship exception under Regulation S-T Rule 201 or 202 (17 
CFR 232.201 or 232.202) may file the registration statement in paper. 
For assistance with EDGAR questions, call the Filer Support Office at 
(202) 551-8900.
* * * * *
PART I
INFORMATION REQUIRED IN THE PROSPECTUS
* * * * *

Item 3. Risk Factors and Other Information.

* * * * *

Instructions to paragraphs (e) and (f).

    1. For a business combination accounted for as a purchase, the 
financial information required by paragraphs (e) and (f) shall be 
presented only for the most recent fiscal year and interim period. For 
a combination of entities under common control, the financial 
information required by paragraphs (e) and (f) (except for information 
with regard to book value) shall be presented for the most recent three 
fiscal years and interim period. For a combination of entities under 
common control, information with regard to book value shall be 
presented as of the end of the most recent fiscal year and interim 
period. Equivalent pro forma per share amounts shall be calculated by 
multiplying the pro forma income (loss) per share before non-recurring 
charges or credits directly attributable to the transaction, pro forma 
book value per share, and the pro forma dividends per share of the 
registrant by the exchange ratio so that the per share amounts are 
equated to the respective values for one share of the company being 
acquired.
* * * * *

Item 10. Information With Respect to F-3 Companies.

* * * * *
    (c) * * *
    (3) Restated financial statements prepared in accordance with or, 
if prepared using a basis of accounting other than IFRS as issued by 
the IASB, reconciled to U.S. GAAP and Regulation S-X where one or more 
business combinations accounted for as combinations of entities under 
common control have been consummated subsequent to the most recent 
fiscal year and the transferred businesses, considered in the 
aggregate, are significant pursuant to Rule 11-01(b) of Regulation S-X 
(Sec.  210.11-01(b) of this chapter); or
* * * * *

Item 11. Incorporation of Certain Information by Reference.

* * * * *
    (a) * * *

Instructions

    1. All annual reports or registration statements incorporated by 
reference pursuant to Item 11 of this Form shall contain financial 
statements that comply with Item 18 of Form 20-F.
* * * * *
    (c) * * *
    (2) state that the SEC maintains an internet site that contains 
reports, proxy and information statements, and other information 
regarding issuers that file electronically with the SEC and state the 
address of that site (http://www.sec.gov). Disclose your internet 
address, if available.
* * * * *

Item 12. Information with Respect to F-3 Registrants.

    If the registrant meets the requirements for use of Form F-3 or 
Form S-3 and elects to comply with this Item, furnish the information 
required by either paragraph (a) or (b) of this Item. However, the 
registrant shall not provide prospectus information in the manner 
allowed by paragraph (a) of this Item if the financial statements 
incorporated by reference pursuant to Item 13 reflect: (1) Restated 
financial statements prepared in accordance with or reconciled to U.S. 
GAAP and Regulation S-X if there has been a change in accounting 
principles or a correction of an error where such a change or 
correction requires a material retroactive statement of financial 
statements; (2) restated financial statements prepared in accordance 
with or reconciled to U.S. GAAP and Regulation S-X where a combination 
of

[[Page 50216]]

entities under common control has been consummated subsequent to the 
most recent fiscal year and the transferred businesses, considered in 
the aggregate, are significant pursuant to Rule 11-01(b) of Regulation 
S-X; or (3) any financial information required because of a material 
disposition of assets outside of the normal course of business.
* * * * *
    (b) * * *
    (2) Include financial statements and information as required by 
Item 18 of Form 20-F. In addition, provide: * * *
    (iv) Restated financial statements prepared in accordance with or, 
if prepared using a basis of accounting other than IFRS as issued by 
the IASB, reconciled to U.S. GAAP and Regulation S-X where a 
combination of entities under common control has been consummated 
subsequent to the most recent fiscal year and the transferred 
businesses, considered in the aggregate, are significant pursuant to 
Rule 11-01(b) of Regulation S-X; and
* * * * *
    (3) * * *
    (vii) Financial statements required by Item 18 of Form 20-F, and 
financial information required by Rule 3-05 and Article 11 of 
Regulation S-X with respect to transactions other than that pursuant to 
which the securities being registered are to be issued;
* * * * *
    (ix) Item 16F of Form 20-F, change in registrant's certifying 
accountant.

Item 13. Incorporation of Certain Information by Reference.

* * * * *
    (b) * * *

Instructions

    1. All annual reports incorporated by reference pursuant to Item 13 
of this Form shall contain financial statements that comply with Item 
18 of Form 20-F.
* * * * *
    (c) * * *
    (2) state that the SEC maintains an internet site that contains 
reports, proxy and information statements, and other information 
regarding issuers that file electronically with the SEC and state the 
address of that site (http://www.sec.gov). Disclose your internet 
address, if available.

Item 14. Information With Respect to Registrants Other Than F-3 
Registrants.

* * * * *
    (h) Financial statements required by Item 18 of Form 20-F. In 
addition, financial information required by Rule 3-05 and Article 11 of 
Regulation S-X with respect to transactions other than that pursuant to 
which the securities being registered are to be issued. (Schedules 
required by Regulation S-X shall be filed as ``Financial Statement 
Schedules'' pursuant to Item 21 of this Form.);
* * * * *
    (j) Item 16F of Form 20-F, change in registrant's certifying 
accountant.
* * * * *

0
83. Amend Form F-6 (referenced in Sec.  239.36) by revising the first 
paragraph of General Instruction III.C to read as follows:

    Note: The text of Form F-6 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM F-6

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 FOR DEPOSITARY 
SHARES EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS

* * * * *

GENERAL INSTRUCTIONS

* * * * *

III. Application of General Rules and Regulations

* * * * *
    C. You must file the Form F-6 registration statement in electronic 
format via the Commission's Electronic Data Gathering, Analysis, and 
Retrieval (EDGAR) system in accordance with the EDGAR rules set forth 
in Regulation S-T (17 CFR part 232). For assistance with EDGAR 
questions, call the Filer Support Office at (202) 551-8900.
* * * * *

0
84. Amend Form F-7 (referenced in Sec.  239.37) by revising the first 
paragraph of General Instruction II.C to read as follows:

    Note: The text of Form F-7 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM F-7

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

GENERAL INSTRUCTIONS

* * * * *

II. Application of General Rules and Regulations

* * * * *
    C. A registrant must file the registration statement in electronic 
format via the Commission's Electronic Data Gathering, Analysis, and 
Retrieval (EDGAR) system in accordance with the EDGAR rules set forth 
in Regulation S-T (17 CFR part 232). For assistance with EDGAR 
questions, call the Filer Support Office at (202) 551-8900.
* * * * *

0
85. Amend Form F-8 (referenced in Sec.  239.38) by revising the first 
paragraph of General Instruction IV.C to read as follows:

    Note: The text of Form F-8 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM F-8

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

GENERAL INSTRUCTIONS

* * * * *

IV. Application of General Rules and Regulations

* * * * *
    C. A registrant must file the registration statement in electronic 
format via the Commission's Electronic Data Gathering, Analysis, and 
Retrieval (EDGAR) system in accordance with the EDGAR rules set forth 
in Regulation S-T (17 CFR part 232). For assistance with EDGAR 
questions, call the Filer Support Office at (202) 551-8900.
* * * * *

0
86. Amend Form F-10 (referenced in Sec.  239.40) by revising the first 
paragraph of General Instruction II.D to read as follows:

    Note: The text of Form F-10 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM F-10

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

GENERAL INSTRUCTIONS

* * * * *

II. Application of General Rules and Regulations

* * * * *
    D. A registrant must file the registration statement in electronic 
format via the Commission's Electronic Data Gathering, Analysis, and 
Retrieval (EDGAR) system in accordance with the EDGAR rules set forth 
in Regulation S-T (17 CFR part 232). For assistance with EDGAR 
questions, call the Filer Support Office at (202) 551-8900.
* * * * *

[[Page 50217]]


0
87. Amend Form F-80 (referenced in Sec.  239.41) by revising the first 
paragraph of General Instruction IV.C to read as follows:

    Note: The text of Form F-80 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM F-80

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

GENERAL INSTRUCTIONS

* * * * *

IV. Application of General Rules and Regulations

* * * * *
    C. A registrant must file the registration statement in electronic 
format via the Commission's Electronic Data Gathering, Analysis, and 
Retrieval (EDGAR) system in accordance with the EDGAR rules set forth 
in Regulation S-T (17 CFR part 232). For assistance with EDGAR 
questions, call the Filer Support Office at (202) 551-8900.
* * * * *

0
88. Amend Form SF-1 (referenced in Sec.  239.44) by revising Item 
10.(b)(2)(ii) to read as follows:

    Note: The text of Form SF-1 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM SF-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

PART I

INFORMATION REQUIRED IN PROSPECTUS

* * * * *

Item 10. Incorporation of Certain Information by Reference.

* * * * *
    (b)(2) * * *
    (ii) State that the SEC maintains an internet site that contains 
reports, proxy and information statements, and other information 
regarding issuers that file electronically with the SEC and state the 
address of that site (http://www.sec.gov). Disclose your internet 
address (or address of the specified transaction party where such 
information is posted), if available.
* * * * *

0
89. Amend Form SF-3 (referenced in Sec.  239.45) by revising Item 
10.(e)(2)(ii) to read as follows:

    Note: The text of Form SF-3 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM SF-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

PART I

INFORMATION REQUIRED IN PROSPECTUS

* * * * *

Item 10. Incorporation of Certain Information by Reference.

* * * * *
    (e)(1) * * *
    (2) * * *
    (ii) State that the SEC maintains an internet site that contains 
reports, proxy and information statements, and other information 
regarding issuers that file electronically with the SEC and state the 
address of that site (http://www.sec.gov). Disclose your internet 
address (or address of the specified transaction party where such 
information is posted), if available.
* * * * *

0
90. Amend Form 1-A (referenced in Sec.  239.90) by:
0
a. Revising the section entitled ``Financial Statements'' in Item 1 of 
Part I;
0
b. Removing and reserving Items 7.(a)(1)(iii) and 7.(b) of Part II;
0
c. Revising paragraph (3) of the Instruction to Item 9.(a) of Part II; 
and
0
d. Revising paragraphs (b)(4) and (5) and paragraph (c)(1)(i) of Part 
F/S of Part II.
    The revisions read as follows:

    Note: The text of Form 1-A does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM 1-A

REGULATION A OFFERING STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

PART I--NOTIFICATION

* * * * *

ITEM 1. Issuer Information

* * * * *

Financial Statements

* * * * *
BILLING CODE 8011-01-P

[[Page 50218]]

[GRAPHIC] [TIFF OMITTED] TR04OC18.000


[[Page 50219]]


[GRAPHIC] [TIFF OMITTED] TR04OC18.001

BILLING CODE 8011-01-C
* * * * *

PART II--INFORMATION REQUIRED IN OFFERING CIRCULAR

* * * * *

Item 9. Management's Discussion and Analysis of Financial Condition and 
Results of Operations

* * * * *
    (a) * * *

Instruction to Item 9(a)

* * * * *
    (3) When interim period financial statements are included, discuss 
any material changes in financial condition from the end of the 
preceding fiscal year to the date of the most recent interim

[[Page 50220]]

balance sheet provided. Discuss any material changes in the issuer's 
results of operations with respect to the most recent fiscal year-to-
date period for which a statement of comprehensive income (or statement 
of net income if comprehensive income is presented in two separate but 
consecutive financial statements or if no other comprehensive income) 
is provided and the corresponding year-to-date period of the preceding 
fiscal year.
* * * * *

Part F/S

* * * * *

(b) Financial Statements for Tier 1 Offerings

* * * * *
    (4) Statements of comprehensive income, cash flows, and changes in 
stockholders' equity. File consolidated statements of comprehensive 
income (either in a single continuous financial statement or in two 
separate but consecutive financial statements; or a statement of net 
income if there was no other comprehensive income), cash flows, and 
changes in stockholders' equity for each of the two fiscal years 
preceding the date of the most recent balance sheet being filed or such 
shorter period as the issuer has been in existence.
    (5) Interim financial statements.
    (i) If a consolidated interim balance sheet is required by (b)(3) 
of Part F/S, consolidated interim statements of comprehensive income 
(either in a single continuous financial statement or in two separate 
but consecutive financial statements; or a statement of net income if 
there was no other comprehensive income) and cash flows shall be 
provided and must cover at least the first six months of the issuer's 
fiscal year and the corresponding period of the preceding fiscal year. 
An analysis of the changes in each caption of stockholders' equity 
presented in the balance sheets must be provided in a note or separate 
statement. This analysis shall be presented in the form of a 
reconciliation of the beginning balance to the ending balance for each 
period for which a statement of comprehensive income is required to be 
filed with all significant reconciling items described by appropriate 
captions with contributions from and distributions to owners shown 
separately. Dividends per share for each class of shares shall also be 
provided.
    (ii) Interim financial statements of issuers that report under U.S. 
GAAP may be condensed as described in Rule 8-03(a) of Regulation S-X.
    (iii) The interim statements of comprehensive income for all 
issuers must be accompanied by a statement that in the opinion of 
management all adjustments necessary in order to make the interim 
financial statements not misleading have been included.
* * * * *

(c) Financial Statement Requirements for Tier 2 Offerings

    (1) * * *
    (i) Issuers that report under U.S. GAAP and, when applicable, other 
entities for which financial statements are required, must comply with 
Article 8 of Regulation S-X, as if they were conducting a registered 
offering on Form S-1, except the age of financial statements may follow 
paragraphs (b)(3)-(4) of this Part F/S.
* * * * *

0
91. Amend Form 1-K (referenced in Sec.  239.91) by revising Item 7.(e) 
of Part II to read as follows:

    Note: The text of Form 1-K does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM 1-K

* * * * *

PART II

INFORMATION TO BE INCLUDED IN REPORT

* * * * *

Item 7. Financial Statements

* * * * *
    (e) Statements of comprehensive income, cash flows, and changes in 
stockholders' equity. File audited consolidated statements of 
comprehensive income (either in a single continuous financial statement 
or in two separate but consecutive financial statements; or a statement 
of net income if there was no other comprehensive income), cash flows, 
and changes in stockholders' equity for each of the two fiscal years 
preceding the date of the most recent balance sheet being filed or such 
shorter period as the issuer has been in existence.
* * * * *

0
92. Amend Form 1-SA (referenced in Sec.  239.92) by:
0
a. Revising the third paragraph of the undesignated introductory text 
of Item 3;
0
b. Revising Item 3.(b);
0
c. Redesignating current Items 3.(d) and (e) as 3.(e) and (f), 
respectively;
0
d. Adding new Item 3.(d); and
0
e. Revising newly redesignated Item 3.(e).
    The revisions and addition read as follows:

    Note: The text of Form 1-SA does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM 1-SA

[ ] SEMIANNUAL REPORT PURSUANT TO REGULATION A

or

[ ] SPECIAL FINANCIAL REPORT PURSUANT TO REGULATION A

* * * * *

INFORMATION TO BE INCLUDED IN REPORT

* * * * *

Item 3. Financial Statements

* * * * *
    The financial statements included pursuant to this item may be 
condensed, unaudited, and are not required to be reviewed. For 
additional guidance on presentation of the financial statements, 
issuers that report under U.S. GAAP should refer to Rule 8-03(a) of 
Regulation S-X. The financial statements for all issuers must include 
the following:
* * * * *
    (b) Interim consolidated statements of comprehensive income (either 
in a single continuous financial statement or in two separate but 
consecutive financial statements; or a statement of net income if there 
was no other comprehensive income) must be provided for the six month 
interim period covered by this report and for the corresponding period 
of the preceding fiscal year. Statements of comprehensive income must 
be accompanied by a statement that in the opinion of management all 
adjustments necessary in order to make the interim financial statements 
not misleading have been included.
* * * * *
    (d) An analysis of the changes in each caption of stockholders' 
equity presented in the balance sheets must be provided in a note or 
separate statement. This analysis shall be presented in the form of a 
reconciliation of the beginning balance to the ending balance for each 
period for which a statement of comprehensive income is required to be 
filed with all significant reconciling items described by appropriate 
captions with contributions from and distributions to owners shown 
separately. Dividends per share for each class of shares shall also be 
presented.
    (e) Footnote and other disclosures should be provided as needed for 
fair presentation and to ensure that the financial statements are not 
misleading. Issuers that report under U.S. GAAP

[[Page 50221]]

should refer to Rule 8-03(b) of Regulation S-X for examples of 
disclosures that may be needed.
    (f) Financial Statements of Guarantors and Issuers of Guaranteed 
Securities. * * *
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

0
93. The authority citation for part 240 continues to read in part as 
follows:

    Authority:  15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4, 
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20, 
80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 et seq.; and 
8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350; and 
Pub. L. 111-203, 939A, 124 Stat. 1887 (2010); and secs. 503 and 602, 
Pub. L. 112-106, 126 Stat. 326 (2012), unless otherwise noted.
* * * * *

0
94. Amend Sec.  240.3a51-1 by revising paragraph (a)(2)(i)(A)(3) to 
read as follows:


Sec.  240.3a51-1  Definition of ``penny stock''.

* * * * *
    (a) * * *
    (2) * * *
    (i) * * *
    (A) * * *
    (3) Net income of $750,000 (excluding non-recurring items) in the 
most recently completed fiscal year or in two of the last three most 
recently completed fiscal years;
* * * * *

0
95. Amend Sec.  240.10A-1 by revising paragraph (b)(3) to read as 
follows:


Sec.  240.10A-1   Notice to the Commission Pursuant to Section 10A of 
the Act.

* * * * *
    (b) * * *
    (3) Submission of the report (or documentation) by the independent 
accountant as described in paragraphs (b)(1) and (2) of this section 
shall not replace, or otherwise satisfy the need for, the newly engaged 
and former accountants' letters under Sec. Sec.  229.304(a)(2)(D) and 
229.304(a)(3) of this chapter (Items 304(a)(2)(D) and 304(a)(3) of 
Regulation S-K, respectively) and shall not limit, reduce, or affect in 
any way the independent accountant's obligations to comply fully with 
all other legal and professional responsibilities, including, without 
limitation, those under the standards of the Public Company Accounting 
Oversight Board (United States) (``PCAOB'') and the rules or 
interpretations of the Commission that modify or supplement those 
auditing standards.
* * * * *

0
96. Amend Sec.  240.12b-2 in the definition of ``Significant 
subsidiary'' by:
0
a. Revising paragraph (3);
0
b. Adding a Note 1 following paragraph (3) before the Computational 
note; and
0
c. Redesignating the Computational note as Computational note 1 to 
paragraph (3).
    The revision and addition read as follows:


Sec.  240.12b-2   Definitions.

* * * * *
    Significant subsidiary. * * *
    (3) The registrant's and its other subsidiaries' equity in the 
income from continuing operations before income taxes of the subsidiary 
exclusive of amounts attributable to any noncontrolling interests 
exceeds 10 percent of such income of the registrant and its 
subsidiaries consolidated for the most recently completed fiscal year.

    Note 1: A registrant that files its financial statements in 
accordance with or provides a reconciliation to U.S. Generally 
Accepted Accounting Principles shall make the prescribed tests using 
amounts determined under U.S. Generally Accepted Accounting 
Principles. A foreign private issuer that files its financial 
statements in accordance with IFRS as issued by the IASB shall make 
the prescribed tests using amounts determined under IFRS as issued 
by the IASB.

* * * * *

0
97. Amend Sec.  240.12g-3 by revising paragraphs (a)(2), (b)(2), and 
(c)(2) to read as follows:


Sec.  240.12g-3   Registration of securities of successor issuers under 
section 12(b) or 12(g).

    (a) * * *
    (2) All securities of such class are held of record by fewer than 
300 persons, or 1,200 persons in the case of a bank; a savings and loan 
holding company, as such term is defined in section 10 of the Home 
Owners' Loan Act (12 U.S.C. 1461); or a bank holding company, as such 
term is defined in section 2 of the Bank Holding Company Act of 1956 
(12 U.S.C. 1841); or
* * * * *
    (b) * * *
    (2) All securities of such class are held of record by fewer than 
300 persons, or 1,200 persons in the case of a bank; a savings and loan 
holding company, as such term is defined in section 10 of the Home 
Owners' Loan Act (12 U.S.C. 1461); or a bank holding company, as such 
term is defined in section 2 of the Bank Holding Company Act of 1956 
(12 U.S.C. 1841); or
* * * * *
    (c) * * *
    (2) All securities of such class are held of record by fewer than 
300 persons, or 1,200 persons in the case of a bank; a savings and loan 
holding company, as such term is defined in section 10 of the Home 
Owners' Loan Act (12 U.S.C. 1461); or a bank holding company, as such 
term is defined in section 2 of the Bank Holding Company Act of 1956 
(12 U.S.C. 1841); or
* * * * *

0
98. Amend Sec.  240.13a-10 by revising paragraphs (b) and (g)(3) to 
read as follows:


Sec.  240.13a-10  Transition reports.

* * * * *
    (b) The report pursuant to this section shall be filed for the 
transition period not more than the number of days specified in 
paragraph (j) of this section after either the close of the transition 
period or the date of the determination to change the fiscal closing 
date, whichever is later. The report shall be filed on the form 
appropriate for annual reports of the issuer, shall cover the period 
from the close of the last fiscal year end and shall indicate clearly 
the period covered. The financial statements for the transition period 
filed therewith shall be audited. Financial statements, which may be 
unaudited, shall be filed for the comparable period of the prior year, 
or a footnote, which may be unaudited, shall state for the comparable 
period of the prior year, revenues, gross profits, income taxes, income 
or loss from continuing operations and net income or loss. The effects 
of any discontinued operations as classified under the provisions of 
generally accepted accounting principles also shall be shown, if 
applicable. Per share data based upon such income or loss and net 
income or loss shall be presented in conformity with applicable 
accounting standards. Where called for by the time span to be covered, 
the comparable period financial statements or footnote shall be 
included in subsequent filings.
* * * * *
    (g) * * *
    (3) The report for the transition period shall be filed on Form 20-
F (Sec.  249.220f of this chapter) responding to all items to which 
such issuer is required to respond when Form 20-F is used as an annual 
report. The financial statements for the transition period filed 
therewith shall be audited. The report shall be filed within four 
months after either the

[[Page 50222]]

close of the transition period or the date on which the issuer made the 
determination to change the fiscal closing date, whichever is later.
* * * * *

0
99. Amend Sec.  240.13b2-2 by revising paragraphs (b)(2)(i) and (ii) to 
read as follows:


Sec.  240.13b2-2   Representations and conduct in connection with the 
preparation of required reports and documents.

* * * * *
    (b) * * *
    (2) * * *
    (i) To issue or reissue a report on an issuer's financial 
statements that is not warranted in the circumstances (due to material 
violations of generally accepted accounting principles, the standards 
of the PCAOB, or other professional or regulatory standards);
    (ii) Not to perform audit, review or other procedures required by 
the standards of the PCAOB or other professional standards;
* * * * *

0
100. Amend Sec.  240.15c3-1g by revising paragraphs (b)(1)(i)(A), 
(b)(1)(ii)(A) and (E), and (b)(2)(i)(A) and (D) to read as follows:


Sec.  240.15c3-1g   Conditions for ultimate holding companies of 
certain brokers or dealers (Appendix G to 17 CFR 240.15c3-1).

* * * * *
    (b) * * *
    (1) * * *
    (i) * * *
    (A) A consolidated balance sheet and income statement (including 
notes to the financial statements) for the ultimate holding company and 
statements of allowable capital and allowances for market, credit, and 
operational risk computed pursuant to paragraph (a) of this appendix G, 
except that the consolidated balance sheet and income statement for the 
first month of the fiscal year may be filed at a later time to which 
the Commission agrees (when reviewing the affiliated broker's or 
dealer's application under Sec.  240.15c3-1e(a)). A statement of 
comprehensive income (as defined in Sec.  210.1-02 of Regulation S-X of 
this chapter) shall be included in place of an income statement, if 
required by the applicable generally accepted accounting principles.
* * * * *
    (ii) * * *
    (A) Consolidating balance sheets and income statements for the 
ultimate holding company. The consolidating balance sheet must provide 
information regarding each material affiliate of the ultimate holding 
company in a separate column, but may aggregate information regarding 
members of the affiliate group that are not material affiliates into 
one column. Statements of comprehensive income (as defined in Sec.  
210.1-02 of Regulation S-X) shall be included in place of an income 
statement, if required by the applicable generally accepted accounting 
principles;
* * * * *
    (E) For a quarter-end that coincides with the ultimate holding 
company's fiscal year-end, the ultimate holding company need not 
include consolidated and consolidating balance sheets and income 
statements (or statements of comprehensive income, as applicable) in 
its quarterly reports. The consolidating balance sheet and income 
statement (or statement of comprehensive income, as applicable) for the 
quarter-end that coincides with the fiscal year-end may be filed at a 
later time to which the Commission agrees (when reviewing the 
affiliated broker's or dealer's application under Sec.  240.15c3-
1e(a));
* * * * *
    (2) * * *
    (i) * * *
    (A) Consolidated (including notes to the financial statements) and 
consolidating balance sheets and income statements for the ultimate 
holding company. Statements of comprehensive income (as defined in 
Sec.  210.1-02 of Regulation S-X) shall be included in place of income 
statements, if required by the applicable generally accepted accounting 
principles;
* * * * *
    (D) For a quarter-end that coincides with the ultimate holding 
company's fiscal year-end, the ultimate holding company need not 
include consolidated and consolidating balance sheets and income 
statements (or statements of comprehensive income, as applicable) in 
its quarterly reports. The consolidating balance sheet and income 
statement (or statement of comprehensive income, as applicable) for the 
quarter-end that coincides with the fiscal year-end may be filed at a 
later time to which the Commission agrees (when reviewing the 
affiliated broker's or dealer's application under Sec.  240.15c3-
1e(a)).
* * * * *

0
101. Amend Sec.  240.15d-2 by revising paragraph (a) to read as 
follows:


Sec.  240.15d-2   Special financial report.

    (a) If the registration statement under the Securities Act of 1933 
did not contain certified financial statements for the registrant's 
last full fiscal year (or for the life of the registrant if less than a 
full fiscal year) preceding the fiscal year in which the registration 
statement became effective, the registrant shall, within 90 days after 
the effective date of the registration statement, file a special report 
furnishing certified financial statements for such last full fiscal 
year or other period, as the case may be, meeting the requirements of 
the form appropriate for annual reports of the registrant. If the 
registrant is a foreign private issuer as defined in Sec.  230.405 of 
this chapter, then the special financial report shall be filed on the 
appropriate form for annual reports of the registrant and shall be 
filed by the later of 90 days after the date on which the registration 
statement became effective, or four months following the end of the 
registrant's latest full fiscal year.
* * * * *

0
102. Amend Sec.  240.15d-10 by revising paragraphs (b) and (g)(3) to 
read as follows:


Sec.  240.15d-10   Transition reports.

* * * * *
    (b) The report pursuant to this section shall be filed for the 
transition period not more than the number of days specified in 
paragraph (j) of this section after either the close of the transition 
period or the date of the determination to change the fiscal closing 
date, whichever is later. The report shall be filed on the form 
appropriate for annual reports of the issuer, shall cover the period 
from the close of the last fiscal year end and shall indicate clearly 
the period covered. The financial statements for the transition period 
filed therewith shall be audited. Financial statements, which may be 
unaudited, shall be filed for the comparable period of the prior year, 
or a footnote, which may be unaudited, shall state for the comparable 
period of the prior year, revenues, gross profits, income taxes, income 
or loss from continuing operations and net income or loss. The effects 
of any discontinued operations as classified under the provisions of 
generally accepted accounting principles also shall be shown, if 
applicable. Per share data based upon such income or loss and net 
income or loss shall be presented in conformity with applicable 
accounting standards. Where called for by the time span to be covered, 
the comparable period financial statements or footnote shall be 
included in subsequent filings.
* * * * *
    (g) * * *
    (3) The report for the transition period shall be filed on Form 20-
F (Sec.  249.220f of this chapter) responding to all items to which 
such issuer is required to

[[Page 50223]]

respond when Form 20-F is used as an annual report. The financial 
statements for the transition period filed therewith shall be audited. 
The report shall be filed within four months after either the close of 
the transition period or the date on which the issuer made the 
determination to change the fiscal closing date, whichever is later.
* * * * *

0
103. Amend Sec.  240.17a-5 by adding Note 1 to paragraph (d)(2)(i) to 
read as follows:


Sec.  240.17a-5  Reports to be made by certain brokers and dealers.

* * * * *
    (d) * * *
    (2) * * *
    (i) * * *

    Note 1 to paragraph (d)(2)(i). If there is other comprehensive 
income in the period(s) presented, the financial report must contain 
a Statement of Comprehensive Income (as defined in Sec.  210.1-02 of 
Regulation S-X of this chapter) in place of a Statement of Income.

* * * * *

0
104. Amend Sec.  240.17a-12 by adding Note 1 to paragraph (b)(2) to 
read as follows:


Sec.  240.17a-12   Reports to be made by certain OTC derivatives 
dealers.

* * * * *
    (b) * * *
    (2) * * *

    Note 1 to paragraph (b)(2).  If there is other comprehensive 
income in the period(s) presented, the financial report must contain 
a Statement of Comprehensive Income (as defined in Sec.  210.1-02 of 
Regulation S-X of this chapter) in place of a Statement of Income.

* * * * *

0
105. Amend Sec.  240.17g-3 by revising paragraph (a)(1)(i) to read as 
follows:


Sec.  240.17g-3  Annual financial and other reports to be filed or 
furnished by nationally recognized statistical rating organizations.

    (a) * * *
    (1) * * *
    (i) Include a balance sheet, an income statement (or a statement of 
comprehensive income, as defined in Sec.  210.1-02 of Regulation S-X of 
this chapter, if required by the applicable generally accepted 
accounting principles noted in paragraph (a)(1)(ii) of this section) 
and statement of cash flows, and a statement of changes in ownership 
equity;
* * * * *

0
106. Amend Sec.  240.17h-1T by adding Note 1 to Paragraph (a)(1)(v) to 
read as follows:


Sec.  240.17h-1T   Risk assessment recordkeeping requirements for 
associated persons of brokers and dealers.

    (a) * * *
    (1) * * *
    (v) * * *

    Note 1 to paragraph (a)(1)(v). Statements of comprehensive 
income (as defined in Sec.  210.1-02 of Regulation S-X of this 
chapter) must be included in place of income statements, if required 
by the applicable generally accepted accounting principles.

* * * * *

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
107. The authority citation for part 249 continues to read in part as 
follows:

    Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C. 
5461 et seq.; 18 U.S.C. 1350; Sec. 953(b), Pub. L. 111-203, 124 
Stat. 1904; Sec. 102(a)(3), Pub. L. 112-106, 126 Stat. 309 (2012); 
Sec. 107, Pub. L. 112-106, 126 Stat. 313 (2012), and Sec. 72001, 
Pub. L. 114-94, 129 Stat. 1312 (2015), unless otherwise noted.
* * * * *

0
108. Amend Sec.  249.210 by revising the section heading to read as 
follows:


Sec.  229.210   Form 10, general form for registration of securities 
pursuant to section 12(b) or (g) of the Securities Exchange Act of 
1934.

* * * * *

0
109. Amend Form 20-F (referenced in Sec.  249.220f) by:
0
a. Revising General Instructions A.(b), D.(a), E.(c), G.(c) and 
G.(f)(1);
0
b. Removing Item 3.A.3;
0
c. Revising Instruction 2. of the Instructions to Item 3.A;
0
d. Adding Item 4.A.8;
0
e. Revising Item 5.C;
0
f. Revising Item 8.A.1.(b) and Item 8.A.5;
0
g. Revising Instruction 2 of the Instructions to Items 8.A.2 and 8.A.4;
0
h. Revising Item 9.A.4;
0
i. Revising Item 10.F;
0
j. Removing and reserving Instruction 1 to General Instructions to 
Items 11(a), 11(b), 11(c), 11(d), and 11(e);
0
k. Revising Instruction 1 of the Instructions to Item 12;
0
l. Removing Instruction to Item 14.B;
0
m. Removing Item 15T;
0
n. Removing and reserving Instruction 1 to Instructions to Item 16F;
0
o. Revising Instruction to Item 16G;
0
p. Revising Items 17(c)(2)(v) and (vi);
0
q. Removing and reserving Instruction 3 to Item 17;
0
r. Removing Special Instruction for Certain European Issuers to Item 
17;
0
s. Revising Instruction 1 to Instruction to Item 18;
0
t. Removing Special Instruction for Certain European Issuers to Item 
18; and
0
u. Removing and reserving Instructions 6 and 7 of the Instructions as 
to Exhibits.
    The revisions read as follows:

    Note:  The text of Form 20-F does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM 20-F

[square] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE 
SECURITIES EXCHANGE ACT OF 1934

OR

[square] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
SECURITIES EXCHANGE ACT OF 1934

* * * * *

GENERAL INSTRUCTIONS

A. Who May Use Form 20-F and When It Must be Filed.

* * * * *
    (b) A foreign private issuer must file its annual report on this 
Form within four months after the end of the fiscal year covered by the 
report.
* * * * *

D. How to File Registration Statements and Reports on this Form.

    (a) You must file the Form 20-F registration statement or annual 
report in electronic format via our Electronic Data Gathering and 
Retrieval System (EDGAR) in accordance with the EDGAR rules set forth 
in Regulation S-T (17 CFR part 232). The Form 20-F registration 
statement or annual report must be in the English language as required 
by Regulation S-T Rule 306 (17 CFR 232.306). You must provide the 
signatures required for the Form 20-F registration statement or annual 
report in accordance with Regulation S-T Rule 302 (17 CFR 232.302). If 
you have EDGAR questions, call the Filer Support Office at (202) 551-
8900.
* * * * *

E. Which Items to Respond to in Registration Statements and Annual 
Reports.

* * * * *
    (c) Financial Statements. (1) An Exchange Act registration 
statement or annual report filed on this Form must contain the 
financial statements and related information specified in Item 18 of 
this Form. Note that Items 17 and 18 may require you to file the 
financial statements of other entities in certain circumstances. These 
circumstances are described in Regulation S-X.
    (2) The issuer's financial statements must be audited in accordance 
with the standards of the Public Company

[[Page 50224]]

Accounting Oversight Board (United States) (``PCAOB''), and the auditor 
must be qualified and independent in accordance with Article 2 of 
Regulation S-X. The financial statements of entities other than the 
issuer must be audited in accordance with applicable professional 
standards. If you have any questions about these requirements, contact 
the Office of Chief Accountant in the Division of Corporation Finance 
at (202) 551-3400.
* * * * *

G. First-Time Application of International Financial Reporting 
Standards.

* * * * *
    (c) Selected Financial Data. The selected historical financial data 
required pursuant to Item 3.A shall be based on financial statements 
prepared in accordance with IFRS and shall be presented for the two 
most recent financial years.
* * * * *
    (f) Financial Information.
    (1) General. With respect to the financial information of the 
issuer required by Item 8.A, all instructions contained in Item 8, 
including the instruction requiring audits in accordance with the 
standards of the PCAOB, shall apply.
* * * * *

PART I

* * * * *

Item 3. Key Information

* * * * *

Instructions to Item 3.A:

* * * * *
    2. You may present the selected financial data on the basis of the 
accounting principles used in your primary financial statements. If you 
use a basis of accounting other than IFRS as issued by the IASB, 
however, you also must include in this summary any reconciliations of 
the data to U.S. generally accepted accounting principles and 
Regulation S-X, pursuant to Item 17 or 18 of this Form. For financial 
statements prepared using a basis of accounting other than IFRS as 
issued by the IASB, you only have to provide selected financial data on 
a basis reconciled to U.S. generally accepted accounting principles for 
(i) those periods for which you were required to reconcile the primary 
annual financial statements in a filing under the Securities Act or the 
Exchange Act, and (ii) any interim periods. An issuer that adopted IFRS 
as issued by the IASB during the past three years is only required to 
provide selected financial data for the periods that it prepared 
financial statements in accordance with IFRS as issued by the IASB.
* * * * *

Item 4. Information on the Company

* * * * *
    A. * * *
    8. State that the SEC maintains an internet site that contains 
reports, proxy and information statements, and other information 
regarding issuers that file electronically with the SEC and state the 
address of that site (http://www.sec.gov). Disclose your internet 
address, if available.
* * * * *

Item 5. Operating and Financial Review and Prospects

* * * * *
    C. Research and development, patents and licenses, etc. Provide a 
description of the company's research and development policies for the 
last three years.
* * * * *

Item 8. Financial Information

* * * * *
    A. * * *
    1. * * *
    (b) statement of comprehensive income (either in a single 
continuous financial statement or in two separate but consecutive 
financial statements; or a statement of net income if there was no 
other comprehensive income);
* * * * *
    5. If the document is dated more than nine months after the end of 
the last audited financial year, it should contain consolidated interim 
financial statements, which may be unaudited (in which case that fact 
should be stated), covering at least the first six months of the 
financial year. The interim financial statements should include a 
balance sheet, statement of comprehensive income (either in a single 
continuous financial statement or in two separate but consecutive 
financial statements; or a statement of net income if there was no 
other comprehensive income), cash flow statement, and a statement 
showing either (i) changes in equity other than those arising from 
capital transactions with owners and distributions to owners, or (ii) 
all changes in equity (including a subtotal of all non-owner items 
recognized directly in equity). Each of these statements may be in 
condensed form as long as it contains the major line items from the 
latest audited financial statements and includes the major components 
of assets, liabilities and equity (in the case of the balance sheet); 
income and expenses (in the case of the statement of comprehensive 
income) and the major subtotals of cash flows (in the case of the cash 
flow statement). The interim financial statements should include 
comparative statements for the same period in the prior financial year, 
except that the requirement for comparative balance sheet information 
may be satisfied by presenting the year end balance sheet. If not 
included in the primary financial statements, a note should be provided 
analyzing the changes in each caption of shareholders' equity presented 
in the balance sheet. The interim financial statements should include 
selected note disclosures that will provide an explanation of events 
and changes that are significant to an understanding of the changes in 
financial position and performance of the enterprise since the last 
annual reporting date. If, at the date of the document, the company has 
published interim financial information that covers a more current 
period than those otherwise required by this standard, the more current 
interim financial information must be included in the document. 
Companies are encouraged, but not required, to have any interim 
financial statements in the document reviewed by an independent 
auditor. If such a review has been performed and is referred to in the 
document, a copy of the auditor's interim review report must be 
provided in the document.
* * * * *

Instructions to Item 8.A.2:

* * * * *
    2. The financial statements of the issuer must be audited in 
accordance with the standards of the PCAOB and the auditor must comply 
with the Commission standards for auditor independence. Refer to 
Article 2 of Regulation S-X, which contains requirements for 
qualifications and reports of accountants.
* * * * *

Instructions to Item 8.A.4:

* * * * *
    2. The additional requirement that financial statements be no older 
than 12 months at the date of filing applies only in those limited 
cases where a nonpublic company is registering its initial public 
offering of securities. A company may comply with only the 15-month 
requirement in this item if the company is able to represent that it is 
not required to comply with the 12-month requirement in any other 
jurisdiction outside the United States

[[Page 50225]]

and that complying with the 12-month requirement is impracticable or 
involves undue hardship. File this representation as an exhibit to the 
registration statement.
* * * * *

Item 9. The Offer and Listing.

* * * * *
    A. * * *
    4. Identify the principal host market(s) and principal market(s) 
outside the principal host market and corresponding trading symbol(s) 
for those markets for each class of the registrant's common equity. If 
significant trading suspensions occurred in the prior three years, they 
shall be disclosed. If the securities are not regularly traded in an 
organized market, information shall be given about any lack of 
liquidity.
* * * * *

Item 10. Additional Information.

* * * * *

F. Dividends and paying agents. Disclose the date on which the 
entitlement to dividends arises, if known, and any procedures for 
nonresident holders to claim dividends. Identify the financial 
organizations which, at the time of admission of shares to official 
listing, are the paying agents of the company in the countries where 
admission has taken place or is expected to take place.

* * * * *

Item 11. Quantitative and Qualitative Disclosure About Market Risk.

* * * * *

Item 12. Description of Securities Other than Equity Securities.

* * * * *

Instructions to Item 12:

    1. Except for Item 12.D.3. and Item 12.D.4, you do not need to 
provide the information called for by this Item if you are using this 
form as an annual report.
* * * * *

Item 16F. Change in Registrant's Certifying Accountant.

* * * * *

Item 16G. Corporate Governance.

* * * * *

Instructions to Item 16G:

    Item 16G only applies to annual reports, and not to registration 
statements on Form 20-F. Registrants should provide a brief and general 
discussion, rather than a detailed, item-by-item analysis.
* * * * *

Item 17. Financial Statements.

* * * * *
    (c) * * *
    (2) * * *
    (v) Issuers that prepare financial statements on a basis of 
accounting other than U.S. generally accepted accounting principles 
that are furnished for a business acquired or to be acquired pursuant 
to Sec.  210.3-05 of this chapter may omit the disclosures specified by 
paragraphs (c)(2)(i), (c)(2)(ii), and (c)(2)(iii) of this Item if the 
conditions specified in the definition of a significant subsidiary in 
Sec.  210.1-02(w) of this chapter do not exceed 30 percent. Issuers 
that prepare financial statements using IFRS as issued by the IASB that 
are furnished pursuant to Sec.  210.3-05 may omit the disclosures 
specified by paragraphs (c)(2)(i), (c)(2)(ii), and (c)(2)(iii) of this 
Item regardless of the size of the business acquired or to be acquired.
    (vi) Issuers that prepare financial statements on a basis of 
accounting other than U.S. generally accepted accounting principles 
that are furnished for a less-than-majority-owned investee pursuant to 
Sec.  210.3-09 of this chapter may omit the disclosures specified by 
paragraphs (c)(2)(i), (c)(2)(ii), and (c)(2)(iii) of this Item if the 
first and third conditions specified in the definition of a significant 
subsidiary in Sec.  210.1-02(w) of this chapter do not exceed 30 
percent. Issuers that prepare financial statements using IFRS as issued 
by the IASB that are furnished pursuant to Sec.  210.3-09 may omit the 
disclosures specified by paragraphs (c)(2)(i), (c)(2)(ii), and 
(c)(2)(iii) of this Item regardless of the size of the investee.
* * * * *

Item 18. Financial Statements.

* * * * *

Instructions to Item 18:

    1. All of the instructions to Item 17 also apply to this Item.
* * * * *

0
110. Amend Form 40-F (referenced in Sec.  249.240f) by revising the 
first paragraph of General Instruction D.(7) to read as follows:

    Note:  The text of Form 40-F does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM 40-F

[square] REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE 
SECURITIES EXCHANGE ACT OF 1934

OR

[square] ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE 
SECURITIES EXCHANGE ACT OF 1934

* * * * *

GENERAL INSTRUCTIONS

* * * * *

D. Application of General Rules and Regulations

* * * * *
    (7) A filer must file the Form 40-F registration statement or 
annual report in electronic format via the Commission's Electronic Data 
Gathering, Analysis, and Retrieval (EDGAR) system in accordance with 
the EDGAR rules set forth in Regulation S-T (17 CFR part 232). For 
assistance with EDGAR questions, call the Filer Support Office at (202) 
551-8900.
* * * * *

0
111. Amend Form 10-K (referenced in Sec.  249.310) by:
0
a. Removing and reserving paragraph J.(1)(e) of the General 
Instructions; and
0
b. Revising paragraph J.(1)(f) of the General Instructions.
    The revisions read as follows:

    Note:  The text of Form 10-K does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
EXCHANGE ACT OF 1934

GENERAL INSTRUCTIONS

* * * * *
    J. * * *
    (1) * * *
    (f) Item 5, Market for Registrant's Common Equity, Related 
Stockholder Matters and Issuer Purchases of Equity Securities;
* * * * *

0
112. Amend Form 11-K (referenced in Sec.  249.311) by revising 
paragraph 2 of Required Information to read as follows:

    Note: The text of Form 11-K does not, and this amendment will 
not, appear in the Code of Federal Regulations.


[[Page 50226]]



FORM 11-K

FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR 
PLANS PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

* * * * *

REQUIRED INFORMATION

* * * * *
    2. An audited statement of comprehensive income (either in a single 
continuous financial statement or in two separate but consecutive 
financial statements; or a statement of net income if there was no 
other comprehensive income) and changes in plan equity for each of the 
latest three fiscal years of the plan (or such lesser period as the 
plan has been in existence).
* * * * *

Form 10-D (referenced in Sec.  249.312) [Amended]

0
113. Amend Form 10-D (referenced in Sec.  249.312) by removing and 
reserving Item 5.

    Note:  The text of Form 10-D does not, and this amendment will 
not, appear in the Code of Federal Regulations.


0
114. Amend the Form X-17A-5 Part II (FOCUS Report) (referenced in Sec.  
249.617) by:
0
 a. Revising under the heading ``Statement of Financial Condition'' 
paragraph 29 by redesignating current paragraphs 29.E and F as 
paragraphs 29.F and G, respectively and adding a new paragraph 29.E; 
and
0
b. Revising the heading ``Statement of Income (Loss)'' and under that 
heading, revising the subheading ``Net Income'', removing and reserving 
paragraphs 32, 32.a and 33, revising paragraph 34, redesignating 
current paragraph 35 as paragraph 37, adding new paragraph 35 and 
paragraphs 35.a and 36, and revising newly redesignated paragraph 37.
    The revisions and additions read as follows:

    Note: The text of Form X-17A-5 Part II does not, and this 
amendment will not, appear in the Code of Federal Regulations.


[[Page 50227]]


[GRAPHIC] [TIFF OMITTED] TR04OC18.002


0
115. Amend the Form X-17A-5 Part II (FOCUS Report) (referenced in Sec.  
249.617) General Instructions by:
0
a. Revising the heading ``Statement of Income (Loss)'' and removing 
from under that heading the subheadings ``Extraordinary Items'' and 
``Effect of Changes in Accounting Principles'' and their related text; 
and
0
 b. Revising under the heading ``Statement of Changes in Ownership 
Equity (Sole Proprietorship, Partnership or Corporation)'' the text 
related to the

[[Page 50228]]

subheading ``Net Income (Loss) For Period''.
    The revisions read as follows:

    Note:  The text of Form X-17A-5 Part II does not, and this 
amendment will not, appear in the Code of Federal Regulations.

FORM X-17A-5 PART II

(FOCUS Report)

GENERAL INSTRUCTIONS

* * * * *

STATEMENT OF INCOME (LOSS) or STATEMENT OF COMPREHENSIVE INCOME

(as defined in Sec.  210.1-02 of Regulation S-X), as applicable

    If there are no items of other comprehensive income in the period 
presented, the broker or dealer is not required to report comprehensive 
income.
* * * * *

STATEMENT OF CHANGES IN OWNERSHIP EQUITY

(SOLE PROPRIETORSHIP, PARTNERSHIP OR CORPORATION)

* * * * *

Net Income (Loss) for Period

    Report the amount of net income (loss) for the period reported on 
the Statement of Income (Loss) or Statement of Comprehensive Income, as 
applicable.
* * * * *

0
116. Amend the Form X-17A-5 Part IIA (FOCUS Report) (referenced in 
Sec.  249.617) by:
0
a. Revising under the heading ``Statement of Financial Condition for 
Noncarrying, Nonclearing and Certain other Brokers or Dealers'' 
paragraph 23 by redesignating current paragraphs 23.E and F as 
paragraphs 23.F and G, respectively and adding a new paragraph 23.E; 
and
0
b. Revising the heading ``Statement of Income (Loss)'' and under that 
heading, revising the subheading ``Net Income'', removing and reserving 
paragraphs 20, 20.a and 21, revising paragraph 22, redesignating 
current paragraph 23 as paragraph 25, adding new paragraph 23 and 
paragraphs 23.a and 24, and revising newly redesignated paragraph 25.
    The revisions and additions read as follows:

    Note:  The text of Form X-17A-5 Part IIA does not, and this 
amendment will not, appear in the Code of Federal Regulations.

BILLING CODE 8011-01-P

[[Page 50229]]

[GRAPHIC] [TIFF OMITTED] TR04OC18.003


[[Page 50230]]


BILLING CODE 8011-01-C

0
117. Amend the Form X-17A-5 Part IIA (FOCUS Report) (referenced in 
Sec.  249.617) General Instructions by:
0
 a. Revising the heading ``Statement of Income (Loss)'' and removing 
from under that heading paragraphs 20 and 21; and
0
 b. Revising under the heading ``Statement of Changes in Ownership 
Equity (Sole Proprietorship, Partnership or Corporation)'' the text 
related to the subheading ``Net Income (Loss) For Period''.
    The revisions read as follows:

    Note: The text of Form X-17A-5 Part IIA does not, and this 
amendment will not, appear in the Code of Federal Regulations.

FORM X-17A-5 PART IIA

(FOCUS Report)

GENERAL INSTRUCTIONS

* * * * *

STATEMENT OF INCOME (LOSS) or STATEMENT OF COMPREHENSIVE INCOME

(as defined in Sec.  210.1-02 of Regulation S-X), as applicable

    If there are no items of other comprehensive income in the period 
presented, the broker or dealer is not required to report comprehensive 
income.
* * * * *

STATEMENT OF CHANGES IN OWNERSHIP EQUITY

(SOLE PROPRIETORSHIP, PARTNERSHIP OR CORPORATION)

* * * * *

Net Income (Loss) for Period

    Report the amount of net income (loss) for the period reported on 
the Statement of Income (Loss) or Statement of Comprehensive Income, as 
applicable.
* * * * *

0
118. Amend the Form X-17A-5 Part IIB (FOCUS Report) (referenced in 
Sec.  249.617) by:
0
 a. Revising under the heading ``Statement of Financial Condition for 
OTC Derivatives Dealers'' paragraph 28 by redesignating current 
paragraphs 28.E and F as paragraphs 28.F and G, respectively and adding 
a new paragraph 28.E; and
0
 b. Revising the heading ``Statement of Income (Loss)'' and under that 
heading, revising the subheading ``Net Income'', removing and reserving 
paragraphs 29, 29.a and 30, revising paragraph 31, redesignating 
current paragraph 32 as paragraph 34. adding new paragraph 32 and 
paragraphs 32.a and 33, and revising newly redesignated paragraph 34.
    The revisions and additions read as follows:

    Note:  The text of Form X-17A-5 Part IIB does not, and this 
amendment will not, appear in the Code of Federal Regulations.

BILLING CODE 8011-01-P

[[Page 50231]]

[GRAPHIC] [TIFF OMITTED] TR04OC18.004

BILLING CODE 8011-01-C

0
119. Amend the Form X-17A-5 Part III (FOCUS Report) (referenced in 
Sec.  249.617) by revising under the heading ``Oath or Affirmation'' 
checkbox (c) to read as follows:

    Note: The text of Form X-17A-5 Part III does not, and this 
amendment will not, appear in the Code of Federal Regulations.


[[Page 50232]]



ANNUAL AUDITED REPORT

FORM X-17A-5

PART III

* * * * *

OATH OR AFFIRMATION

* * * * *
[square] (c) Statement of Income (Loss) or, if there is other 
comprehensive income in the period(s) presented, a Statement of 
Comprehensive Income (as defined in Sec.  210.1-02 of Regulation S-X).
* * * * *

PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940

0
120. The authority citation for part 274 continues to read in part as 
follows:

    Authority:  15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b),78l, 78m, 
78n, 78o(d), 80a-8, 80a-24, 80a-26, 80a-29, and Pub. L. 111-203, 
sec. 939A, 124 Stat. 1376 (2010), unless otherwise noted.
* * * * *

0
121. Amend Form N-5 (referenced in Sec. Sec.  239.24 and 274.5) by 
revising Item 3(i) to read as follows:

    Note:  The text of Form N-5 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM N-5

REGISTRATION STATEMENT OF SMALL BUSINESS INVESTMENT COMPANY UNDER THE 
SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940 *

* * * * *
PART I. INFORMATION REQUIRED IN REGISTRATION STATEMENT UNDER THE 
INVESTMENT COMPANY ACT OF 1940
* * * * *
Item 3. Policies with Respect to Security Investments.
* * * * *
    (i) Whether the registrant and its investment adviser and principal 
underwriter have adopted codes of ethics under Rule l 7j-1 of the 
Investment Company Act of 1940 [17 CFR 270.17j-1] and whether these 
codes of ethics permit personnel subject to the codes to invest in 
securities, including securities that may be purchased or held by the 
registrant. Also explain that these codes of ethics are available on 
the EDGAR Database on the Commission's internet site at http://www.sec.gov, and that copies of these codes of ethics may be obtained, 
after paying a duplicating fee, by electronic request at the following 
Email address: <a href="/cdn-cgi/l/email-protection#a3d3d6c1cfcac0cacdc5cce3d0c6c08dc4ccd5"><span class="__cf_email__" data-cfemail="027277606e6b616b6c646d427167612c656d74">[email protected]</span></a>.
* * * * *

0
122. Amend Form N-1A (referenced in Sec. Sec.  239.15A and 274.11A) by:
0
a. Revising Item 1.(b)(3);
0
b. Revising Instruction 3.(c)(ii) to Item 3 and Instruction 2.(a)(ii) 
to Item 27.(d)(1); and
0
c. Removing Item 27.(d)(3)(iii) and redesignating current Item 
27.(d)(3)(iv) as Item 27.(d)(3)(iii).
    The revisions read as follows:

    Note: The text of Form N-1A does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM N-1A

* * * * *
[square] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
* * * * *
[square] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 
1940
* * * * *

PART A--INFORMATION REQUIRED IN PROSPECTUS

* * * * *

Item 1. Front and Back Cover Pages

* * * * *
    (b) * * *
    (3) State that reports and other information about the Fund are 
available on the EDGAR Database on the Commission's internet site at 
http://www.sec.gov, and that copies of this information may be 
obtained, after paying a duplicating fee, by electronic request at the 
following Email address: <a href="/cdn-cgi/l/email-protection#e19194838d8882888f878ea1928482cf868e97"><span class="__cf_email__" data-cfemail="79090c1b15101a10171f16390a1c1a571e160f">[email protected]</span></a>.
* * * * *

Item 3. Risk/Return Summary: Fee Table

* * * * *

Instructions

* * * * *
    3. * * *
    (c) * * *
    (ii) ``Other Expenses'' do not include extraordinary expenses.--
``Extraordinary expenses'' refers to expenses that are distinguished by 
their unusual nature and by the infrequency of occurrence. Unusual 
nature means the expense has a high degree of abnormality and is 
clearly unrelated to, or only incidentally related to, the ordinary and 
typical activities of the fund, taking into account the environment in 
which the fund operates. Infrequency of occurrence means the expense is 
not reasonably expected to recur in the foreseeable future, taking into 
consideration the environment in which the fund operates. The 
environment of a fund includes such factors as the characteristics of 
the industry or industries in which it operates, the geographical 
location of its operations, and the nature and extent of governmental 
regulation. If extraordinary expenses were incurred that materially 
affected the Fund's ``Other Expenses,'' disclose in a footnote to the 
table what ``Other Expenses'' would have been had the extraordinary 
expenses been included.
* * * * *

Item 27. Financial Statements

* * * * *
    (d) * * *
    (1) * * *

Instructions

* * * * *
    2. * * *
    (a) * * *
    (ii) For purposes of this Item 27(d)(1), ``Other Expenses'' include 
extraordinary expenses. ``Extraordinary expenses'' refers to expenses 
that are distinguished by their unusual nature and by the infrequency 
of occurrence. Unusual nature means the expense has a high degree of 
abnormality and is clearly unrelated to, or only incidentally related 
to, the ordinary and typical activities of the fund, taking into 
account the environment in which the fund operates. Infrequency of 
occurrence means the expense is not reasonably expected to recur in the 
foreseeable future, taking into consideration the environment in which 
the fund operates. The environment of a fund includes such factors as 
the characteristics of the industry or industries in which it operates, 
the geographical location of its operations, and the nature and extent 
of governmental regulation. If extraordinary expenses were incurred 
that materially affected the Fund's ``Other Expenses,'' the Fund may 
disclose in a footnote to the Example what ``actual expenses'' would 
have been had the extraordinary expenses not been included.
* * * * *
    (3). Statement Regarding Availability of Quarterly Portfolio 
Schedule. A statement that: (i) The Fund files its complete schedule of 
portfolio holdings with the Commission for the first and third quarters 
of each fiscal year on Form N-Q; (ii) the Fund's Forms N-Q are 
available on the Commission's

[[Page 50233]]

website at http://www.sec.gov; and (iii) if the Fund makes the 
information on Form N-Q available to shareholders on its website or 
upon request, a description of how the information may be obtained from 
the Fund.
* * * * *

0
123. Amend Form N-2 (referenced in Sec. Sec.  239.14 and 274.11a-1) by 
revising Item 18.15 and revising Instruction 6.b to Item 24 to read as 
follows:

    Note:  The text of Form N-2 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM N-2

* * * * *
[square] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
* * * * *
[square] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 
1940
* * * * *

PART B--INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION

* * * * *

Item 18. Management.

* * * * *
    15. Codes of Ethics: Provide a brief statement disclosing whether 
the Registrant and its investment adviser and principal underwriter 
have adopted codes of ethics under Rule 17j-1 of the 1940 Act [17 CFR 
270.17j-1] and whether these codes of ethics permit personnel subject 
to the codes to invest in securities, including securities that may be 
purchased or held by the Registrant. Also explain in the statement that 
these codes of ethics are available on the EDGAR Database on the 
Commission's internet site at http://www.sec.gov, and that copies of 
these codes of ethics may be obtained, after paying a duplicating fee, 
by electronic request at the following email address: 
<a href="/cdn-cgi/l/email-protection#304045525c5953595e565f704355531e575f46"><span class="__cf_email__" data-cfemail="dcaca9beb0b5bfb5b2bab39cafb9bff2bbb3aa">[email protected]</span></a>.
* * * * *

Item 24. Financial Statements

* * * * *

Instructions

* * * * *
    6. * * *
    b. a statement that: (i) The Registrant files its complete schedule 
of portfolio holdings with the Commission for the first and third 
quarters of each fiscal year on Form N-Q; (ii) the Registrant's Forms 
N-Q are available on the Commission's website at http://www.sec.gov; 
and (iii) if the Registrant makes the information on Form N-Q available 
to shareholders on its website or upon request, a description of how 
the information may be obtained from the Registrant.
* * * * *

0
124. Amend Form N-3 (referenced in Sec. Sec.  239.17a and 274.11b) by:
0
a. Revising Instruction 4.(c)(i) to Item 3.(a);
0
b. Revising Item 20.(m); and
0
c. Removing Instruction 6.(ii)(C) to Item 28.(a) and redesignating 
current Instruction 6.(ii)(D) to Item 28.(a) as Instruction 6.(ii)(C) 
to Item 28.(a).
    The revisions read as follows:

    Note:  The text of Form N-3 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM N-3

* * * * *
[square] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
* * * * *
[square] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 
1940
* * * * *

PART A--INFORMATION REQUIRED IN A PROSPECTUS

* * * * *

Item 3. Synopsis or Highlights

* * * * *

Instructions

* * * * *
    4. * * *
    (c) * * *
    (i) ``Other Expenses'' do not include extraordinary expenses. 
``Extraordinary expenses'' refers to expenses that are distinguished by 
their unusual nature and by the infrequency of occurrence. Unusual 
nature means the expense has a high degree of abnormality and is 
clearly unrelated to, or only incidentally related to, the ordinary and 
typical activities of the fund, taking into account the environment in 
which the fund operates. Infrequency of occurrence means the expense is 
not reasonably expected to recur in the foreseeable future, taking into 
consideration the environment in which the fund operates. The 
environment of a fund includes such factors as the characteristics of 
the industry or industries in which it operates, the geographical 
location of its operations, and the nature and extent of governmental 
regulation. If extraordinary expenses were incurred that materially 
affected the Registrant's ``Other Expenses,'' the Registrant should 
disclose in the narrative following the table what the ``Other 
Expenses'' would have been had extraordinary expenses been included.
* * * * *

Item 20. Management

* * * * *
    (m) Provide a brief statement disclosing whether the Registrant and 
its investment adviser and principal underwriter have adopted codes of 
ethics under Rule 17j-1 of the 1940 Act [17 CFR 270.17j-1] and whether 
these codes of ethics permit personnel subject to the codes to invest 
in securities, including securities that may be purchased or held by 
the Registrant. Also explain in the statement that these codes of 
ethics are available on the EDGAR Database on the Commission's internet 
site at http://www.sec.gov, and that copies of these codes of ethics 
may be obtained, after paying a duplicating fee, by electronic request 
at the following Email address: <a href="/cdn-cgi/l/email-protection#1e6e6b7c72777d777078715e6d7b7d30797168"><span class="__cf_email__" data-cfemail="314144535d5852585f575e714254521f565e47">[email protected]</span></a>.
* * * * *

Item 28. Financial Statements

    (a) * * *

Instructions

    (6) * * *
    (ii) a statement that: (A) the Registrant files its complete 
schedule of portfolio holdings with the Commission for the first and 
third quarters of each fiscal year on Form N-Q; (B) the Registrant's 
Forms N-Q are available on the Commission's website at http://www.sec.gov; and (C) if the Registrant makes the information on Form N-
Q available to contractowners on its website or upon request, a 
description of how the information may be obtained from the Registrant;
* * * * *

0
125. Amend Form N-4 (referenced in Sec. Sec.  239.17b and 274.11c) by 
revising Item 1.(a)(v) and revising Instruction 17.(b) to Item 3(a) to 
read as follows:

    Note: The text of Form N-4 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM N-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
* * * * *
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
* * * * *

[[Page 50234]]

INFORMATION REQUIRED IN A PROSPECTUS

* * * * *

Item 1. Cover Page

    (a) * * *
    (v) a statement or statements that: (A) The prospectus sets forth 
the information about the Registrant that a prospective investor ought 
to know before investing; (B) the prospectus should be kept for future 
reference; (C) additional information about the Registrant has been 
filed with the Commission and is available upon written or oral request 
without charge (This statement should explain how to obtain the 
Statement of Additional Information, whether any of it has been 
incorporated by reference into the prospectus, and where the table of 
contents of the Statement of Additional Information appears in the 
prospectus. If the Registrant intends to disseminate its prospectus 
electronically, also include the information that the Commission 
maintains a website (http://www.sec.gov) that contains the Statement of 
Additional Information, material incorporated by reference, and other 
information regarding registrants that file electronically with the 
Commission.);
* * * * *

Item 3. Synopsis

* * * * *

Instructions

* * * * *
    17. * * *
    (b) ``Total Annual [Portfolio Company] Operating Expenses'' do not 
include extraordinary expenses. ``Extraordinary expenses'' refers to 
expenses that are distinguished by their unusual nature and by the 
infrequency of occurrence. Unusual nature means the expense has a high 
degree of abnormality and is clearly unrelated to, or only incidentally 
related to, the ordinary and typical activities of the fund, taking 
into account the environment in which the fund operates. Infrequency of 
occurrence means the expense is not reasonably expected to recur in the 
foreseeable future, taking into consideration the environment in which 
the fund operates. The environment of a fund includes such factors as 
the characteristics of the industry or industries in which it operates, 
the geographical location of its operations, and the nature and extent 
of governmental regulation. If extraordinary expenses were incurred by 
any portfolio company that would, if included, materially affect the 
minimum or maximum amounts shown in the table, disclose in a footnote 
to the table what the minimum and maximum ``Total Annual [Portfolio 
Company] Operating Expenses'' would have been had the extraordinary 
expenses been included.
* * * * *

0
126. Amend Form N-6 (referenced in Sec. Sec.  239.17c and 274.11d) by 
revising Item 1.(b)(3) and Instruction 4.(c) to Item 3 to read as 
follows:

    Note: The text of Form N-6 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM N-6

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [square]

* * * * *

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 
[square]

* * * * *

PART A: INFORMATION REQUIRED IN A PROSPECTUS

* * * * *

Item 1. Front and Back Cover Pages

* * * * *
    (b) * * *
    (3) State that reports and other information about the Registrant 
are available on the Commission's internet site at http://www.sec.gov.
* * * * *

Item 3. Risk/Benefit Summary: Fee Table

* * * * *
Instructions.
* * * * *
    4. * * *
    (c) ``Total Annual [Portfolio Company] Operating Expenses'' do not 
include extraordinary expenses. ``Extraordinary expenses'' refers to 
expenses that are distinguished by their unusual nature and by the 
infrequency of occurrence. Unusual nature means the expense has a high 
degree of abnormality and is clearly unrelated to, or only incidentally 
related to, the ordinary and typical activities of the fund, taking 
into account the environment in which the fund operates. Infrequency of 
occurrence means the expense is not reasonably expected to recur in the 
foreseeable future, taking into consideration the environment in which 
the fund operates. The environment of a fund includes such factors as 
the characteristics of the industry or industries in which it operates, 
the geographical location of its operations, and the nature and extent 
of governmental regulation. If extraordinary expenses were incurred by 
any Portfolio Company that would, if included, materially affect the 
minimum or maximum amounts shown in the table, disclose in a footnote 
to the table what the minimum and maximum ``Total Annual [Portfolio 
Company] Operating Expenses'' would have been had the extraordinary 
expenses been included.
* * * * *

0
127. Amend Form N-8B-2 (referenced in Sec.  274.12) by revising Item 
52.(e) to read as follows:

    Note: The text of Form N-8B-2 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM N-8B-2

REGISTRATION STATEMENT OF UNIT INVESTMENT TRUSTS WHICH ARE CURRENTLY 
ISSUING SECURITIES

* * * * *
VII
POLICY OF REGISTRANT
    52. * * *
    (e) Provide a brief statement disclosing whether the trust and its 
principal underwriter have adopted codes of ethics under rule 17j-l of 
the Act [17 CFR 270.l7j-l] and whether these codes of ethics permit 
personnel subject to the codes to invest in securities, including 
securities that may be purchased or held by the trust. Also explain 
that these codes of ethics are available on the EDGAR Database on the 
Commission's internet site at http://www.sec.gov, and that copies of 
these codes of ethics may be obtained, after paying a duplicating fee, 
by electronic request at the following Email address: 
<a href="/cdn-cgi/l/email-protection#f08085929c9993999e969fb0839593de979f86"><span class="__cf_email__" data-cfemail="fe8e8b9c92979d97909891be8d9b9dd0999188">[email protected]</span></a>.
* * * * *

    By the Commission.

    Dated: August 17, 2018.
 Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-18142 Filed 10-3-18; 8:45 am]
 BILLING CODE 8011-01-P


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