50148 Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 

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. 

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duplicative, overlapping, outdated, or 

superseded, in light of other 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: 

Commission reference CFR citation 

(17 CFR) 

Regulation S–X1: 

Rule 1–02 .................................................................................................................................................................... § 210.1–02. 

Rule 2–01 .................................................................................................................................................................... § 210.2–01. 

Rule 2–02 .................................................................................................................................................................... § 210.2–02. 

Rule 3–01 .................................................................................................................................................................... § 210.3–01. 

Rule 3–02 .................................................................................................................................................................... § 210.3–02. 

Rule 3–03 .................................................................................................................................................................... § 210.3–03. 

Rule 3–04 .................................................................................................................................................................... § 210.3–04. 

Rule 3–05 .................................................................................................................................................................... § 210.3–05. 

Rule 3–12 .................................................................................................................................................................... § 210.3–12. 

Rule 3–14 .................................................................................................................................................................... § 210.3–14. 

Rule 3–15 .................................................................................................................................................................... § 210.3–15. 

Rule 3–17 .................................................................................................................................................................... § 210.3–17. 

Rule 3–20 .................................................................................................................................................................... § 210.3–20. 

Rule 3A–01 ................................................................................................................................................................. § 210.3A–01. 

Rule 3A–02 ................................................................................................................................................................. § 210.3A–02. 

Rule 3A–03 ................................................................................................................................................................. § 210.3A–03. 

Rule 3A–04 ................................................................................................................................................................. § 210.3A–04. 

Rule 4–01 .................................................................................................................................................................... § 210.4–01. 

Rule 4–07 .................................................................................................................................................................... § 210.4–07. 

Rule 4–08 .................................................................................................................................................................... § 210.4–08. 

Rule 4–10 .................................................................................................................................................................... § 210.4–10. 

Rule 5–02 .................................................................................................................................................................... § 210.5–02. 

Rule 5–03 .................................................................................................................................................................... § 210.5–03. 

Rule 5–04 .................................................................................................................................................................... § 210.5–04. 

Rule 6–03 .................................................................................................................................................................... § 210.6–03. 

Rule 6–04 .................................................................................................................................................................... § 210.6–04. 

Rule 6–07 .................................................................................................................................................................... § 210.6–07. 

Rule 6–09 .................................................................................................................................................................... § 210.6–09. 

Rule 6A–04 ................................................................................................................................................................. § 210.6A–04. 

Rule 6A–05 ................................................................................................................................................................. § 210.6A–05. 

Rule 7–03 .................................................................................................................................................................... § 210.7–03. 

Rule 7–04 .................................................................................................................................................................... § 210.7–04. 

Rule 7–05 .................................................................................................................................................................... § 210.7–05. 

Rule 8–01 .................................................................................................................................................................... § 210.8–01. 

Rule 8–02 .................................................................................................................................................................... § 210.8–02. 

Rule 8–03 .................................................................................................................................................................... § 210.8–03. 

Rule 8–04 .................................................................................................................................................................... § 210.8–04. 

Rule 8–05 .................................................................................................................................................................... § 210.8–05. 

Rule 8–06 .................................................................................................................................................................... § 210.8–06. 

Rule 9–03 .................................................................................................................................................................... § 210.9–03. 

Rule 9–04 .................................................................................................................................................................... § 210.9–04. 

Rule 9–05 .................................................................................................................................................................... § 210.9–05. 

Rule 9–06 .................................................................................................................................................................... § 210.9–06. 

Rule 10–01 .................................................................................................................................................................. § 210.10–01. 

Rule 11–02 .................................................................................................................................................................. § 210.11–02. 

Rule 11–03 .................................................................................................................................................................. § 210.11–03. 

Rule 12–16 .................................................................................................................................................................. § 210.12–16. 

Rule 12–17 .................................................................................................................................................................. § 210.12–17. 


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Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 50149 

Commission reference CFR citation 

(17 CFR) 

Rule 12–18 .................................................................................................................................................................. § 210.12–18. 

Rule 12–21 .................................................................................................................................................................. § 210.12–21. 

Rule 12–22 .................................................................................................................................................................. § 210.12–22. 

Rule 12–23 .................................................................................................................................................................. § 210.12–23. 

Rule 12–24 .................................................................................................................................................................. § 210.12–24. 

Rule 12–27 .................................................................................................................................................................. § 210.12–27. 

Rule 12–28 .................................................................................................................................................................. § 210.12–28. 

Rule 12–29 .................................................................................................................................................................. § 210.12–29. 

Regulation S–K2: 

Item 10 ........................................................................................................................................................................ § 229.10. 

Item 101 ...................................................................................................................................................................... § 229.101. 

Item 201 ...................................................................................................................................................................... § 229.201. 

Item 302 ...................................................................................................................................................................... § 229.302. 

Item 303 ...................................................................................................................................................................... § 229.303. 

Item 406 ...................................................................................................................................................................... § 229.406. 

Item 503 ...................................................................................................................................................................... § 229.503. 

Item 504 ...................................................................................................................................................................... § 229.504. 

Item 508 ...................................................................................................................................................................... § 229.508. 

Item 512 ...................................................................................................................................................................... § 229.512. 

Item 601 ...................................................................................................................................................................... § 229.601. 

Regulation M–A3: 

Item 1010 .................................................................................................................................................................... § 229.1010. 

Regulation AB4: 

Item 1118 .................................................................................................................................................................... § 229.1118. 

Securities Act of 1933 (Securities Act) 5: 

Rule 158 ...................................................................................................................................................................... § 230.158. 

Rule 405 ...................................................................................................................................................................... § 230.405. 

Rule 436 ...................................................................................................................................................................... § 230.436. 

Form S–1 .................................................................................................................................................................... § 239.11. 

Form S–3 .................................................................................................................................................................... § 239.13. 

Form S–11 .................................................................................................................................................................. § 239.18. 

Form S–4 .................................................................................................................................................................... § 239.25. 

Form F–1 ..................................................................................................................................................................... § 239.31. 

Form F–3 ..................................................................................................................................................................... § 239.33. 

Form F–4 ..................................................................................................................................................................... § 239.34. 

Form F–6 ..................................................................................................................................................................... § 239.36. 

Form F–7 ..................................................................................................................................................................... § 239.37. 

Form F–8 ..................................................................................................................................................................... § 239.38. 

Form F–10 ................................................................................................................................................................... § 239.40. 

Form F–80 ................................................................................................................................................................... § 239.41. 

Form SF–1 .................................................................................................................................................................. § 239.44. 

Form SF–3 .................................................................................................................................................................. § 239.45. 

Form 1–A .................................................................................................................................................................... § 239.90. 

Form 1–K .................................................................................................................................................................... § 239.91. 

Form 1–SA .................................................................................................................................................................. § 239.92. 

Securities Exchange Act of 1934 (Exchange Act) 6: 

Rule 3a51–1 ................................................................................................................................................................ § 240.3a51–1. 

Rule 10A–1 ................................................................................................................................................................. § 240.10A–1. 

Rule 12b–2 .................................................................................................................................................................. § 240.12b–2. 

Rule 12g–3 .................................................................................................................................................................. § 240.12g–3. 

Rule 13a–10 ................................................................................................................................................................ § 240.13a–10. 

Rule 13b2–2 ................................................................................................................................................................ § 240.13b2–2. 

Rule 15c3–1g .............................................................................................................................................................. § 240. 15c3–1g. 

Rule 15d–2 .................................................................................................................................................................. § 240.15d–2. 

Rule 15d–10 ................................................................................................................................................................ § 240.15d–10. 

Rule 17a–5 .................................................................................................................................................................. § 240.17a–5. 

Rule 17a–12 ................................................................................................................................................................ § 240.17a–12. 

Rule 17g–3 .................................................................................................................................................................. § 240.17g–3. 

Rule 17h–1T ................................................................................................................................................................ § 240.17h–1T. 

Form 10 ....................................................................................................................................................................... § 249.210. 

Form 20–F ................................................................................................................................................................... § 249.220f. 

Form 40–F ................................................................................................................................................................... § 249.240f. 

Form 10–K .................................................................................................................................................................. § 249.310. 

Form 11–K .................................................................................................................................................................. § 249.311. 

Form 10–D .................................................................................................................................................................. § 249.312. 

Form X–17A–5 ............................................................................................................................................................ § 249.617. 

Investment Company Act of 1940 (Investment Company Act) 7: 

Form N–8B–2 .............................................................................................................................................................. § 274.12. 

Securities Act and Investment Company Act: 

Form N–5 .................................................................................................................................................................... § 239.24 and 274.5. 

Form N–1A .................................................................................................................................................................. § 239.15A and 274.11A. 

Form N–2 .................................................................................................................................................................... § 239.14 and 274.11a–1. 

Form N–3 .................................................................................................................................................................... § 239.17a and 274.11b. 


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50150 Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 

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. 

8See 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. 

10We refer to the proposed amendments and this 

additional comment solicitation collectively as 

‘‘proposals.’’ 

11The 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). 

12The 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. 

Commission reference CFR citation 

(17 CFR) 

Form N–4 .................................................................................................................................................................... § 239.17b and 274.11c. 

Form N–6 .................................................................................................................................................................... § 239.17c and 274.11d. 

I. Introduction and Background 

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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Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 50151 

13Public Law 114–94. 

14Under 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 nonaffiliates 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. 

15Under 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. 

16Although 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. 

17An 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. 

18An 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. 

19See 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. 

20Foreign 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. 

21 Domestic issuers include foreign issuers that do 

not meet the definition of foreign private issuer. 

22Throughout 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.’’ 

23Foreign 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. 

24For example, these forms include Forms F–1, 

F–3, F–4, and 20–F. 

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. 

26See 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. 

Surface Transportation Act 13 (the 

‘‘FAST Act’’). 

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 nonaccelerated 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: 

• Amendments involving Regulation 

S–K relate to domestic issuers 21 and 

foreign private issuers that elect to file 

on forms used by domestic issuers. 

• 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

• 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. 

Some of the amendments also affect 

asset-backed issuers.25

2. Issuers Offering Securities Under 

Regulation A 

Some of the amendments affect 

Regulation A issuers, as follows: 26

• 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. 

• 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. 

• Amendments involving Regulation 

A forms may affect issuers that report 


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50152 Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 

27Only 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. 

28Statements 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. 

29See, 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’’). 

30See, e.g. letters from CAQ and Ernst & Young 

LLP (Oct. 31, 2016) (‘‘E&Y’’). 

31See, e.g. letters from CAQ; CFA; Corporate 

Governance Coalition for Investor Value (Oct. 27, 

2016) (‘‘CGCIV’’); FEI; and USCC. 

32See, 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. 

34See, 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. 

35See, e.g. letters from AFL–CIO and AFR; 

Domini Social Investments LLC (Nov. 1, 2016) 

(‘‘Domini’’); and Public Citizen. 

36See 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)] 

37See, e.g. letters from AFL–CIO and AFR and 

FACT Coalition. 

38See, e.g. letters from American Gas Association 

(Aug. 24, 2016) and Center for Audit Quality (Aug. 

4, 2016). 

39See Extension of Comment Period for 

Disclosure Update and Simplification, Release No. 

33–10220 (September 23, 2016) [81 FR 66898 (Sept. 

29, 2016)] 

40See, 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. 

41See 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. 

43See Accounting Series Release No. 150 (Dec. 

20, 1973). 

44Public Law 107–204, 116 Stat. 745 (2002) 

45See section 19 of the Securities Act [15 U.S.C. 

77s]. 

46Section 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’’ 

under U.S. GAAP or Canadian issuers 

that report under IFRS.27

In this release, we have highlighted 

the Commission disclosure 

requirements that affect Regulation A 

issuers.28

3. Issuers Regulated Under the 

Investment Company Act 

Certain amendments are applicable to 

issuers regulated under the Investment 

Company Act, as follows: 

• Amendments involving Regulation 

S–K affect business development 

companies to which the regulation 

applies. 

• Amendments involving Regulation 

S–X affect investment companies to 

which the regulation applies. 

• 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

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 standardsetting projects related to disclosure 

framework and materiality, information 

that is material under the current 

disclosure framework would no longer 

be provided to investors.34

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. 

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. 

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 privateVerDate Sep<11>2014 22:38 Oct 03, 2018 Jkt 247001 PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 E:\FR\FM\04OCR2.SGM 04OCR2

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for purposes of the federal securities laws. See 2003 

FASB Policy Statement. 47See 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. 

48The 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. 

49See, e.g., Rule 4–08(h) of Regulation S–X, parts 

of which were subsequently incorporated into U.S. 

GAAP. 

50See, 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. 

51See, 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)]. 

52See, 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’’). 

53For 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 nonSRCs, disclosure of the effect on retained earnings. 

54See letters from CAQ; CFA; Grant; and KPMG. 

55See 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). 

56See letter from ABA. The FASB scopes 

financial accounting and reporting for companies 

by (1) public business entities (PBEs); (2) not-forprofit 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. 

57See further discussion in Sections II and III 

below. 

58The 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%2

FDocument_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-Foundationand-IASB.aspx. 

59See Section II.B of the 2003 FASB Policy 

Statement. 

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

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. 

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

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. 

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

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 


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60We 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 SarbanesOxley Act. 

61See supra note 59. 

62FASB 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&accepted

Disclaimer=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). 

64Commenters 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. 

65See Project Update for Disclosure Framework: 

Disclosures-Interim Reporting, available at: http://

fasb.org/jsp/FASB/FASBContent_C/ProjectUpdate

Page&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. 

66See Minutes from FASB Board Meeting (May 

29, 2014), available at: http://www.fasb.org/jsp/ 

FASB/FASBContent_C/ProjectUpdatePage&cid=

1176164227056. 

67See, e.g. letters from AFL–CIO and AFR; 

CalPERS; Domini; and Public Citizen. 

68See letter from CalPERS. 

69The 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. 

70See, e.g. letters from CAQ; E&Y; and KPMG. 71See letters from CAQ; CFA; KPMG; and 

PricewaterhouseCoopers LLP (Nov. 1, 2016) 

(‘‘PwC’’). 

72See summary of decisions reached at the FASB 

Board Meeting (Mar. 21, 2018), available at: https:// 

www.fasb.org/jsp/FASB/FASBContent_C/Project

UpdateExpandPage&cid=1176170687841. 

73See Project Update for Disclosure Framework: 

Board’s Decision Process, available at: http://

fasb.org/jsp/FASB/FASBContent_C/ProjectUpdate

Page&cid=1176163077030. 

74Statement of Financial Accounting Concepts 

No. 2, Qualitative Characteristics of Accounting 

Information. 

75See SEC Staff Accounting Bulletin: No. 99— 

Materiality, which is available at: https://

www.sec.gov/interps/account/sab99.htm. 

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. 

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

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

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. 

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 


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76See Sections II.B., III.B., and V.B. below. 

77Exchange Act Rule 12b–20 [17 CFR 240.12b– 

20]. 

78See 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’’). 

79ASC 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. 

80For 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. 

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

82For 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. 

83See, e.g. letters from CAQ and Davis Polk & 

Wardwell LLP (Nov. 2, 2016) (‘‘Davis’’). 

84See, e.g. letters from Council of Institutional 

Investors (Sept. 22, 2016) (‘‘CII’’) and The Ohio 

Society of CPAs (Nov. 2, 2016). 

85See, e.g. letters from CGCIV and Edison Electric 

Institute and American Gas Association (November 

2, 2016) (‘‘EEI and AGA’’); and USCC. 

86See, e.g. letters from CAQ; Davis; EEI and AGA; 

and FEI. 

87See, e.g. letters from CalPERS; FEI; and R.G. 

Associates. 

88See, e.g. letters from AFL–CIO and AFR; 

CalPERS; CFA; Public Citizen; and R.G. Associates. 

89See, e.g. letters from CAQ; CGCIV; The Clearing 

House Association L.L.C. (Oct. 28, 2016) (‘‘Clearing 

House’’); Davis; FEI; and USCC. 

90The proposed amendments that give rise to 

Disclosure Location Prominence or Financial 

Statement Considerations include those discussed 

Continued 

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

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: 

• 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.’’ 

• 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.’’ 

• 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.’’ 

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

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. 

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 


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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. 

91See discussion in Section III.C.2 below. 

92ASC 830–10–45–2, ASC 830–10–45–12, and 

ASC 830–10–55–10. 

93See letters from Davis; Deloitte; & Touche LLP 

(Oct. 5, 2016) (‘‘Deloitte’’); E&Y; EEI and AGA; 

Grant; KPMG; and R.G. Associates. 

94See letters from CAQ and PwC. 

95ASC 830–10–45–2, ASC 830–10–45–12, and 

ASC 830–10–55–10. 

96First sentence of Rule 3–20(d) of Regulation S– 

X. 

97These proposed amendments are discussed in 

further detail in Section II.B of the Proposing 

Release. 

98See supra note 23. 

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. 

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

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

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

Commission disclosure requirement proposed 

for elimination 

Description of commission disclosure 

requirement proposed for elimination Corresponding U.S. GAAP requirement 

Consolidation 

All except fourth sentence of Rule 3A–02(b)(1) 

of Regulation S–X.

Permits consolidation of an 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.

ASC 810–10–45–12.99

First sentence of Rule 3A–02(d) of Regulation 

S–X.

Requires consideration of the propriety of 

consolidation under certain restrictions.100

ASC 810–10–15–10. 

Last two sentences of first paragraph of Rule 

3A–02 of Regulation S–X and 3A–03(a) of 

Regulation S–X.

Requires disclosure of the accounting policies 

followed in consolidation or combination.101

ASC 235–10–50–1 and ASC 810–10–50–1. 

First sentence of Rule 3A–04 of Regulation S– 

X.

Requires elimination of intercompany transactions.ASC 323–10–35–5a and ASC 810–10–45–1 

through 45–9. 

Obligations 

Reference to issuances in Rule 4–08(f) of Regulation S–X.Requires disclosure of significant changes 102

in amounts of debt issued subsequent to 

the latest balance sheet date.

ASC 855–10–50–2 and 855–10–55–2a. 

Income Tax Disclosures 

First sentence of Rule 4–08(h)(2) of Regulation 

S–X.

Requires an income tax rate reconciliation ..... ASC 740–10–50–12. 


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Commission disclosure requirement proposed 

for elimination 

Description of commission disclosure 

requirement proposed for elimination Corresponding U.S. GAAP requirement 

Fourth sentence of Rule 4–08(h)(2) of Regulation S–X.Permits the income tax rate reconciliation to 

be presented in either percentages or dollars.

ASC 740–10–50–12 

Warrants, Rights, and Convertible Instruments 

Rule 4–08(i) of Regulation S–X ......................... Requires disclosure of the title and amount of 

securities subject to warrants or rights, the 

exercise price, and the exercise period.103

Non-compensatory 104 warrants or rights: ASC 

505–10–50–3 and ASC 815–40–50–5. 

Compensatory warrants or rights: ASC 505– 

10–50–3, ASC 718–10–50–1, and ASC 

718–10–50–2. 

Related Parties 

Reference to identification of related party 

transactions in Rule 4–08(k)(1) of Regulation 

S–X.

Requires identification of related party transactions.ASC 850–10–50–1. 

Contingencies 

References to ‘‘material contingencies’’ in Rule 

8–03(b)(2),105 the second sentence of Rule 

10–01(a)(5) of Regulation S–X, and the entire last sentence of Rule 10–01(a)(5) of Regulation S–X.106

Require disclosure of material contingencies 

in interim financial statements, notwithstanding disclosure in the annual financial 

statements.

ASC 270–10–50–6. 

Earnings per Share 

Reference to ‘‘earnings per share’’ in first sentence of Rule 10–01(b)(2) of Regulation S–X.Requires presentation of earnings per share 

on the face of an interim income statement.

ASC 270–10–50–1b. 

Item 601(b)(11) of Regulation S–K107 and Instruction 6 to ‘‘Instructions as to Exhibits’’ of 

Form 20–F.

Require disclosure of the computation of 

earnings per share in annual filings.

ASC 260–10–50–1a, Rule 10–01(b)(2) of 

Regulation S–X, and IAS 33, paragraph 

70.108

Insurance Companies 

Last sentence of Rule 7–03(a)(11) of Regulation S–X.Requires a description of the activities being 

reported in the separate accounts.109

ASC 944–80–50–1a. 

Rule 7–04.3(c) of Regulation S–X ..................... Requires disclosure of the method followed in 

determining the cost of investments sold.110

ASC 235–10–50–1 and ASC 320–10–50–9b. 

Bank Holding Companies 

Rule 9–03.6(a) of Regulation S–X ..................... Requires disclosure of the carrying and market values of (1) securities of the U.S. 

Treasury and other U.S. Government agencies and corporations, (2) securities of 

states of the U.S. and political subdivisions, 

and (3) other securities.

ASC 320–10–50–1B, ASC 320–10–50–2, 

ASC 320–10–50–5, and ASC 942–320–50– 

2. 

Rule 9–03.7(d) of Regulation S–X ..................... Requires disclosure of changes in the allowance for loan losses.ASC 310–10–50–11B(c). 

First part of Rule 9–04.13(h) of Regulation S–X Requires disclosure of the method followed in 

determining the cost of investment securities sold.

ASC 235–10–50–1 and ASC 320–10–50–9b. 

Changes in Accounting Principles 

Requirement to disclose reason for change in 

accounting principle in Rule 8–03(b)(5) 111

and Rule 10–01(b)(6) 112 of Regulation S–X.

Requires disclosure of the reasons for making 

material accounting changes in an interim 

period.

ASC 250–10–45–12 to 16, ASC 250–10–50– 

1a, and ASC 270–10–50–1g. 

Interim Adjustments 

Third sentence of Rule 3–03(d) and third sentence of Rule 10–01(b)(8) of Regulation S–X.Provide examples of adjustments in order for 

interim financial statements to be fairly stated.

ASC 270–10–45–10. 

Interim Financial Statements—Common Control Transactions 

Part of first sentence of Rule 10–01(b)(3) of 

Regulation S–X.

Requires that common control transactions be 

reflected in current and prior comparative 

period’s interim financial statements.

ASC 805–50–45–1 to 5. 


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99ASC 810–10–45–12 uses the phrase ‘‘about 

three months’’ instead of 93 days. 

100Rule 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. 

101Rule 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. 

102ASC 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. 

103For compensatory warrants or rights, U.S. 

GAAP requires disclosure of the nature and terms 

of such arrangements, the number and weightedaverage exercise price, and the weighted-average 

contractual term. 

104Compensatory 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. 

105This rule specifically applies to SRCs and 

Regulation A issuers in a Tier 2 offering that report 

under U.S. GAAP. 

106This rule specifically applies to companies 

other than SRCs (‘‘non-SRCs’’). 

107We 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. 

109ASC 944–80–50–1a requires disclosure of the 

nature of the contracts reported in separate 

accounts. 

110ASC 320–10–50–9b refers to the ‘‘cost of a 

security sold.’’ 

111This rule specifically applies to SRCs and 

Regulation A issuers in a Tier 2 offering that report 

under U.S. GAAP. 

112This rule specifically applies to non-SRCs. 

113See, e.g. letters from CAQ; Davis; EEI & AGA; 

and R.G. Associates. 

114 17 CFR 210.3A–01 through 210.3A–04. 

115We 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. 

117We 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. 

Commission disclosure requirement proposed 

for elimination 

Description of commission disclosure 

requirement proposed for elimination Corresponding U.S. GAAP requirement 

Interim Financial Statements—Dispositions 

Rule 10–01(b)(5) of Regulation S–X .................. Requires disclosure of the effect of discontinued operations on interim revenues, net 

income, and earnings per share for all periods presented.

ASC 205–20–50–5B, ASC 205–20–50–5C, 

ASC 260–10–45–3, and ASC 270–10–50– 

7. 

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. 

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. 

Commission disclosure requirement proposed 

for elimination 

Description of commission disclosure 

requirement proposed for elimination 

Corresponding other commission disclosure 

requirement 

Foreign Currency 

Last sentence of Rule 3–20(d) of Regulation S– 

X.

States that foreign private issuers must comply with Item 17(c)(2) of Form 20–F, which 

requires disclosure and quantification of departures from the methodology of Rule 3– 

20 if their financial statements are prepared 

on a basis other than U.S. GAAP or IFRS.

Item 17(c)(2) of Form 20–F. 

Also Item 4 of Form F–1, General Instructions 

I.B of Form F–3, and Items 11, 12, and 13 

of Form F–4, which indirectly refer to Item 

17 of Form 20–F. 

Consolidation 

Rule 4–08(a) of Regulation S–X ........................ Requires compliance with Article 3A.114 Article 3A itself requires compliance. The requirement is repeated in Rule 4–08(a). 

Rule 3A–01 of Regulation S–X .......................... States subject matter of Article 3A .................. The same information is set forth in the title of 

Article 3A. 

Report Furnished to Security Holders 

Item 601(b)(19) of Regulation S–K. 115 Provides specific instructions to address the 

incorporation by reference into Form 10– 

Q 116 of information that is separately made 

available to security holders.

General Instruction D(3) to Form 10–Q, which 

refers to Item 601(b)(13) of Regulation S– 

K.117


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118See letters from Davis; Deloitte; E&Y; EEI and 

AGA; Grant; KPMG; and R.G. Associates. 

119See 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.’’ 

120The requirement to disclose the sources of any 

material amounts of other funds needed to 

accomplish the specific purpose is stated twice 

within the instruction. 

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

122See Accounting Standards Update (‘‘ASU’’) 

No. 2014–11, Transfers and Servicing (Topic 860): 

Repurchase-to-Maturity Transactions, Repurchase 

Financings, and Disclosures. 

123See Rule 4–08(m)(1)(i) of Regulation S–X. 

124See ASC 860–30–45–2. 

125Regulation 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. 

126Specifically, 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. 

127See Rule 4–08(m)(1)(ii) of Regulation S–X. 

128See ASC 860–30–50–7. 

129See ASC 860–30–55–4. 

130 Id. 

131See Rules 4–08(m)(1)(ii)(A)(i) and 4– 

08(m)(1)(ii)(B) of Regulation S–X. 

132See ASC 860–30–25–5a. 

133See ASC 860–30–50–1A.b.1 and 2. 

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

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

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: 

• 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. 

• 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

(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. 

(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. 

(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

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


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134U.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. 

135See 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. 

136See 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. 

137Specifically, 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. 

138See Rule 4–08(m)(2)(i)(B)(1) of Regulation S– 

X. 

139See ASC 860–30–50–1Aa. 

140See letters from CAQ; Clearing House; 

Deloitte; E&Y; and KPMG. 

141See Rule 4–08(m)(2)(i)(B)(1) of Regulation S– 

X. 

142See letters from CAQ; Grant; and PwC. 

143See, 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. 

144See letter from Zevin Asset Management, LLC 

(Nov. 2, 2016) (‘‘Zevin’’). 

145See letter from CII. 

146See letter from Elise J. Bean (Oct. 3, 2016) 

(‘‘Bean’’). 

147See letter from Clearing House. 

148See letters from As You Sow, et al. and Public 

Citizen. 

149See 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. 

150See ASC 815–10–50. 

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

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

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. 

(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. 

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. 

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

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

(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 


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151See ASC 235–10–50–1 and ASC 235–10–50– 

3. 

152See ASC 815–10–50. 

153See 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. 

154See SFAS No. 133, Accounting for Derivative 

Instruments and Hedging Activities, codified in 

ASC 815. 

155See letters from CAQ; Deloitte; E&Y; Grant; 

and PwC. 

156See letters from Bean and KPMG. 

157See letter from KPMG. 

158ASC 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. 

159See letter from Bean. 

160Because we are no longer eliminating all of 4– 

08(n), we are retaining Note 2(b) to Rule 8–01. 161ASC 815 and ASC 230. 162See ASC 235–10–50–1, ASC 235–10–50–3, 

and ASC 815–10–50. 163The 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. 

164See 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. 165See ASC 730–10–50–1 and ASC 730–20–50– 

1. 166See 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’’). 

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. 

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. 

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. 

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

(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

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. 

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

Regulation S–K also uses the term 

‘‘company-sponsored,’’ but U.S. GAAP 


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167 Id. 

168See Small Business Initiatives, Release No. 33– 

6949, (Jul. 30, 1992) [57 FR 36442 (Aug. 13, 1992)]. 

169Paragraph 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. 

170See 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. 

171 Item 7(a)(1)(iii) of Form 1–A. 

172See letters from CAQ; Deloitte; E&Y; Grant; 

KPMG; and PwC. 

173See letter from KPMG. 

174See letter from E&Y. 

175See letter from CalSTRS. 

176For 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.’’ 

177See 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)]. 

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

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

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 companysponsored 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. 

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. 

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

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

(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. 

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

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 


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178ASC 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. 

179ASC 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. 

180See letters from CAQ; Deloitte; E&Y; Grant; 

KPMG; and PwC. 

181See letter from Bean. 

182See ASC 260–10–50. 

183See 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. 

185See 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. 

186See Instruction 5 to Item 201(d). 

187See Instruction 8 to Item 201(d). 

188ASC 718–10–50–1a. 

189See Disclosure of Equity Compensation Plan 

Information, Release No. 33–8048 (Dec. 21, 2001) 

[67 FR 232 (Jan. 2, 2002)]. 

190For 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 

§ 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 § 711. 

191These exchanges are the NYSE, NYSE MKT, 

and Nasdaq. 

192One 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. 

193See Items 10(a), 10(b), and the Instructions to 

10(c) of Schedule 14A. 

194The 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. 

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. 

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

(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

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

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. 

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

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 


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195See letters from E&Y; FedEx Corporation (Nov. 

2, 2016) (‘‘FedEx’’); Grant; and KPMG. 196See, e.g. letters from AFL–CIO and AFR; 

CalSTRS; CalPERS; CAQ; and Public Citizen. 197See Instruction 5 of Item 201(d) of Regulation 

S–K. 198See, e.g. letter from AFL–CIO and AFR. 199See letters from CAQ; Deloitte; and PwC. 200See Instruction 8 of Item 201(d) of Regulation 

S–K. 201See letters from As You Sow, et al. and Public 

Citizen. 

202See 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). 

205Other 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). 

206The interest coverage ratio is often calculated 

as earnings before interest and taxes divided by 

interest payments. 

207The 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. 

209See 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 EarningsBased 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). 

210One 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. 

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 forwardlooking information because note 

disclosures are not subject to the safe 

harbor under the PSLRA. 

(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

(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. 

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. 

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 


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211See 2003 MD&A Release. 212The 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. 

213See, e.g. letters from CAQ; CGCIV; National 

Association of Real Estate Investments Trusts (Oct. 

28, 2016) (‘‘NAREIT’’); and Shearman and USCC. 

214For 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. 

215See letter from FedEx. 

216See letter from Deloitte. 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. 

218These proposed amendments are discussed in 

further detail in Section III.C of the Proposing 

Release. 

219See, e.g., ASC 505–10–45. 

220As 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. 

221See ASC 810–10–45–12. 

222See ASC 810–10–45–13. 

223See ASC 946–20–50–11. 

224Similar 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. 

225See ASC 944–40–50. 

226See ASC 250–10–50–1 and ASC 270–10–50– 

1g. 

227See, e.g. letters from CAQ and NAREIT. 

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

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. 

(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

(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

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

Topic Commission disclosure 

requirement(s) Proposed amendments 

REIT Disclosures—Undistributed Gains 

or Losses on the Sale of Properties.

Rule 3–15(a)(2) of Regulation S–X ....... Delete as U.S. GAAP219 also sets 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 Fiscal Periods.Rule 3A–02(b)(1) of Regulation S–X ..... Delete as U.S. GAAP221 requires 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 Fiscal Periods.Final sentence of Rule 3A–03(b) of 

Regulation S–X.

Delete the final sentence of this requirement as U.S. GAAP222 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 Registered Investment Companies.Rule 6–04.17 of Regulation S–X ........... Amend to require presentation of the total, rather than the components, of distributable earnings on the balance sheet. U.S. GAAP223 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 Regulation S–X ............. Delete the 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 Assumptions.Rule 7–03(a)(13)(b) of Regulation S–X Delete as U.S. GAAP225 does not limit its disclosure to certain assumptions, 

and therefore, it may elicit more disclosure. 

Interim Financial Statements—Changes 

in Accounting Principles.

Rule 8–03(b)(5) and Rule 10–01(b)(6) 

of Regulation S–X.

Delete the requirement for disclosure of the date of any material accounting 

change, as U.S. GAAP226 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 


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228See letters from E&Y and Investment Company 

Institute (Nov. 2, 2016). 

229See ASC 946–20–50–8. 

230These proposed amendments are discussed in 

further detail in Section III.C of the Proposing 

Release. 

231 Items 101(a)(1), 503(c), and 303(a)(3)(ii) of 

Regulation S–K. 

232For 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. 

234The Commission also proposed to delete its 

accompanying reference in the Exhibit Table within 

Item 601. 

235See, e.g. letters from CAQ; KPMG; and PwC. 

236See 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. 

237See ASC 270–10–50–7, which refers to ASC 

805–10–50–2h.3 for purposes of interim 

disclosures. 

238 17 CFR 249.308. 

239For additional discussion of this difference, 

see Section III.C.9 of the Proposing Release, supra 

note 1, at 51621. 

240See ASC 805–10–50–2h.3. 

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. 

(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

Topic Commission disclosure 

requirement(s) Proposed amendments 

REIT Disclosures—Status as a 

REIT.

Rule 3–15(b) of Regulation S–X ... Delete, as Regulation S–K231 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 Regulation S–K Delete requirement to disclose the frequency and amount of cash 

dividends declared, as amended Rule 3–04 of Regulation S–X233

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 Bids ...... Item 601(b)(26) of Regulation S– 

K234.

Delete, as this disclosure does not 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. 

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. 

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

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 


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241For 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. 

242For 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]. 

243Rule 11–01(a) and Rule 11–02(b)(7) of 

Regulation S–X. [17 CFR 210.11–01(a)]. 

244For 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. 

245See letters from CAQ; Deloitte; E&Y; Grant; 

KPMG, and PwC. 

246See letters from As You Sow, et al. and Zevin. 

247See letter from Public Citizen. 

248See letter from Zevin. 

249See ASC 270–10–50, which requires 

disclosure of unusual and infrequent items and 

references business combinations. 

250See 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. 

251See ASC 205–20–45. 

252See ASC 270–10–50–7, which refers to ASC 

360–10–50–3A for purposes of interim disclosures. 

253For 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. 

254See ASC 360–10–50–3A. 

255See Rule 10–01(b)(5) of Regulation S–X. 

256See supra note 234. 

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 nonSRCs, even though Commission 

disclosure requirements, as a general 

matter, provide certain accommodations 

for SRCs 242 and Regulation A issuers. 

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

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

(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

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

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. 

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. 

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

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


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257See 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.’’ 

259See letters from BDO; CAQ; Deloitte; E&Y; 

Grant; KPMG; and PwC. 

260See letters from BDO; CAQ; Deloitte; E&Y; and 

PwC. 

261Rule 8–05 of Regulation S–X. 

262See ASC 280–10–50–22, ASC 280–10–50–34, 

and ASC 280–10–50–35. 

263Specifically, 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. 

264See Item 7(b) of Form 1–A. 

265See letters from CAQ; Deloitte; E&Y; Grant; 

KPMG; and PwC. 

266See letter from Deloitte. 

267See Rule 3–03(e) of Regulation S–X. 

268See ASC 280–10–50–20. 

269See letter from CalSTRS. 

270See ASC 280–10–50–20 

271 Items 101(d)(1) and 101(d)(2). 

272See ASC 280–10–50–41. 

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

(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. 

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). 

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. 

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

(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. 

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). 

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). 


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273See letters from CAQ; Deloitte; E&Y; Grant; 

KPMG; and PwC. 

274See letters from Bean; and CalSTRS. 

275See letter from CalSTRS. 

276See letter from Bean. 

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

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. 

279See ASC 270–10–45–11. 

280Specifically, 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. 

281See ASC 270–10–45–11. See also Item 

101(c)(1)(v) of Regulation S–K. 

282See letters from CAQ; CGCIV; Deloitte; E&Y; 

Grant; KPMG; PwC; and USCC. 

283See letters from CAQ and KPMG. 

284See letter from CAQ. 

285See letter from KPMG. 

286See letter from CalSTRS. 

287See 2003 MD&A Release. 

288ASC 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. 

(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. 

(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. 

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. 

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. 

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. 

(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

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

(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

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 


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289These proposed amendments are discussed in 

further detail in Section III.C. of the Proposing 

Release. 

290See ASC 944–20–50–3 and ASC 944–20–50– 

4. 

291See Item 303(a)(3)(i) of Regulation S–K. 

292See ASC 270–10–50–1 and 7. 

293See 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). 

294See letters from CAQ; Deloitte; E&Y; Grant; 

KPMG; and PwC. 

295Foreign private issuers would continue to 

apply Rule 3–20 pursuant to General Instruction 

B(d) of Form 20–F. 

296The 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. 

297See supra note 19. 

298See letters from CAQ; Deloitte; E&Y; Grant; 

KPMG; and PwC. 

299See letters from CAQ; E&Y; PwC; and Sullivan 

& Cromwell LLP (Aug. 2, 2017). 

300See 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. 

301The 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. 

Commission disclosure requirements 

are also discussed below.289

Topic Commission requirement Proposed amendments 

Insurance Companies—Reinsurance Transactions.Rule 7–03(a)(13)(c) of Regulation 

S–X.

Delete, as this provision requires disclosures that are encompassed 

by the disclosures that result from compliance with U.S. GAAP290

and Regulation S–K.291

Interim Financial Statements—Material Events Subsequent to the 

End of the Most Recent Fiscal 

Year.

Rule 8–03(b)(2) and Rule 10– 

01(a)(5) of Regulation S–X.

Delete the requirements to disclose material 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. GAAP292 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. 

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. 

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

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

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 nonforeign 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 


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302These 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. 304This amendment gives rise to Bright Line 

Disclosure Threshold Considerations. See also 

Section III.B.2 of the Proposing Release, supra note 

1, at 51616. 

305This 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). 

306We did not propose and are not changing the 

requirements in Rules 5–04, 7–05, and 9–06 for 

parent only financial information. 

307The definitions of terms used in Regulation S– 

X are located in Rule 1–02 of Regulation S–X. 

308Foreign 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. 

309Although 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. 

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

PwC. 

311See, e.g. letter from CAQ; Deloitte; and PwC. 

312See letters from CAQ; E&Y; and PwC. 

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

Issuer type Commission disclosure requirement Proposed amendments 

Domestic 

Issuers.

Item 201(c)(1) of Regulation S–K requires disclosure of restrictions (including restrictions on the 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

Consolidate these disclosure requirements into a single requirement in revised Rule 4–08(e)(3).304

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 Regulation S–X requires disclosure related to 

the most significant restrictions of the issuer’s payment of 

dividends. Rule 4–08(e)(3) requires, where restricted net 

assets, as defined by the 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.

Revise to require the dividend restrictions and related disclosures in subparagraphs (i) and (ii) when material, rather 

than when restricted net assets exceed the 25 percent 

threshold.305

Rule 5–04, Rule 7–05, and Rule 9–06 of Regulation S–X 

refer to the definition of restricted net assets in Rule 4– 

08(e)(3) in determining when condensed financial information of the issuer (‘‘parent only financial information’’) is required to be disclosed.306

Move definition of restricted net assets in Rule 4–08(e)(3) to 

Rule 1–02 307 and make corresponding changes to the 

cross reference in Rules 5–04, 7–04, and 9–06. 

Foreign Private 

Issuers.

Item 10.F of Form 20–F requires disclosure of any dividend 

restrictions.

Instruction to Item 14.B of Form 20–F requires disclosure of 

any limitations on the payment of dividends.

Delete both requirements to disclose dividend restrictions because: (1) Foreign private issuers are already required to 

disclose dividend restrictions in the 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. 

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

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 


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313Applicable 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. 

314See 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. 

315See ASC 505–10–45. 

316See SAB Topic 5:A, Expenses of Offering. 

317See letters from CAQ; Deloitte; and PwC. 

318See letters from E&Y; Grant; Institute of 

Management Accountants (Oct. 28, 2016) (‘‘IMA’’); 

and KPMG. 

319See 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. 

320See Rule 4–08(h) of Regulation S–X. 

321See ASC 740–10–50. 

322The FASB has an income tax disclosure 

project underway regarding income tax disclosures. 

See http://www.fasb.org/jsp/FASB/FASBContent_C/ 

ProjectUpdatePage&cid=1176164227426. 

323See, 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/Project

UpdateExpandPage&cid=1176170683850#. 

324See letters from CAQ; E&Y; KPMG; and PwC. 

325See letters from AFL–CIO and AFR; and 

Rutkowski. 

326See letter from IMA. 

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 standardsetting 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. 

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. 

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

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

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. 

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

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, 


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327See, 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). 

328See, e.g. letter from Jeffery L. Hoopes (Oct. 3, 

2016). 

329See, e.g. letter from Bean. 

330See, e.g. letters from ATF and Citizens for Tax 

Justice (Oct. 3, 2016). 

331See letter from IMA. 

332See Tax Cuts and Jobs Act Public Law 115– 

97, 131 Stat. 2054 (2017) 

333See 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 

334See Item101(c)(1)(vii) and Item 101(h)(4)(vi) of 

Regulation S–K. Item 101(c)(1)(vii) applies to nonSRCs and Item 101(h)(4)(vi) applies to SRCs. 335See ASC 280–10–50–42. 336 Item 101(h)(4)(vi) of Regulation S–K does not 

require disclosure of the name of major customers. 337See Segment Reporting, Release No. 33–7620, 

(Jan. 5, 1999) [64 FR 1728 (Jan. 12, 1999)]. 

338See letters from CAQ; E&Y; EEI and AGA; 

KPMG; and PwC. 

339See letters from E&Y and EEI and AGA. 

340See letters from Davis; Deloitte; Grant; and 

IMA. 

341See letter from Deloitte. 

342See letter from Davis. 

343See letter from Bean. 

344See ASC 450. 

345See also Section III.E.15 of the Proposing 

Release, supra note 1, at 51616. 

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. 

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

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. 

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

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 principlesbased 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

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 


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346See, e.g. letters from CAQ; CGCIV; Davis; 

FedEx; Shearman; and USCC. 347See, 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. 349See, e.g. letters from CAQ and Davis. 350See, e.g. letters from CAQ; Davis; and 

Shearman. 351See 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. 

352See letters from CGCIV; Davis; FedEx; 

NAREIT; Shearman; and USCC. 

353See letters from Davis; EEI and AGA; and 

Grant. 

354See letter from Davis. 

355See letter from EEI and AGA. 

356See letters from Grant; and IMA. 

357While 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. 

358See letter from Grant. 

359See letters from CGCIV; and USCC. 

360See letters from AFL–CIO and AFR; CII; and 

Rutkowski. 

361The 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. 

362See letters from CGCIV; Clearing House; Davis; 

EEI and AGA; NAREIT; Shearman; and USCC. 

363These proposed amendments are discussed in 

further detail in Section III.E. of the Proposing 

Release. 

or include a cross-reference to those 

disclosures. 

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. 

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

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

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

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. 

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

Topic Commission disclosure requirement Description of requirement 

REIT—Tax Status of Distributions.Rule 3–15(c) of Regulation 

S–X.

Both Regulation S–X and U.S. GAAP364 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 S–X.Regulation S–X and U.S. GAAP365 both 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. 


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364See ASC 740–10–50–16. 

365See ASC 810–10–50. 

366See ASC 860–30–50–1A and ASC 860–30–50– 

7. 

367See 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. 

368See ASC 470–10–45–1 and ASC 470–10–45– 

11. 

369See ASC 855–10–50–2 and ASC 855–10–55– 

2a. 

370See ASC 470–10–50. 

371See ASC 505–10–50–4. 

372See ASC 850–10–50–1. 

373See ASC 860–30–45–2 and ASC 860–30–50. 

374Rule 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. 

375See ASC 260–10–50–1. 

376See ASC 250–10–50–1 and 250–10–50–6 to 8. 

377See ASC 805–50–45–1 to 5. 

378See ASC 280–10–50–40. 

379See ASC 932–235–50. 

Topic Commission disclosure requirement Description of requirement 

Assets Subject to Lien ......... Rule 4–08(b) of Regulation 

S–X.

Regulation S–X and U.S. GAAP366 both 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 

S–X.

Regulation S–X and U.S. GAAP367 both 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 

S–X.

Regulation S–X and U.S. GAAP368 both 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 

S–X.

Regulation S–X and U.S. GAAP369 both 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 Financing Arrangements.

Rule 5–02.19(b), Rule 5– 

02.22(b), Rule 6– 

04.13(b), Rule 7– 

03.16(b), Rule 7– 

03.16(c), Rule 9– 

03.13(a), and Rule 9– 

03.16 of Regulation S–X.

Regulation S–X and U.S. GAAP370 both require disclosures of an issuer’s financing arrangements. Regulation S–X incrementally requires disclosure of specific 

information related to the financing arrangement. 

Preferred Shares .................. Rule 4–08(d)(1) of Regulation S–X.Regulation S–X and U.S. GAAP371 both 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.Regulation S–X and U.S. GAAP372 both 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 Agreements.

Rule 4–08(m) of Regulation 

S–X.

Regulation S–X and U.S. GAAP373 both 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—Computation of 

Earnings Per Share.

Rule 10–01(b)(2) of Regulation S–X, and Item 

601(b)(11) of Regulation 

S–K.

Commission disclosure requirements and U.S. GAAP375 both require disclosure in 

the notes to the financial statements 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—Retroactive Prior 

Period Adjustments.

Rule 8–03(b)(5) and Rule 

10–01(b)(7) of Regulation 

S–X.

Regulation S–X and U.S. GAAP376 both 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 Control 

Transactions.

Rule 10–01(b)(3) of Regulation S–X.Regulation S–X and U.S. GAAP377 both 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.Regulation S–K and U.S. GAAP378 both 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–X.

Regulation S–K and U.S. GAAP379 both 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 


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380See, e.g. letters from CAQ; Deloitte; E&Y; 

KPMG; and PwC. 

381Rule 3–15(c). 

382See 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. 

383See ASC 805; 810–10–50; and ASC 205–10– 

45. 

384See letters from CAQ; E&Y; Grant; and PwC. 

385See letter from KPMG. 

386See discussion in Section III.B.1.a below. See 

also Section III.C.3 of the Proposing Release, supra 

note 1, at 51618. 

387See 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. 

389See ASC 280 

390See letters from CAQ; EEI and AGA; E&Y; 

Grant; KPMG; and PwC. 

391See letters from CAQ; E&Y; and PwC. 

392See letter from E&Y. 

393See letters from CAQ; Deloitte; E&Y; IMA; 

KPMG; and PwC. 

394See letter from Bean. 

395See letters from Clearing House and EEI and 

AGA. 

396See letters from CAQ and Grant. 

397See letters from CGCIV and FedEx. 

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

399ASC 932 

400See letters from CAQ; Deloitte; E&Y; and PwC. 

401These proposed amendments are discussed in 

further detail in Section IV.B of the Proposing 

Release. 

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

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

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: 

• 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

• Clarify the concept of 

‘‘authorization of debt’’ in Rule 

4–08(f); 396

• 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

• 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 

• 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

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

Topic Commission disclosure requirement(s) Proposed amendment(s) 

Stale Transition 

Dates.

Rule 4–01(a)(3) and Note 6 to Rule 8– 

01 of Regulation S–X; Forms S–3, F– 

1, F–3, F–4, and 20–F; and Exchange Act Rule 13a–10(g)(3), 15d– 

2, and 15d–10(g)(3).

Delete references to transition dates given the passage of these transition 

dates. 


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402See letters from CAQ; Deloitte; E&Y; Grant; 

PwC; and R.G. Associates. 

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

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

405 Item 201(a)(1)(iii) of Regulation S–K. This 

provision requires qualification where the over-thecounter 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. 

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

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)]. 

408See, e.g., www.finance.yahoo.com; 

www.google.com/finance; www.bloomberg.com; 

www.nyse.com; www.nasdaq.com; 

www.londonstockexchange.com; deutscheboerse.com; www.otcbb.com; and 

www.otcmarkets.com. 

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. 

410Form 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 

Continued 

Topic Commission disclosure requirement(s) Proposed amendment(s) 

Income Tax Disclosures.Rule 4–08(h)(1)(ii), the parenthetical at 

the end of Rule 4–08(h)(1), part of 

the introductory sentence of Rule 4– 

08(h)(2), and all of Rule 4–08(h)(3) of 

Regulation S–X.

Delete the instructions to the rule that relate to adoption of ASC 740—Income 

Taxes because all issuers are now required to apply it. 

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. 

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: 

• 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

• 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

• 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

• 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

• 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

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. 

As a result, the Commission proposed 

the following amendments to Item 

201(a)(1) of Regulation S–K: 

• 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. 

• 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, markdown or commission and may not 

necessarily represent actual 

transactions. 

• 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. 

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


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S–K, Release No. 33–10425 (Oct. 10, 2017) [82 FR 

50988 (Nov. 2, 2017)]. 

412See letters from E&Y; EEI and AGA; FedEx; 

KPMG; R.G. Associates; and XBRL US, Inc. (Oct. 3, 

2016) (‘‘XBRL’’). 

413See Section IV.B.4 of the Proposing Release, 

supra note 1, at 51638. 

414See letter from E&Y. 

415See letter from XBRL. 

416ADR ratio is the number of foreign shares 

represented by one ADR. 

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. 

418These proposed amendments are discussed in 

further detail in Section IV.B of the Proposing 

Release. 

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: 

• The annual high and low market 

prices for the last five full financial 

years; 

• Quarterly high and low market 

prices for the last two full financial 

years and any subsequent period; and 

• 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. 

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

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

Topic Commission disclosure requirement(s) Proposed amendments 

Available Information—Public Reference Room.Item 101(e)(2) and Item 

101(h)(5)(iii) of Regulation S–K; 

Forms S–1, S–3, S–4, S–11, F– 

1, F–3, and F–4; Item 1118(b) 

of Regulation AB; and Forms 

SF–1, SF–3, N–1A, N–2, N–3, 

N–5, N–6, and N–8B–2.

Delete the requirements to identify the Public Reference Room and 

disclose its physical address and phone number. The Commission’s Public Reference Room is rarely used by the public to obtain 

or review issuer 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 Regulation S–K; 

and Forms S–1, S–3, S–4, S– 

11, F–1, F–3, F–4, 20–F, SF–1, 

SF–3, and N–4.

Retain the requirement to disclose the Commission’s Internet address 

and a statement that 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 Internet Address.Items 101(e) and 101(h)(5) of 

Regulation S–K; and Forms S– 

3, S–4, F–1, F–3, F–4, 20–F, 

SF–1, and SF–3.

Require all issuers to disclose their Internet addresses (or, in the 

case of asset-backed issuers, the address 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. 


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419See Rules 14 [17 CFR 232.14], 101 [17 CFR 

232.101], and 102 [17 CFR 232.102] of Regulation 

S–T. 420See Rules 100 [17 CFR 232.100] and 101 [17 

CFR 232.101] of Regulation S–T. 421Existing rules only require the disclosure by 

accelerated and large accelerated filers. 422See note [451]. 423See letters from E&Y; KPMG; and R.G. 

Associates. 424See Section I.C.I of the Proposing Release, 

supra note 1, at 51611. 

425Some 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. 

426Rule 3–15(a)(1) of Regulation S–X. 

427ASC 205–20–45–1B. 

428See letters from CAQ; Deloitte; E&Y; Grant; 

KPMG; NAREIT; PwC; and R.G. Associates. 

429See Adoption of Regulation S–X, (March 6, 

1940) [5 FR 954 (Mar. 6, 1940)]. 

430For 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. 

431These proposed amendments are discussed in 

further detail in Section V.B.4. of the Proposing 

Release. 

Topic Commission disclosure requirement(s) Proposed amendments 

Exchange Rate data ....................... Item 3.A.3 of Form 20–F ............... Delete the 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 Public 

Offering—Age of Financial Statements.

Instruction 2 to Item 8.A.4 of Form 

20–F.

Remove the reference to a waiver and 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. 

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 privatesector 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

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. 

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. 

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

Topic Commission disclosure 

requirement(s) Proposed amendments 

Consolidation—Difference in Fiscal 

Periods.

Rule 3A–02(b) 432 and Rule 3A– 

02(b)(2) 433 of Regulation S–X.

Delete the requirements because U.S. GAAP434 requires consolidation despite different fiscal periods and the fiscal periods of combined entities must differ by less than three months. 

Consolidation—Bank Holding Company Act of 1956.Rule 3A–02(c) of Regulation S– 

X435.

Delete the requirement because U.S. GAAP436 does not provide an 

exception to consolidation for subsidiaries of issuers subject to the 

BHC Act in relation to a divestiture. 


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432Regulation 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. 

433Regulation 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. 

434ASC 810–10–15–11. 

435Regulation 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. 

436ASC 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. 

438See ASC 323–10–35–5a and ASC 810–10–45– 

1. 

439When 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. 

440A subset of a consolidated group that may 

present separate financial statements includes 

financial statements of the registrant, certain 

investees, or subsidiaries. 

441ASC 810–10–45–1. 

442Regulation 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. 

443See ASC 260–10–45–5. 

444Rule 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. 

445The 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. 

446See letters from CAQ; Deloitte; E&Y; Grant; 

KPMG; PwC; and R.G. Associates. 

447See letters from CAQ and PwC. 

448See letter from E&Y. 

449See letter from E&Y. 

450ASC 946–810–45. 

Topic Commission disclosure 

requirement(s) Proposed amendments 

Consolidation—Intercompany 

Transactions Generally.

Rule 3A–04 of Regulation S–X437 Delete the requirement because U.S. GAAP438 requires the elimination of intercompany transactions from consolidated financial 

statements. 

Consolidation—Intercompany 

Transactions in Separate Financial Statements.

Rule 4–08(k)(2) of Regulation S– 

X439.

Delete the requirement to 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. 

GAAP441 prohibits elimination of these transactions in the separate 

financial statements. 

Dividends Per Share in Interim Financial Statements.Rule 8–03(a)(2) and Rule 10– 

01(b)(2) of Regulation S–X442.

Delete the requirements to present dividends per share on the face 

of the income statement for interim periods because U.S. GAAP443

(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 Regulation S–X444 .. Extend the annual disclosure requirement of changes in stockholders’ 

equity and the amount of dividends per share for each class of 

shares to interim periods445

b. Comments on Proposed Amendments 

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 noncontrolling 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. 

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

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 yearto-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 


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451ASC 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. 

452Some 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. 

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

454FASB ASC Topic 915, Development Stage 

Entities. 

455See 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. 

456ASU 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.’’ 

457See letters from CAQ; Deloitte; E&Y; Grant; 

KPMG; PwC; and R.G. Associates. 

458See 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. 

459Some 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. 

460See 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. 

462See Rule 7–03(a)(11) of Regulation S–X. 

463See ASC 944–80–25–1 to 5. 

464See letters from CAQ; Deloitte; E&Y; Grant; 

KPMG; PwC; and R.G. Associates. 

465See 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’’). 

466See letter from Committee of Annuity Insurers. 

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. 

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. 

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). 

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

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 whollyowned 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

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. 

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 


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467See letters from ACLI and Northwestern 

Mutual. 

468See 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. 

469The 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 nonrecurring 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. 

470The proposed definition is consistent with the 

historical U.S. GAAP definition of ‘‘extraordinary 

items.’’ 

471While 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. 

472See letters from CAQ: Deloitte; E&Y; Grant; 

KPMG; PwC; and R.G. Associates. 

473See 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. 

475See letter from ICI. 

476See ASC 260–10–45–2. 

477These proposed amendments are discussed in 

further detail in Section V.B. of the Proposing 

Release. 

478See Amendments to Rules and Forms, Release 

No. 33–6958A, (Oct. 1, 1992) [57 FR 45287 (Oct. 1, 

1992)]. 

479See ASC 270–10–50–7, which refers to ASC 

805–10–50–2h.3 for purposes of interim 

disclosures. 

potential costs and benefits.467 These 

commenters also outlined the relevance 

of financial statements prepared under 

statutory accounting principles for 

general account insurance products. 

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

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

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. 

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

Topic Commission disclosure requirement(s) Proposed amendments 

Statement of Cash Flows .......... Rule 3–02 of Regulation S–X ....................................................... Amend to replace the 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 Financial 

Statements—Pro Forma Business Combination Information.

Rule 8–03(b)(4) and Rule 10–01(b)(4) of Regulation S–X ........... Delete reference to when a business combination should be assumed to have occurred in pro forma financial information because U.S. GAAP479 requires reflection of the business combination at the beginning of the preceding fiscal year. 


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480See 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. 

481See SFAS No. 142, Goodwill and Other 

Intangible Assets. 

482See ASC 205. 

483See 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)]. 

484See 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. 

485See 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. 

486See Rule 5–03, Rule 7–04, and Rule 9–04. 

487See SFAS No. 154, Accounting Changes and 

Error Corrections. This is now reflected in ASC 250, 

Accounting Changes and Error Corrections. 

488See letters from CAQ; Deloitte; E&Y; Grant; 

KPMG; PwC; and R.G. Associates. 

489Public 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). 

490These standards are currently promulgated by 

the American Institute of Certified Public 

Accountants. 

Topic Commission disclosure requirement(s) Proposed amendments 

Bank Holding Companies—Net 

Presentation.

Rule 9–03.3 of Regulation S–X .................................................... Delete requirement 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. GAAP480 permits net presentation under certain conditions. 

Bank Holding Companies— 

Goodwill.

Rule 9–03.10(1) and Rule 9–04.14(c) of Regulation 

S–X.

Delete the parenthetical 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. GAAP481 prohibits amortization of goodwill. 

Discontinued Operations ........... Instruction 1 to Rule 11–02(b) of Regulation S–X; and Item 

302(a)(3) of Regulation S–K.

Replace the reference to ‘‘segments’’ with ‘‘discontinued operations’’ because the definition of ‘‘discontinued operations’’ 

under U.S. GAAP482 has changed and no longer incorporates 

the term ‘‘segment.’’ 

Pooling-of-Interests .................... Rule 11–02(c)(2)(ii) of Regulation S–X; Rule 405 of Regulation 

C; Item 4A(b)(1)(iii) of Form F–1; Instruction 1 to paragraphs 

(e) and (f) of Item 3 of Form F–4; Item 10(c)(3) of Form F–4; 

Introduction to Item 12 of Form F–4; and Item 12(b)(2)(iv) of 

Form F–4.

Delete references to ‘‘pooling-of-interests’’ and replace them 

with references to ‘‘combinations of entities under common 

control’’ because similar amendments were made in 2009.483

Statement of Comprehensive Income.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 5–03, Rule 5–04, Rule 6–07, Rule 6A–04, Rule 6A– 

05, Rule 7–03, Rule 7–04, Rule 7–05, Rule 8–02, Rule 8–03, 

Rule 8–05, Rule 8–06, Rule 9–03, Rule 9–04, 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, 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

Replace (or, in some cases, supplement) the existing references 

to ‘‘income statement’’ and variations thereof with ‘‘statement 

of comprehensive income’’ because the FASB has replaced 

the income statement with the statement of comprehensive income.485 Also amend to clarify the two presentation options 

for the statement by defining the term ‘‘statement of comprehensive income’’ in Regulation S–X. 

Rule 5–03, Rule 7–04, and Rule 9–04 of Regulation S–X.486 Amend to add line items to present comprehensive income and 

related items in the statement of comprehensive income. 

Rule 5–02.30(a) and Rule 7–03(a)(23)(a) of Regulation S–X; 

and Form X–17–A–5.

Amend to include accumulated other comprehensive 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 in 

Accounting Principles.

Rule 1–02, Rule 3–01, Rule 3–15, Rule 5–03, Rule 7–04, Rule 

8–03, Rule 8–04, Rule 9–04, Rule 10–01, Rule 11–02, and 

Instruction 1 to Rule 11–02 of Regulation S–X; Item 302 of 

Regulation S–K; Securities Act Rule 405; Exchange Act Rule 

12b–2, Rule 13a–10(b), and Rule 15d–10(b); and Form X– 

17A–5.

Delete references to cumulative effect of a change in accounting 

principle because the FASB has eliminated the requirement to 

report cumulative effect of a change in accounting principle in 

the income statement.487

Commenters supported the proposed 

amendments.488 We are adopting all of 

the amendments described in the table 

above as proposed. 

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 


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491See 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. 

493These proposed amendments are discussed in 

further detail in Section V.B.1. of the Proposing 

Release. 

494See letters from CAQ; Deloitte; E&Y; Grant; 

KPMG; PwC; and R.G. Associates. 

495See letters from CAQ; and KPMG. 

496See letter from KPMG. 

497These proposed amendments are discussed in 

further detail in Section V.B. of the Proposing 

Release. 

audits. The standards of the PCAOB are 

different from GAAS. 

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

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 

General Instruction G(f)(1) of 

Form 20–F.

Amend to replace the references to GAAS with ‘‘the standards of the Public Company Accounting Oversight Board (United States) (‘‘PCAOB’’)’’. Replace the term ‘‘examination’’ with ‘‘audit conducted.’’ 

Instruction 2 to Item 8.A.2 of Form 

20–F.

Amend to state that financial 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 Regulation 

S–X.

Amend to make language consistent with current auditing standards. 

Rules 2–02(b)(1), 8–03, and 10–01 

of Regulation S–X.

Amend to refer to ‘‘applicable professional standards’’ instead of GAAS. 

Rules 10A–1(b)(3) and 13b2– 

2(b)(2) of the Exchange Act.

Amend to replace the references to 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

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

Topic Commission disclosure 

requirement(s) Proposed amendments 

Published Report Regarding Matters Submitted to Vote of Security Holders.Item 601(b)(22) of Regulation S–K 

(including accompanying inclusion in the Exhibit Table within 

Item 601); Item 5 of Form 10–D.

Delete requirement in light of changes made in 2009 to disclose 

shareholder voting results in Forms 10–K and 10–Q and Item 5.07 

of Form 8–K.498

Selected Financial Data for Foreign 

Private Issuers that Report under 

IFRS.

General Instruction G(c) and Instruction 2 to Item 3.A of Form 

20–F.

Amend (1) General Instruction G(c) to delete the requirement to 

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–SA .................... Amend references to 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. 


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498See 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. 499See First-Time Application of International 

Financial Reporting Standards, Release No. 33– 

8567 (Apr. 12, 2005) [70 FR 20674 (Apr. 20, 2005)]. 

500See 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. 

501See letters from CAQ; Deloitte; E&Y; Grant; 

KPMG; PwC; and R.G. Associates. 

502These proposed amendments are discussed in 

further detail in Section V.B.16. of the Proposing 

Release. 

503See International Disclosure Standards, 

Release No. 33–7745 (Sept. 28, 1999) [64 FR 53900 

(Oct. 5, 1999)]. 

504See letters from CAQ; Deloitte; E&Y; Grant; 

KPMG; PwC; and R.G. Associates. 

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. 

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

Commission disclosure 

requirement(s) Proposed amendments 

Rule 5–02 of Regulation S–X, Balance sheets.Delete reference to Rule 4–05 of Regulation S–X, which no longer exists. 

Rule 5–02.22(a) of Regulation S–X, 

Bonds, mortgages and other 

long-term debt, including capitalized leases.

Delete reference to Rule 4–06 of Regulation S–X, which no longer exists. 

Rule 7–04.9 of Regulation S–X, Income tax expense.Replace reference to Rule 4–08(g) of 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– 

X, Loans.

Delete reference to Rule 4–08(L)(3) of Regulation S–X, which no longer exists. 

Item 512(a)(4) of Regulation S–K, 

Undertakings.

Replace reference to Rule 3–19 of 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 

Form 1–A.

Delete reference to ‘‘interim’’ 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– 

8, F–10, F–80, 20–F, and 40–F.

Replace references to the 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. 

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, Significant Subsidiary ......................... Replace the term ‘‘submitted’’ with ‘‘substituted’’ which was inadvertently changed in a prior technical amendment.505

Rule 9–03(12)(a) of Regulation S–X, Deposits ........................................ Replace reference to Rule 0–05, 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, For Face-Amount Certificate Investment Companies.Replace superseded references to Rule 6–21 of Regulation S–X 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 Regulation S–X, For Face-Amount 

Certificate Investment Companies.

Replace superseded references to Rule 6–22 of Regulation S–X with 

correct references to Rule 6–06.507

Footnote 6 of Rule 12–22 of Regulation S–X, For Face-Amount Certificate Investment Companies.Replace superseded references to Rule 6–23(a) of Regulation 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 I.D.1.(c)(iv) of Form S–3 ........................... Replace outdated reference to the title of General Instruction B.2 of 

Form S–3. 

Instruction 3 of the Instructions to the Signatures of Form S–3 .............. Remove Instruction 3 which relates to a superseded transaction requirement.510

Item 17(c)(2)(v) and (vi) of Form 20–F 511 ............................................... Replace reference to the 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, Significant Subsidiary .............................. Revise the definition of ‘‘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


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505See 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. 

507See 1982 Investment Company Release. 

508See 1982 Investment Company Release. 

509The 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 ByLaws 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. 

512Rule 1–02(v) defines the term ‘‘share,’’ while 

Rule 1–02(w) defines ‘‘significant subsidiary.’’ 

513The 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. 

514See supra note 513. 

515See Additional Form 8–K Disclosure 

Requirements and Acceleration of Filing Date, 

Release No. 33–8400 (Mar. 16, 2004) [69 FR 15594 

(Mar. 25, 2004)]. 

516See supra note 12. 

517Section 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. 

Commission disclosure requirement(s) Technical amendments 

Rule 12b–2, Definitions, Significant Subsidiary ....................................... Revise the definition of ‘‘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 of successor issuers under section 12(b) or 12(g) of the Securities Exchange Act of 1934 and Rule 

3–04 of Regulation S–X.

Revise Rules 3–04, 12g–3(a)(2), 12g–3(b)(2), and 12g–3(c)(2) for 

punctuation errors. 

Rule 3–04, Rule 4–08(m)(2)(ii), Rule 5–03(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.

Correct typographical errors. 

Item 406(d) and Item 601(b)(14) of Regulation S–K ............................... Replace superseded references 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 Exchange Act of 1934 ........... Remove outdated reference to Form 10–SB in Form 10 heading. 

VI. Other Matters 

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. 

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

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 


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518The 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 nonaccelerated 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. 

519This 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. 

520Staff 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. 

521Approximately 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 nonaccelerated filer status. Accordingly, these amounts 

exclude foreign private issuers that file on Form 40– 

F. 

522The 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. 

523Between 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. 

524The 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). 

525The 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 brokerdealers who must file periodic reports with the 

Commission. The amendments to Part II of Form X– 

17A–5 affect up to approximately 467 brokerdealers, 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 brokerdealers, based on the number of broker-dealers who 

filed Part IIB as of March 31, 2018. 

526See A. Cazier and R. Pfeiffer, Say Again? 

Assessing Redundancy in 10–K Disclosures, Journal 

of Financial Reporting, 2(1), 2017 at 107–131. 527See A. Lawrence, Individual Investors and 

Financial Disclosure, Journal of Accounting and 

Economics 56, 2013 at 13–147. 528Recent 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. 

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 nonaccelerated 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. 

Certain amendments also affect 

requirements applicable to: 

• Fewer than 600 asset-backed 

issuing entities.522

• Issuers that rely on Regulation A 

exemptions.523

• 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

• Up to approximately 3,883 

registered broker-dealers.525

• 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. 

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 


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529See discussion in Section I.D. 

530See e.g., letters from CGCIV; EEI and AGA; 

and USCC. 

531See 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. 

533See e.g., letters from CAQ; CalPERS; Crowe; 

Davis; E&Y; FEI; PwC; and R&G Associates. 

534See 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. 

535See e.g., letters from CGCIV; EEI and AGA; 

and USCC. 

536See letters from CII and Ohio CPAs. 

537According 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/AccountingFinancial

Reporting/XBRL/DownloadableDocuments/ 

XBRL%20Costs%20for%20Small%20

Companies.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. 

538See, 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. Mu ̈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 stockbased 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). 

539See, 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. 

540P. 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 

rulemaking.529 In addition, issuers 

remain liable for their disclosures, 

including the omission of any 

information required to make the 

disclosures not misleading. 

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

The relocation of existing disclosures 

may affect the extent of information that 

investors receive. Since the PSLRA does 

not provide a safe harbor for forwardlooking 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

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

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 proforma (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


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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. 

541See, e.g. letters from CAQ; Deloitte; and EY. 

542Rule 4–08(e)(3) of Regulation S–X. 

543See, e.g. letters from CAQ; CGCIV; Clearing 

House; Davis; FEI; and USCC. 

544See, e.g. letters from CalPERS; Public Citizen; 

and R.G. Associates. 

545See 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. 

546See 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.) 

547See 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, misvaluation, long-run abnormal returns, and corporate 

decisions.) 

548See Section VIII.B. 

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

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

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

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 


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549ASC 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. 

550See Section VIII.B. 

551See, e.g., letters from CAQ; Deloitte; E&Y; 

Grant; KPMG; and PwC. 

552 Item 201(a)(1) of Regulation S–K. 

553 Item 3.A.3 of Form 20–F. 

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

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. 

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 standardsetting 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 


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554See e.g., letters from CAQ; EEI and AGA; 

FedEx; R.G. Associates; and XBRL US. 

555See letters from E&Y; EEI and AGA; FedEx; 

and KPMG. 

556See SFAS No. 154, Accounting Changes and 

Error Corrections. This is now reflected in ASC 250, 

Accounting Changes and Error Corrections. 

557See letters from CAQ and PwC. 

558See 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). 

559See 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). 

560See 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). 

561ASC 260–10–45–5 requires disclosure of 

dividends per share in the notes to the financial 

statements. 

562The 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. 

internet address, if available) to mitigate 

any loss of information or decrease the 

burden for investors. 

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

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. 

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

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. 

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 


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563Any future consideration of amendments to 

these disclosures requirements will take into 

account the outcome of standard-setting activities 

undertaken by the FASB. 

564 44 U.S.C. 3501 et seq. 

565 44 U.S.C. 3507(d) and 5 CFR 1320.11. 

566The 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. 

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. 

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: 

Title OMB 

Control No. 

Regulation S–X566 ................. 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. 


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567See supra note 12. 

568The 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. 

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. 

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. 

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. 

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. 

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. 


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570As 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. 

571While 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. 

572The 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. 

573See supra note 570. 

574Filers 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 

TABLE 1 

Number of 

responses 

Reduction in 

incremental 

burden 

hours/form 

Total 

incremental 

burden hours 

reduction 

Internal 

company 

time 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

TABLE 2 

Number of 

responses 

Increase in 

incremental 

burden 

hours/form 

Total 

incremental 

burden hours 

increase 

Internal 

company 

time 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. 

TABLE 3 

Number of 

responses 

Reduction in 

incremental 

burden 

hours/form 

Total 

incremental 

burden hours 

reduction 

Internal 

company 

time 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 


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Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 50195 

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. 

575The 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. 

577See supra note 12. 

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. 

Number of 

responses 

Increase in 

incremental 

burden 

hours/form 

Total 

incremental 

burden hours 

increase 

Internal 

company 

time 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. 

Number of 

responses 

Reduction in 

incremental 

burden 

hours/form 

Total 

incremental 

burden hours 

reduction 

Internal 

company 

time 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. 

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: 

• Eliminate certain Commission 

disclosure requirements that are 

redundant or duplicative of 

requirements in U.S. GAAP, IFRS, or 

other Commission disclosure 

requirements. 

• Streamline certain overlapping 

Commission disclosure requirements by 

deleting or integrating provisions that 

address disclosure topics covered 

elsewhere in our rules or regulations. 

• Revise certain Commission 

disclosure requirements that are 

outdated. 

• 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. 


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

579This 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. 

580See 17 CFR 270.0–10(a). 581The 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. 

582See 17 CFR 275.0–7. 

583The estimate is based on SEC-registered 

investment adviser responses to Items 5.F. and 12 

of Form ADV. 

584See 17 CFR 240.17a–5(d). 

585See 17 CFR 240.0–10(c). 

586This 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. 

587See, e.g., Final Rules: Nationally Recognized 

Statistical Rating Organizations, Release No. 34– 

72936 (Aug. 27, 2014) [79 FR 55077 (Sep. 15, 

2014)]. 

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

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

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

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

For the purposes of the RFA, a brokerdealer 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

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. 

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 


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588The 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. 

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. 

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 

■ 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. 

■ 2. Amend § 210.1–02 by: 

■ a. Revising paragraphs (d) and (w)(3); 

■ b. Redesignating the Computational 

note as Computational note 1 to 

paragraph (w)(3); 

■ c. Revising paragraph 2 of the newly 

redesignated Computational note 1 to 

paragraph (w)(3); 

■ d. Revising paragraph (bb)(1)(ii); and 

■ e. Adding paragraphs (cc) and (dd). 

The revisions and additions read as 

follows: 

§ 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 


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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 (§ 210.5–02.27) and 

noncontrolling interests shall be 

deducted in computing net assets for 

purposes of this test. 

■ 3. Amend § 210.2–01 by revising 

paragraph (f)(7)(ii)(B) to read as follows: 

§ 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’’); 

* * * * * 

■ 4. Amend § 210.2–02 by revising 

paragraph (b)(1) to read as follows: 

§ 210.2–02 Accountants’ reports and 

attestation reports. 

* * * * * 

(b) * * * 

(1) Shall state the applicable 

professional standards under which the 

audit was conducted; and 

* * * * * 

■ 5. Amend § 210.3–01 by revising 

paragraphs (c)(2) and (3) to read as 

follows: 

§ 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. 

* * * * * 

■ 6. Amend § 210.3–02 by revising the 

section heading and paragraphs (a) and 

(b) to read as follows: 

§ 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 § 230.405 of this chapter (Rule 405 of 

the Securities Act) or § 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 § 210.10–01. 

* * * * * 

■ 7. Amend § 210.3–03 by 

■ a. Revising the section heading and 

paragraphs (b) and (d); and 


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■ b. Removing paragraph (e). 

The revisions read as follows: 

§ 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. 

■ 8. Revise § 210.3–04 to read as 

follows: 

§ 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. 

■ 9. Amend § 210.3–05 by revising 

paragraph (b)(4)(iii) to read as follows: 

§ 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 § 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 

§ 210.3–02. 

* * * * * 

■ 10. Amend § 210.3–12 by revising 

paragraph (a) to read as follows: 

§ 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 § 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. 

* * * * * 

■ 11. Amend § 210.3–14 by: 

■ a. Revising paragraph (a) introductory 

text; and 

■ b. Redesignating the Note following 

paragraph (a)(1)(iii) as Note 1 to 

paragraph (a)(1). 

The revision reads as follows: 

§ 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: 

* * * * * 

§ 210.3–15 [Amended] 

■ 12. Amend § 210.3–15 by removing 

and reserving paragraphs (a) and (b). 

■ 13. Amend § 210.3–17 by revising 

paragraph (a) to read as follows: 

§ 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. 

* * * * * 

■ 14. Amend § 210.3–20 by: 

■ a. Revising the section heading; 

■ b. Redesignating paragraph (a) as 

paragraph (a)(1); 

■ c. Adding paragraph (a)(2); 

■ d. Redesignating paragraph (b) as 

paragraph (b)(1) and adding paragraph 

(b)(2); and 

■ e. Revising paragraph (d). 

The additions and revisions read as 

follows: 

§ 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 


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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 (§ 249.220f of this chapter). 

§ 210.3A–01 [Removed and Reserved] 

■ 15. Remove and reserve § 210.3A–01. 

■ 16. Revise § 210.3A–02 to read as 

follows: 

§ 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]. 

■ 17. Amend § 210.3A–03 by removing 

and reserving paragraph (a) and revising 

paragraph (b). 

The revision reads as follows: 

§ 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. 

§ 210.3A–04 [Removed and Reserved] 

■ 18. Remove and reserve § 210.3A–04. 

§ 210.4–01 [Amended] 

■ 19. Amend § 210.4–01 by removing 

paragraph (a)(3). 

■ 20. Amend § 210.4–08 by: 

■ a. Revising the introductory text; 

■ b. Removing and reserving paragraph 

(a); 

■ c. Redesignating paragraph (d)(1) as 

paragraph (d) and removing paragraph 

(d)(2); 

■ d. Revising paragraphs (e)(1) and 

(e)(3) introductory text; 

■ e. Revising paragraphs (f) and (h)(1) 

introductory text; 

■ f. Redesignating the Note following 

paragraph (h)(1) as Note 1 to paragraph 

(h)(1); 

■ g. Revising paragraph (h)(2); 

■ h. Removing paragraph (h)(3); 

■ i. Removing and reserving paragraph 

(i); 

■ j. Revising paragraph (k); and 

■ k. Revising paragraphs (m)(2)(ii) and 

(n). 

The revisions read as follows: 

§ 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 


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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. 

■ 21. Amend § 210.4–10 by revising 

paragraph (c)(7)(i) to read as follows: 

§ 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). 

* * * * * 

■ 22. Amend § 210.5–02 by: 

■ a. Removing ‘‘[See § 210.4–05]’’ 

immediately below the undesignated 

heading ‘‘Current Assets, when 

appropriate’’ and immediately above 

paragraph 1; 

■ b. Revising paragraphs 6.(a)(2) and (3); 

■ c. Revising the undesignated heading 

immediately above paragraph 19; 

■ d. Revising paragraphs 22.(a) 

introductory text, 27.(c)(3), 28, and 29; 

and 

■ e. Revising paragraph 30.(a). 

The revisions read as follows: 

§ 210.5–02 Balance sheets. 

* * * * * 

6. * * * 

(a) * * * 

(2) inventoried costs relating to longterm 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 § 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 § 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 § 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 § 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 § 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 


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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 § 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. 

* * * * * 

■ 23. Amend § 210.5–03 by: 

■ a. Revising the section heading and 

paragraphs (a), (b)1, 7, and 9; 

■ b. Removing and reserving paragraphs 

(b)15, 16, and 17; 

■ c. Redesignating paragraph (b)21 as 

(b)25; and 

■ d. Adding new paragraph (b)21 and 

paragraphs (b)22, 23, and 24. 

The revisions and additions read as 

follows: 

§ 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 § 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 

§ 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 § 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 § 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. 

■ 24. Amend § 210.5–04 by revising 

paragraph (a)(2); and Schedule I to read 

as follows: 

§ 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 § 210.12–04 shall be filed 

when the restricted net assets 

(§ 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. 

* * * * * 

■ 25. Amend § 210.6–03 by revising 

paragraph (c)(1) introductory text and 

removing and reserving paragraph 

(c)(1)(i). 

The revision reads as follows: 

§ 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 §§ 210.3A– 

02 and 210.3A–03 (Article 3A), except 

that: 

* * * * * 

■ 26. Amend § 210.6–04 by revising the 

paragraph 17 heading, its introductory 

text, and paragraph 17.(a) to read as 

follows: 

§ 210.6–04 Balance sheets. 

* * * * * 

17. Total distributable earnings (loss). 

Disclose total distributable earnings 

(loss), which generally comprise: 

(a) Accumulated undistributed 

investment income-net, 

* * * * * 

■ 27. Amend § 210.6–07 by revising the 

introductory text to read as follows: 

§ 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 

§ 210.6–08, and business development 

companies, shall comply with the 

following provisions: 

* * * * * 

■ 28. Amend § 210.6–09 by revising 

paragraphs 3, 4.(b), and 7 to read as 

follows: 

§ 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 


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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. 

■ 29. Amend § 210.6A–04 by revising 

the section heading and introductory 

text to read as follows: 

§ 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: 

* * * * * 

■ 30. Amend § 210.6A–05 by revising 

paragraph (a) introductory text and 

Schedule III to read as follows: 

§ 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. 

* * * * * 

■ 31. Amend § 210.7–03 by: 

■ a. Revising paragraphs (a)6, (a)11, and 

(a)13.(a)(2); and 

■ b. Removing and reserving paragraph 

(a)13.(b); 

■ c. Removing paragraph (a)13.(c); and 

■ d. Revising paragraphs (a)23.(a)(3) and 

(a)23.(c)(2). 

The revisions read as follows: 

§ 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. 

* * * * * 

■ 32. Amend § 210.7–04 by: 

■ a. Revising the section heading; 

■ b. Revising the introductory text; 

■ c. Revising paragraph 3.(b); 

■ d. Removing and reserving paragraph 

3.(c); 

■ e. Revising paragraphs 3.(d), 7, and 9; 

■ f. Removing and reserving paragraphs 

13, 14, and 15; 

■ g. Redesignating paragraph 19 as 

paragraph 23; and 

■ h. Adding new paragraph 19 and 

paragraphs 20, 21, and 22. 

The revisions and additions read as 

follows: 

§ 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 § 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 

§ 210.7–03.1(a)] and for equity securities 

[see § 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 § 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. 

■ 33. Amend § 210.7–05 by revising 

paragraph (a)(2) and Schedules II and III 

to read as follows: 

§ 210.7–05 What schedules are to be filed. 

(a) * * * 

(2) The schedules specified in this 

section as Schedule IV and V shall be 


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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 § 210.12–04 shall be filed 

when the restricted net assets 

(§ 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 § 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. 

* * * * * 

■ 34. Amend § 210.8–01 by revising 

paragraph a. of Note 2 to § 210.8 and 

removing Note 6 to § 210.8. 

The revision reads as follows: 

§ 210.8–01 Preliminary Notes to Article 8. 

* * * * * 

Note 2 to § 210.8. * * * 

a. The report and qualifications of the 

independent accountant shall comply with 

the requirements of §§ 210.2–01 through 

210.2–07 (Article 2 of this part); and 

* * * * * 

■ 35. Revise § 210.8–02 to read as 

follows: 

§ 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). 

■ 36. Amend § 210.8–03 by: 

■ a. Revising the introductory text; 

■ b. Revising paragraph (a)(2); 

■ c. Adding paragraph (a)(5); 

■ d. Removing and reserving paragraph 

(b)(2); 

■ e. Revising paragraphs (b)(4) and (5); 

■ f. Removing paragraph (b)(6); and 

■ g. Revising Instruction 1 to § 210.8– 

03. 

The revisions and addition read as 

follows: 

§ 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 

(§ 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 § 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 (§ 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 (§ 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 § 210.8–03. Where 

§§ 210.8–01 through 210.8–08 (Article 8 

of this part) are applicable to a Form 10– 

Q (§ 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. 

* * * * * 

■ 37. Amend § 210.8–04 by revising 

paragraph (b)(3) to read as follows: 

§ 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. 

* * * * * 

■ 38. Amend § 210.8–05 by revising 

paragraphs (b)(1) and (2) to read as 

follows: 

§ 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 § 210.8–02 or § 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. 

■ 39. Amend § 210.8–06 by revising the 

introductory text to read as follows: 

§ 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 


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in the aggregate are significant, or since 

the date of the latest balance sheet 

required by § 210.8–02 or § 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: 

* * * * * 

■ 40. Amend § 210.9–03 by: 

■ a. Revising paragraph 3; 

■ b. Removing paragraph 6.(a) and 

removing and reserving paragraph 7.(d); 

and 

■ c. Revising paragraphs 7.(e)(3), 10, 

and 12.(a). 

The revisions read as follows: 

§ 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 

§ 210.9–05 is required. 

* * * * * 

■ 41. Amend § 210.9–04 by: 

■ a. Revising the section heading and 

introductory text; 

■ b. Revising paragraph 13.(h); 

■ c. Removing and reserving paragraphs 

14.(c), 17, 18, and 19; 

■ d. Redesignating paragraph 23 as 

paragraph 27; and 

■ e. Adding new paragraph 23 and 

paragraphs 24, 25, and 26. 

The revisions and additions read as 

follows: 

§ 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. 

* * * * * 

■ 42. Amend § 210.9–05 by revising 

paragraph (b)(2) to read as follows: 

§ 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. 

* * * * * 

■ 43. Revise § 210.9–06 to read as 

follows: 

§ 210.9–06 Condensed financial 

information of registrant. 

The information prescribed by 

§ 210.12–04 shall be presented in a note 

to the financial statements when the 

restricted net assets (§ 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. 

■ 44. Amend § 210.10–01 by: 

■ a. Revising paragraphs (a)(3), (5), and 

(7); 

■ b. Revising paragraphs (b)(1) through 

(3); 

■ c. Removing and reserving paragraphs 

(b)(4) and (5); and 

■ d. Revising paragraphs (b)(6) through 

(8), (c)(2) and (4), and (d). 

The revisions read as follows: 

§ 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, 

§ 210.4–02 applies and de minimis 

amounts therefore need not be shown 

separately, except that registrants 

reporting under § 210.9 shall show 

investment securities gains or losses 

separately regardless of size. 

* * * * * 


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(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 § 210.4–08 

may be omitted. 

* * * * * 

(7) Provide the information required 

by § 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 § 240.13a–13 or § 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 

(§ 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. 

* * * * * 

■ 45. Amend § 210.11–02 by: 

■ a. Revising paragraphs (b)(1) and (3) 

and (b)(5) through (7); 

■ 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); 

■ 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 

■ d. Revising paragraphs (c)(2) through 

(4). 

The revisions read as follows: 

§ 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 


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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 § 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 §§ 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 


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50208 Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 

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. 

■ 46. Amend § 210.11–03 by revising 

paragraphs (a) introductory text and 

(a)(2) to read as follows: 

§ 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 § 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 

§ 210.11–02(b)(3). 

* * * * * 

■ 47. Amend § 210.12–16 by revising 

footnotes 4 and 5 to read as follows: 

§ 210.12–16 Supplementary insurance 

information. 

* * * * * 4The total of columns I and J should agree 

with the amount shown for statement of 

comprehensive income caption 7. 5Totals should agree with the indicated 

balance sheet and statement of 

comprehensive income caption amounts, 

where a caption number is shown. 

■ 48. Amend § 210.12–17 by revising 

footnote 2 to read as follows: 

§ 210.12–17 Reinsurance. 

* * * * * 2This 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). 

* * * * * 

■ 49. Amend § 210.12–18 by revising 

footnote 1 to read as follows: 

§ 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. 

* * * * * 

■ 50. Amend § 210.12–21 by revising 

footnote 4 to read as follows: 

§ 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 § 210.6–03(d), indicate each such 

item by means of an appropriate symbol and 

explain in a footnote. 

* * * * * 

■ 51. Amend § 210.12–22 by revising 

footnotes 1(a), 4(b), and 6 to read as 

follows: 

§ 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 §§ 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 § 210.6–03(d), indicate each such 

item by means of an appropriate symbol and 

explain in a footnote. 

* * * * * 6Show 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 §§ 210.6–06(3)(a)(2), 210.6–03(g), and 

210.6–07(1). 

* * * * * 

■ 52. Amend § 210.12–23 by revising 

footnotes 9 and 12 to read as follows: 

§ 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 § 210.6–03 

describe the item and explain the basis for 

the write-down or reserve. 

* * * * * 12Summarize the aggregate amounts for 

each column applicable to § 210.6–06(1) and 

6–06(5)(a). 

■ 53. Amend § 210.12–24 by revising 

the column headings to the first table 

and by revising footnotes 5 and 8 to read 

as follows: 

§ 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 classification 

of property 

as indicated 

below 2 3

Column B— 

Amount of 

incumbrances 

Column C— 

Initial cost 

to company 

Column D— 

Cost of 

improvements, etc. 

Column E— 

Amount at 

which carried 

at close of 

period 4567

Column F— 

Reserve for 

depreciation 

Column G— 

Rents due and 

accrued at 

end of period 

Column H— 

Total rental 

income 

applicable 

to period 

Column I— 

Expended 

for interest, 

taxes, repairs 

and expenses 

Column J— 

Net income 

applicable 

to period 

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * 

1All money columns shall be totaled. 

* * * * * 5 If any item of real estate investments has 

been written down or reserved against 

pursuant to § 210.6–03(d), describe the item 

and explain the basis for the write-down or 

reserve. 

* * * * * 8Summarize the aggregate amounts for 

each column applicable to § 210.6–06(1) and 

6–06(5)(a). 

■ 54. Amend § 210.12–27 by revising 

footnote 3 to read as follows: 

§ 210.12–27 Qualified assets on deposit.1

* * * * * 1All money columns shall be totaled. 

* * * * * 3Total of column F shall agree with note 

required by § 210.6–06(4) as to total amount 

of qualified Assets on Deposit. 

■ 55. Amend § 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: 


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§ 210.12–28 Real estate and accumulated 

depreciation.1

* * * * * 1All 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: 

* * * * * 

■ 56. Amend § 210.12–29 by revising 

footnote 6 introductory text to read as 

follows: 

§ 210.12–29 Mortgage loans on real 

estate.1

* * * * * 1All 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 

■ 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). 

■ 58. Amend § 229.10 by revising 

paragraphs (b)(2) and (e)(2)(i) to read as 

follows: 

§ 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 

* * * * * 

■ 59. Amend § 229.101 by: 

■ a. Removing and reserving paragraphs 

(b), (c)(1)(xi), and (d); 

■ b. Revising paragraphs (e) 

introductory text and (e)(2) and (3); 

■ c. Removing and reserving paragraph 

(h)(4)(x); and 

■ d. Revising paragraph (h)(5)(iii). 

The revisions read as follows: 

§ 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 (§ 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 

§ 240.12b–2 of this chapter) filing an 

annual report on Form 10–K (§ 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. 

* * * * * 

■ 60. Amend § 229.201 by: 

■ a. Revising paragraph (a)(1); 

■ b. Removing and reserving paragraphs 

(a)(2)(i) and (c)(1); 

■ c. Removing the text and reserving 

Instruction 1 to the Instructions to Item 

201; 

■ 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 

■ e. Revising newly redesignated 

Instruction 2 to Item 201. 

The revisions read as follows: 

§ 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 


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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. 

* * * * * 

■ 61. Amend § 229.302 by: 

■ a. Revising paragraphs (a)(1) and (3); 

■ 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 

■ c. Revising paragraphs (a) and (c) of 

newly redesignated Instruction 1 to 

paragraph (b). 

The revisions read as follows: 

§ 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 

§ 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 

§ 210.1–02 of Regulation S–X) is 

required. 

* * * * * 

■ 62. Amend § 229.303 by: 

■ a. Revising the paragraphs (a) 

introductory text and (b)(2); 

■ 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. 

■ c. Removing and reserving newly 

redesignated Instruction 5 to paragraph 

(b); and 

■ d. Adding an Instruction 8 to 

paragraph (b). 

The revisions and addition read as 

follows: 

§ 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 § 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 


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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 

§ 210.1–02 of Regulation S–X of this 

chapter. 

* * * * * 

■ 63. Amend § 229.406 by revising 

paragraph (d) to read as follows: 

§ 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. 

* * * * * 

■ 64. Amend § 229.503 by: 

■ a. Revising the section heading; 

■ b. Removing paragraph (d) and the 

instructions to paragraph (d); and 

■ c. Removing paragraph (e). 

The revision reads as follows: 

§ 229.503 (Item 503) Prospectus summary 

and risk factors. 

* * * * * 

■ 65. Amend § 229.504 by revising 

Instruction 3 to the Instructions to Item 

504 to read as follows: 

§ 229.504 (Item 504) Use of proceeds. 

* * * * * 

Instructions to Item 504: * * * 

■ 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. 

* * * * * 

■ 66. Amend § 229.508 by revising 

paragraph (e) introductory text to read 

as follows: 

§ 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. 

* * * * * 

■ 67. Amend § 229.512 by revising 

paragraph (a)(4) to read as follows: 

§ 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 

(§ 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 (§ 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. 

* * * * * 

■ 68. Amend § 229.601 by: 

■ a. Removing and reserving entries (11) 

and (12) from the exhibit table in 

paragraph (a); 

■ b. In entry (13) in the exhibit table in 

paragraph (a), adding an X in the 

column labelled ‘‘10–Q’’; 

■ c. Removing and reserving entries 

(19), (22), and (26) from the exhibit table 

in paragraph (a); 

■ d. Removing and reserving paragraphs 

(b)(11) and (12); 

■ e. Revising paragraph (b)(14); 

■ f. Removing and reserving paragraphs 

(b)(19), (22), and (26); and 

■ g. Removing paragraph (c). 

The revision reads as follows: 

§ 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 

§ 229.406 (Item 406 of Regulation S–K) 

or Item 5.05 of Form 8–K (§ 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. 

* * * * * 

■ 69. Amend § 229.1010 by: 

■ a. Revising paragraph (a)(2); 

■ b. Removing and reserving paragraph 

(a)(3); 

■ c. Revising paragraph (b)(2); and 

■ d. Removing and reserving paragraph 

(c)(4). 

The revisions read as follows: 

§ 229.1010 (Item 1010) Financial 

statements. 

(a) * * * 

(2) Unaudited balance sheets, 

comparative year-to-date statements of 

comprehensive income (as defined in 

§ 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 

* * * * * 

■ 70. Amend § 229.1118 by revising 

paragraph (b)(2) to read as follows: 

§ 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). 

* * * * * 


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PART 230—GENERAL RULES AND 

REGULATIONS, SECURITIES ACT OF 

1933 

■ 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. 

* * * * * 

■ 72. Amend § 230.158 by: 

■ a. Revising paragraph (a)(1) 

introductory text; and 

■ 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: 

§ 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 

§ 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 § 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. 

* * * * * 

■ 73. Amend § 230.405, in the definition 

of ‘‘Significant subsidiary’’ by: 

■ a. Revising paragraphs (1) and (3); 

■ b. Adding a Note 1 following 

paragraph (3) before the Computational 

note; 

■ c. Redesignating the Computational 

note as Computational note 1 to 

paragraph (3) and revising it. 

The revisions and addition read as 

follows: 

§ 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. 

* * * * * 

■ 74. Amend § 230.436 by revising 

paragraph (d)(4) to read as follows: 

§ 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 

■ 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. 

* * * * * 

■ 76. Amend Form S–1 (referenced in 

§ 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). 

* * * * * 

■ 77. Amend Form S–3 (referenced in 

§ 239.13) by: 

■ a. Revising General Instruction I.B.2; 

■ 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)’’; 

■ c. Revising the heading of Item 3; 

■ d. Revising Item 12.(c)(2)(ii); and 

■ 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. 


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

* * * * * 

■ 78. Amend Form S–11 (referenced in 

§ 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). 

* * * * * 

■ 79. Amend Form S–4 (referenced in 

§ 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. 

* * * * * 

■ 80. Amend Form F–1 (referenced in 

§ 239.31) by: 

■ a. Revising General Instruction II.C; 

■ b. Revising the heading of Item 3; 

■ c. Revising Item 4.b; 

■ d. Removing and reserving Item 4.c; 

■ e. Revising Item 4.d; 

■ f. Adding Item 4.e; 

■ g. Removing Instruction 2 to Item 4; 

■ h. Revising Item 4A.(b)1.iii.; 

■ i. Revising the Instruction to Item 4A; 

and 

■ 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 

* * * * * 


daltland on DSKBBV9HB2PROD with RULES2
50214 Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 

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) 

(§ 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). 

* * * * * 

■ 81. Amend Form F–3 (referenced in 

§ 239.33) by: 

■ a. Revising General Instructions I.B.2, 

I.B.3, I.B.4 and II.D; 

■ b. Revising the heading of Item 3; 

■ c. Revising Item 5 Instructions 1 and 

2; and 

■ 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 NonConvertible 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 nonconvertible 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 (§ 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 (§ 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 


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

* * * * * 

■ 82. Amend Form F–4 (referenced in 

§ 239.34) by: 

■ a. Revising General Instruction D.4; 

■ b. Revising the heading of Item 3; 

■ c. Revising Instruction 1 of the 

instructions to paragraphs (e) and (f) of 

Item 3; 

■ d. Revising Item 10.(c)(3); 

■ e. Revising paragraph 1 of the 

Instructions between Items 11(a) and 

(b); 

■ f. Revising Item 11.(c)(2); 

■ g. Revising the introductory text of 

Items 12 and 12.(b)(2) 

■ h. Revising Items 12.(b)(2)(iv) and 

12.(b)(3)(vii) and (ix); 

■ i. Revising paragraph 1 of the 

Instructions between Items 13.(b) and 

(c); 

■ j. Revising Item 13.(c)(2); and 

■ 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 nonrecurring 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 (§ 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 


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50216 Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 

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. 

* * * * * 

■ 83. Amend Form F–6 (referenced in 

§ 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. 

* * * * * 

■ 84. Amend Form F–7 (referenced in 

§ 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. 

* * * * * 

■ 85. Amend Form F–8 (referenced in 

§ 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. 

* * * * * 

■ 86. Amend Form F–10 (referenced in 

§ 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. 

* * * * * 


daltland on DSKBBV9HB2PROD with RULES2
Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 50217 

■ 87. Amend Form F–80 (referenced in 

§ 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. 

* * * * * 

■ 88. Amend Form SF–1 (referenced in 

§ 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. 

* * * * * 

■ 89. Amend Form SF–3 (referenced in 

§ 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. 

* * * * * 

■ 90. Amend Form 1–A (referenced in 

§ 239.90) by: 

■ a. Revising the section entitled 

‘‘Financial Statements’’ in Item 1 of Part 

I; 

■ b. Removing and reserving Items 

7.(a)(1)(iii) and 7.(b) of Part II; 

■ c. Revising paragraph (3) of the 

Instruction to Item 9.(a) of Part II; and 

■ 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 


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[If "Other" is selected, display the following options in the Financial Statements table:] 

Balance Sheet Information 

Cash and Cash Equivalents: 

Investment Securities: 

Accounts and Notes Receivable: 

Property, Plant and Equipment (PP&E): 

Total Assets: 

Accounts Payable and Accrued Liabilities: 

Long Term Debt: 

Total Liabilities: 

Total Stockholders' Equity: 

Total Liabilities and Equity: 

Statement of Comprehensive Income 

Information 

Total Revenues: 

Costs and Expenses Applicable to Revenues: 

Depreciation and Amortization: 

Net Income: 

Earnings Per Share- Basic: 

Earnings Per Share - Diluted: 

[If "Banking" is selected, display the following options in the Financial Statements table:] 

Balance Sheet Information 

Cash and Cash Equivalents: 

Investment Securities: 

Loans: 

Property and Equipment: 

Total Assets: 

Accounts Payable and Accrued Liabilities: 

Deposits: 

Long Term Debt: 

Total Liabilities: 

Total Stockholders' Equity: 

Total Liabilities and Equity: 
Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 50219 

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 


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Statement of Comprehensive Income 

Information 

Total Interest Income: 

Total Interest Expense: 

Depreciation and Amortization: 

Net Income: 

Earnings Per Share- Basic: 

Earnings Per Share - Diluted: 

[If "Insurance" is selected, display the following options in the Financial Statements table:] 

Balance Sheet Information 

Cash and Cash Equivalents: 

Total Investments: 

Accounts and Notes Receivable: 

Property and Equipment: 

Total Assets: 

Accounts Payable and Accrued Liabilities: 

Policy Liabilities and Accruals: 

Long Term Debt: 

Total Liabilities: 

Total Stockholders' Equity: 

Total Liabilities and Equity: 

Statement of Comprehensive Income 

Information 

Total Revenues: 

Costs and Expenses Applicable to Revenues: 

Depreciation and Amortization: 

Net Income: 

Earnings Per Share- Basic: 

Earnings Per Share - Diluted: 

[End of section that varies based on the selection of Industry Group] 

Name of Auditor (if any): _________________________ _ 
50220 Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 

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. 

* * * * * 

■ 91. Amend Form 1–K (referenced in 

§ 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. 

* * * * * 

■ 92. Amend Form 1–SA (referenced in 

§ 239.92) by: 

■ a. Revising the third paragraph of the 

undesignated introductory text of Item 

3; 

■ b. Revising Item 3.(b); 

■ c. Redesignating current Items 3.(d) 

and (e) as 3.(e) and (f), respectively; 

■ d. Adding new Item 3.(d); and 

■ 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 


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

■ 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. 

* * * * * 

■ 94. Amend § 240.3a51–1 by revising 

paragraph (a)(2)(i)(A)(3) to read as 

follows: 

§ 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; 

* * * * * 

■ 95. Amend § 240.10A–1 by revising 

paragraph (b)(3) to read as follows: 

§ 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 

§§ 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. 

* * * * * 

■ 96. Amend § 240.12b–2 in the 

definition of ‘‘Significant subsidiary’’ 

by: 

■ a. Revising paragraph (3); 

■ b. Adding a Note 1 following 

paragraph (3) before the Computational 

note; and 

■ c. Redesignating the Computational 

note as Computational note 1 to 

paragraph (3). 

The revision and addition read as 

follows: 

§ 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. 

* * * * * 

■ 97. Amend § 240.12g–3 by revising 

paragraphs (a)(2), (b)(2), and (c)(2) to 

read as follows: 

§ 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 

* * * * * 

■ 98. Amend § 240.13a–10 by revising 

paragraphs (b) and (g)(3) to read as 

follows: 

§ 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 (§ 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 


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close of the transition period or the date 

on which the issuer made the 

determination to change the fiscal 

closing date, whichever is later. 

* * * * * 

■ 99. Amend § 240.13b2–2 by revising 

paragraphs (b)(2)(i) and (ii) to read as 

follows: 

§ 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; 

* * * * * 

■ 100. Amend § 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: 

§ 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 § 240.15c3– 

1e(a)). A statement of comprehensive 

income (as defined in § 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 § 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 

§ 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 

§ 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 

§ 240.15c3–1e(a)). 

* * * * * 

■ 101. Amend § 240.15d–2 by revising 

paragraph (a) to read as follows: 

§ 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 § 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. 

* * * * * 

■ 102. Amend § 240.15d–10 by revising 

paragraphs (b) and (g)(3) to read as 

follows: 

§ 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 (§ 249.220f 

of this chapter) responding to all items 

to which such issuer is required to 


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

* * * * * 

■ 103. Amend § 240.17a–5 by adding 

Note 1 to paragraph (d)(2)(i) to read as 

follows: 

§ 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 § 210.1–02 of Regulation S–X of 

this chapter) in place of a Statement of 

Income. 

* * * * * 

■ 104. Amend § 240.17a–12 by adding 

Note 1 to paragraph (b)(2) to read as 

follows: 

§ 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 § 210.1–02 of Regulation S–X of 

this chapter) in place of a Statement of 

Income. 

* * * * * 

■ 105. Amend § 240.17g–3 by revising 

paragraph (a)(1)(i) to read as follows: 

§ 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 

§ 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; 

* * * * * 

■ 106. Amend § 240.17h–1T by adding 

Note 1 to Paragraph (a)(1)(v) to read as 

follows: 

§ 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 

§ 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 

■ 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. 

* * * * * 

■ 108. Amend § 249.210 by revising the 

section heading to read as follows: 

§ 229.210 Form 10, general form for 

registration of securities pursuant to 

section 12(b) or (g) of the Securities 

Exchange Act of 1934. 

* * * * * 

■ 109. Amend Form 20–F (referenced in 

§ 249.220f) by: 

■ a. Revising General Instructions A.(b), 

D.(a), E.(c), G.(c) and G.(f)(1); 

■ b. Removing Item 3.A.3; 

■ c. Revising Instruction 2. of the 

Instructions to Item 3.A; 

■ d. Adding Item 4.A.8; 

■ e. Revising Item 5.C; 

■ f. Revising Item 8.A.1.(b) and Item 

8.A.5; 

■ g. Revising Instruction 2 of the 

Instructions to Items 8.A.2 and 8.A.4; 

■ h. Revising Item 9.A.4; 

■ i. Revising Item 10.F; 

■ j. Removing and reserving Instruction 

1 to General Instructions to Items 11(a), 

11(b), 11(c), 11(d), and 11(e); 

■ k. Revising Instruction 1 of the 

Instructions to Item 12; 

■ l. Removing Instruction to Item 14.B; 

■ m. Removing Item 15T; 

■ n. Removing and reserving Instruction 

1 to Instructions to Item 16F; 

■ o. Revising Instruction to Item 16G; 

■ p. Revising Items 17(c)(2)(v) and (vi); 

■ q. Removing and reserving Instruction 

3 to Item 17; 

■ r. Removing Special Instruction for 

Certain European Issuers to Item 17; 

■ s. Revising Instruction 1 to Instruction 

to Item 18; 

■ t. Removing Special Instruction for 

Certain European Issuers to Item 18; 

and 

■ 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 

b REGISTRATION STATEMENT 

PURSUANT TO SECTION 12(b) OR (g) 

OF THE SECURITIES EXCHANGE ACT 

OF 1934 

OR 

b 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 


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50224 Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 

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 


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

§ 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 § 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. 

* * * * * 

■ 110. Amend Form 40–F (referenced in 

§ 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 

b REGISTRATION STATEMENT 

PURSUANT TO SECTION 12 OF THE 

SECURITIES EXCHANGE ACT OF 1934 

OR 

b 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. 

* * * * * 

■ 111. Amend Form 10–K (referenced in 

§ 249.310) by: 

■ a. Removing and reserving paragraph 

J.(1)(e) of the General Instructions; and 

■ 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; 

* * * * * 

■ 112. Amend Form 11–K (referenced in 

§ 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. 


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50226 Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 

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 § 249.312) 

[Amended] 

■ 113. Amend Form 10–D (referenced in 

§ 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. 

■ 114. Amend the Form X–17A–5 Part 

II (FOCUS Report) (referenced in 

§ 249.617) by: 

■ 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 

■ 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. 


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Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 50227 

■ 115. Amend the Form X–17A–5 Part 

II (FOCUS Report) (referenced in 

§ 249.617) General Instructions by: 

■ 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 

■ b. Revising under the heading 

‘‘Statement of Changes in Ownership 

Equity (Sole Proprietorship, Partnership 

or Corporation)’’ the text related to the 


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* * 

* * 

* * 

* * 

* * 

FORM X-17A-5 

FOCUS REPORT 

(Financial and Operational Combined Uniform Single Report) 

PART II ITI] 

* 

STATEMENT OF FINANCIAL CONDITION 

* 

29. * * * 

E. Accumulated other comprehensive income 

F. Total 

G. Less capital stock in treasury ( 

* * * 

[@!] 

[rn5] 

)117961 

STATEMENT OF INCOME (LOSS) or STATEMENT OF COMPREHENSIVE 

INCOME (as defined in §210.1-02 of Regulation S-X), as applicable 

* * * * * 

NET INCOME/COMPREHENSIVE INCOME 

* * * * * 

34. Net income (loss) after Federal income taxes $ __ ~ 

35. Other comprehensive income (loss) ___ @2261 

a. After Federal income taxes of __ @ill] 

36. Comprehensive income (loss) $ __ @2281 

MONTHLY INCOME 

37. Income (current month only) before provision for Federal income taxes $ __ [ill] 
50228 Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 

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 § 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. 

* * * * * 

■ 116. Amend the Form X–17A–5 Part 

IIA (FOCUS Report) (referenced in 

§ 249.617) by: 

■ 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 

■ 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 


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Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 50229 


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FORM X-17A-5 

FOCUS REPORT 

(Financial and Operational Combined Uniform Single Report) 

PART IIAB] 

* * * * * 

STATEMENT OF FINANCIAL CONDITION FOR NONCARRYING, 

NONCLEARING AND CERTAIN OTHER BROKERS OR DEALERS 

* * * * * 

23. * * * 

E. Accumulated other comprehensive income [7971 

F. Total [7951 

G. Less capital stock in treasury T16 ( )117961 

* * * * * 

STATEMENT OF INCOME (LOSS) or STATEMENT OF COMPREHENSIVE 

INCOME (as defined in §210.1-02 of Regulation S-X), as applicable 

* * * * * 

NET INCOME/COMPREHENSIVE INCOME 

* * * * * 

22. Net income (loss) after Federal income taxes $ __ ~ 

23. Other comprehensive income (loss) ___ § 

a. After Federal income taxes of __ Hill] 

24. Comprehensive income (loss) $ __ @2281 

MONTHLY INCOME 

25. Income (current month only) before provision for Federal income taxes $ __ [ill] 
50230 Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 

BILLING CODE 8011–01–C 

■ 117. Amend the Form X–17A–5 Part 

IIA (FOCUS Report) (referenced in 

§ 249.617) General Instructions by: 

■ a. Revising the heading ‘‘Statement of 

Income (Loss)’’ and removing from 

under that heading paragraphs 20 and 

21; and 

■ 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 § 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. 

* * * * * 

■ 118. Amend the Form X–17A–5 Part 

IIB (FOCUS Report) (referenced in 

§ 249.617) by: 

■ 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 

■ 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 


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Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 50231 

BILLING CODE 8011–01–C 

■ 119. Amend the Form X–17A–5 Part 

III (FOCUS Report) (referenced in 

§ 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. 


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FORM X-17A-5 

FOCUS REPORT 

(Financial and Operational Combined Uniform Single Report) 

PART liB 1!1] 

* * * * * 

STATEMENT OF FINANCIAL CONDITION FOR OTC DERIVATIVES DEALERS 

* * * * * 

28. * * * 

E. Accumulated other comprehensive income [@!] 

F. Total 1@5] 

G. Less capital stock in treasury )1179~ 

* * * * * 

STATEMENT OF INCOME (LOSS) or STATEMENT OF COMPREHENSIVE 

INCOME (as defined in §210.1-02 of Regulation S-X), as applicable 

* * * * * 

NET INCOME/COMPREHENSIVE INCOME 

* * * * * 

31. Net income (loss) after Federal income taxes $ __ ~ 

32. Other comprehensive income (loss) ___ § 

A. After Federal income taxes of __ Hill] 

33. Comprehensive income (loss) $ __ @2281 

MONTHLY INCOME 

34. Income (current month only) before provision for Federal income taxes $ __ [ill] 
50232 Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 

ANNUAL AUDITED REPORT 

FORM X–17A–5 

PART III 

* * * * * 

OATH OR AFFIRMATION 

* * * * * 

b (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 

§ 210.1–02 of Regulation S–X). 

* * * * * 

PART 274—FORMS PRESCRIBED 

UNDER THE INVESTMENT COMPANY 

ACT OF 1940 

■ 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. 

* * * * * 

■ 121. Amend Form N–5 (referenced in 

§§ 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: publicinfo@

sec.gov. 

* * * * * 

■ 122. Amend Form N–1A (referenced 

in §§ 239.15A and 274.11A) by: 

■ a. Revising Item 1.(b)(3); 

■ b. Revising Instruction 3.(c)(ii) to Item 

3 and Instruction 2.(a)(ii) to Item 

27.(d)(1); and 

■ 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 

* * * * * 

b REGISTRATION STATEMENT 

UNDER THE SECURITIES ACT OF 1933 

* * * * * 

b 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: 

publicinfo@sec.gov. 

* * * * * 

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 


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

* * * * * 

■ 123. Amend Form N–2 (referenced in 

§§ 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 

* * * * * 

b REGISTRATION STATEMENT 

UNDER THE SECURITIES ACT OF 1933 

* * * * * 

b 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: 

publicinfo@sec.gov. 

* * * * * 

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. 

* * * * * 

■ 124. Amend Form N–3 (referenced in 

§§ 239.17a and 274.11b) by: 

■ a. Revising Instruction 4.(c)(i) to Item 

3.(a); 

■ b. Revising Item 20.(m); and 

■ 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 

* * * * * 

b REGISTRATION STATEMENT 

UNDER THE SECURITIES ACT OF 1933 

* * * * * 

b 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: publicinfo@

sec.gov. 

* * * * * 

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; 

* * * * * 

■ 125. Amend Form N–4 (referenced in 

§§ 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 

* * * * * 


daltland on DSKBBV9HB2PROD with RULES2
50234 Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Rules and Regulations 

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. 

* * * * * 

■ 126. Amend Form N–6 (referenced in 

§§ 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 b 

* * * * * 

REGISTRATION STATEMENT UNDER 

THE INVESTMENT COMPANY ACT 

OF 1940 b 

* * * * * 

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. 

* * * * * 

■ 127. Amend Form N–8B–2 (referenced 

in § 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: 

publicinfo@sec.gov. 

* * * * * 

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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