Topic 1: Registrant's Financial Statements

Not required

1. for Smaller Reporting Companies.
2. in proxy statements, except certain schedules are required for insurance and real estate companies. [Schedule 14A Item 13 Instruction 3]

Financial statements may be required where action is taken to authorize, issue, exchange or modify securities, including when the authorization or issuance is in connection with a business combination. However, financial statements are not required if they would not be material for the exercise of prudent judgment concerning the action. Financial statements usually are considered material to this exercise if the action is the authorization or issuance of a material amount of senior securities or the authorization or issuance of securities related to a business combination. [Instructions to Schedule 14A Item 13]

The requirement for acquirer and target financial statements in proxy statements depends on whose proxies are solicited and the nature of the consideration. See Section 10220.7 for the number of years of target financial statements to be presented when one of the entities is an EGC.

If the consideration to be issued in the business combination includes registered securities, registrants must comply with the financial statement requirements of Form S-4 or Form F-4. See Topic 2.

In connection with proxy statements and registration statements on Form S-4/F-4, financial statements for the latest fiscal year must be audited if practicable. Financial statements for prior years need not be audited if they were not previously audited. The staff will assess the merits of a registrant’s assertion that an audit for the latest fiscal year is impracticable based on the particular facts and circumstances, including the specific actions taken by the registrant (acquirer) to obtain a timely audit of the target. For significant acquisitions, registrants will be obligated to file separate audited target financial statements in a Form 8-K. [Instruction 1 to Item 17.b.7 of Form S-4]

In transactions where the registrant is a SPAC, the target's financial statements become those of the registrant upon consummation of the merger. In light of this fact and that the staff considers the transaction to be equivalent to an initial public offering of the target, the staff would expect the financial statements of the target included in either a proxy statement or Form S-4/F-4 to be audited in accordance with the standards of the PCAOB.

In proxy statements soliciting authorization for the disposal of a significant business (including spin-offs), the registrant (seller) should include its audited financial statements for each of the 2 most recent fiscal years plus unaudited interim periods. Unaudited financial statements of the business to be disposed should be included for the same periods; however, audited financial statements for each of the 2 most recent fiscal years of that business should be provided if they are available. The registrant should include its pro forma financial information giving effect to the disposal for the latest complete fiscal year and subsequent interim period; if the disposal qualifies as a discontinued operation, the pro forma operating information should be presented for each of the past 2 years and interim periods. If three years plus interim historical financial statements are presented, then for discontinued operations, the pro forma financial statements should include three years plus interim periods. See the Division of Corporation Finance's July 2001 Interim Supplement to Publicly Available Telephone Interpretations, Section H6. If the registrant (seller) receives consideration for the disposal that includes unregistered securities of the acquirer, the acquirer's audited financial statements may need to be provided for each of the 2 most recent fiscal years plus unaudited interim periods.

The financial statement requirement of Item 14(c) of Schedule 14A follows the legal form of the transaction rather than the accounting form. For example, when a public shell company solicits authorization for the acquisition of a non-reporting operating company that will be accounted for as a recapitalization of the operating company, the "acquiring company” is the public shell and the "acquired company” is the operating company under Item 14(c). As such, the audit relief for non-reporting targets described above applies to the operating company. After consummation of the transaction, the registrant must file in a Form 8-K audited financial statements of the operating company, which will replace the shell's historical financial statements (as predecessor of the registrant) in future filings. See Topic 12.

The provision of S-X 3-06(b) permitting the filing of financial statements covering a period of nine to twelve months to satisfy the one-year financial statement requirement for an acquired business does not apply to financial statements of target companies filed under Item 14(c)(2) of Schedule 14A.

A “shell” company is an entity other than an asset-backed issuer (See Topic 12) that has no or nominal operations and either:

1. no or nominal assets,
2. assets consisting solely of cash and cash equivalents, or
3. assets consisting of any amount of cash and cash equivalents and nominal other assets. [Regulation C, Rule 405]

A shell company that is:

1. formed by an entity (that is not a shell company) solely for the purpose of changing the corporate domicile of that entity solely within the United States; or
2. formed by an entity (that is not a shell company) solely for the purpose of completing a business combination transaction among one or more entities other than the shell company none of which is a shell company. [Regulation C, Rule 405]

Financial information of a registrant’s predecessor is required for all periods before the succession, with no lapse in audited periods or omission of other information required about the registrant. Financial statements for the registrant and its predecessor should collectively be ‘as of’ all dates and ‘for’ all periods required by S-X Articles 3 and 10 (or Article 8 for SRC). Any interim period of the predecessor before its acquisition by the registrant should be audited when audited financial statements for the period after the acquisition are presented. Schedules required by S-X Article 12 are required for predecessor entities.

1. After an acquisition, financial statements of the predecessor should be included in Forms 10-K and 10-Q for the required comparative periods before the acquisition, in addition to those of the registrant.
2. After the acquisition of a business by a special-purpose acquisition company registrant ("SPAC"), the financial statements of the registrant for periods prior to the acquisition may not be required to be included in Forms 10-K and 10-Q once the financial statements include the period in which the acquisition or recapitalization was consummated. Generally, these financial statements would not be required in cases in which the registrant had only nominal statement of comprehensive income activity. (Last updated: 10/20/2014)
3. S-X 3-01 and 8-02 do not specifically refer to balance sheets of predecessors. When only one registrant balance sheet would otherwise be included in the filing, a registrant, including a Smaller Reporting Company, must file an audited predecessor balance sheet as of the end of its last fiscal year. (Last updated: 6/30/2010)

When predecessor audited financial statements are provided for part of a fiscal year and successor audited financial statements are provided for the rest of the year, the predecessor is not required to provide comparative financial statements for the prior year partial period.

Example: A shell company formed on January 15, 2021 acquires an operating company, determined to be its predecessor, on June 25, 2021. The Newco subsequently files an IPO registration statement in the third quarter of 2022. The IPO registration statement must include audited financial statements of the predecessor for the two years ended December 31, 2020 and the period from January 1, 2021 to June 25, 2021. The Newco registrant must provide audited financial statements for the period from the inception date through December 31, 2021 (there were no operations from inception date to acquisition date) and unaudited interim financial statements for the periods ending June 30, 2021 and June 30, 2022. Financial statements of the predecessor for the period January 1, 2020 to June 25, 2020 are not required.

See Topic 13 for guidance applicable to supplemental or restated financial statements as a result of post-balance sheet events.

Example: A Form S-1 of a non-accelerated filer with an audited March 31st balance sheet (March year-end) cannot be declared effective after August 12th without updating.

Generally, the Division of Corporation Finance will not issue comments asking a delinquent registrant to file separately all of its delinquent filings if the registrant files a comprehensive annual report on Form 10-K that includes all material information that would have been included in those filings.

The Division’s decision not to seek the filing of additional reports when a registrant files a comprehensive annual report does not absolve a registrant from any liability under the Exchange Act for failing to file all required reports and would not foreclose enforcement action for the registrant’s filing delinquencies. In addition, filing a comprehensive annual report does not result in the registrant being considered “current” for purposes of Regulation S, Rule 144, or Form S-8 registration statements. Also, the registrant would not be eligible to use Form S-3 until it establishes a sufficient history of making timely filings.

Exempt from Part I disclosures required by Form 10-Q [Exchange Act Rule 13a-13(b)].

A periodic report otherwise due on a weekend or federal holiday is due the next business day (Exchange Act Rule 0-3).

Automatic extensions of due dates for periodic reports are available (up to 5 calendar days for quarterly reports and 15 calendar days for annual reports) if all or any portion of the report cannot be filed timely without unreasonable effort or expense. A registrant must file Form 12b-25 no later than one day after the due date of the form for which relief is requested. No further extensions are available.

1. Length
   The extension period begins to run the day the periodic report is due. For example, a Form 10-Q due on a Wednesday must be filed no later than the following Monday to be considered timely assuming the registrant files a Form 12b-25 by Thursday and no federal holidays are involved. The extension period under Rule 12b-25 would start to run on Wednesday, even though the Form 12b-25 may be filed as late as Thursday.
2. Disclosure of Reasons
   The registrant must disclose in the Form 12b-25 the reason for its inability to file the report timely and, if applicable, that such reason could not be eliminated without unreasonable effort or expense. If the reason relates to the inability of a third party to furnish a required opinion, report or certification, an exhibit must be attached to the Form 12b-25 that includes a statement signed by that third party stating the specific reasons why it was unable to furnish the required opinion, report or certification on or before the due date of the report.
3. Application to Transition Reports
   The extension period permitted under Rule 12b-25 applies to transition reports (for change in fiscal year-end).
4. Exclusions
   The extension period permitted under Rule 12b-25 does not apply to any filing on Form 8-K, nor does it apply to an amendment to Form 10-K with respect to filing financial statements under S-X 3-09. See Topic 2 and the Division of Corporation Finance's C&DIs for Exchange Act Rules, Question 135.01.
5. Application Unrelated to Filer Size
   The extension period provided under Rule 12b-25 is the same for large accelerated, accelerated, and non-accelerated filers.

After a registrant's first registration statement is effective, a Form 10-Q for the quarter following the most recent period included in the registration statement is due the later of 45 days after the effective date or the date the Form 10-Q would otherwise be due. [Exchange Act Rules 13a-13 and 15d-13]

If the effective date of an initial registration statement was within 45 days (90 days for a Smaller Reporting Company) after the fiscal year-end, but does not include the audited statements of the just recently completed year, the following reporting requirements apply:

An issuer becomes a large accelerated filer if it meets all of the following criteria as assessed at the end of its fiscal year:

1. The aggregate worldwide market value of its voting and non-voting common equity held by non-affiliates (“public float”) was at least $700 million as of the last business day of its most recently completed second fiscal quarter;
2. It has been subject to the requirements of Section 13(a) or 15(d) of the Exchange Act for a period of at least 12 calendar months;
3. It has filed at least one annual report under Section 13(a) or 15(d) of the Exchange Act; and
4. It is not eligible to use the requirements for smaller reporting companies under the revenue test in paragraph (2) or (3)(iii)(B), as applicable, of the "smaller reporting company" definition in Rule 12b-2.

As noted in Sections 1340.1 and 1340.2, the determination of filer status occurs at the end of the issuer’s fiscal year. Because the determination occurs at the end of the issuer’s fiscal year, the first periodic filing affected by a change in status will be the Form 10-K for the fiscal year in which the assessment is made. The Form 10-K is the first periodic filing affected even though the “public float” test is performed as of the last business day of the issuer’s most recently completed second quarter.

For example, a calendar year-end issuer was a non-accelerated filer as of 12/31/2021. As of June 30, 2022, the issuer's "public float" increased to $300 million and revenue for fiscal year 2021 was greater than $100 million. The issuer will be an accelerated filer for its 12/31/2022 Form 10-K.

The rules provide explicit conditions that allow an issuer to exit its accelerated, or large accelerated, filer status. These conditions relate to the level of public float as of the last business day of the issuer’s most recently completed second fiscal quarter and annual revenues for the most recent fiscal year completed before the last business day of the second fiscal quarter. The determination as to whether an issuer exits the accelerated or large accelerated filer status is made at the end of the issuer’s fiscal year and will govern the deadlines for the annual report to be filed for that fiscal year, and the quarterly and annual reports to be filed subsequently (until the filing status changes). Once an issuer becomes an accelerated filer or large accelerated filer it will maintain this status except:

1. A large accelerated or an accelerated filer will become a non-accelerated filer if it determines that its public float was below $60 million as of the last business day of its most recently completed second fiscal quarter; or if it determines that it is eligible to use the requirement for smaller reporting companies under the revenue test in paragraph (2) or (3)(iii)(B) of the “smaller reporting company” definition.
2. A large accelerated filer will become an accelerated filer if it determines that its public float was below $560 million, but not below $60 million, as of the last business day of its most recently completed second fiscal quarter, and it is not eligible to use the requirements for smaller reporting companies under the revenue test in paragraph (2) or (3)(iii)(B) of the "smaller reporting company" definition.

The definitions of accelerated filer and large accelerated filer do not exclude companies that qualify as foreign private issuers (FPIs) even though the deadlines for Forms 20-F and 40-F annual reports are not affected by accelerated filer or large accelerated filer status. However, only an FPI that elects to file on domestic forms and provides financial statements in accordance with U.S. GAAP may apply the revenue test in paragraph (2) or (3)(iii)(B) of the "smaller reporting company" definition in determining its non-accelerated, accelerated or large accelerated filer status. An FPI electing to file on Forms 10-K and 10-Q and that meets one of the accelerated filer definitions is subject to accelerated filing deadlines. A company that loses its ability to file on Form 20-F and must begin to file on Forms 10-K and 10-Q becomes subject to the accelerated filer rules, starting with its initial filing on Form 10-K or 10-Q.

Cover pages to Forms 10-K, 10-Q, and 20-F include boxes that must be checked to indicate (1) whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, and (2) whether an internal control over financial reporting auditor attestation is included in the filing. The issuer also must disclose on the cover page to Form 10-K the amount of its public float as of the last business day of its most recently completed second quarter.

The accelerated filer rules apply to transition reports (for change in year-end) filed on either Form 10-K or 10-Q. A non-accelerated filer, an accelerated filer, or a large accelerated filer, that changes its year-end and files a transition report on Form 10-K or 10-Q must assess its accelerated filer status to determine whether its status has changed. A change in status could accelerate or decelerate the due date for that transition report (and subsequent periodic reports). For example, a non-accelerated filer could become an accelerated filer, or a large accelerated filer could become an accelerated filer. The filer must make this assessment regardless of the length of the transition period, and perform the public float test as of the last business day of what would have been the most recently completed second quarter if the close of the transition period were the end of a full fiscal year (i.e., six-month look back).

The accelerated filer rules do not affect Form 8-K filing deadlines.

Annual report disclosure obligations affected by non-accelerated, accelerated or large accelerated filer status:

1. Unresolved staff comment — (Item 1B of Form 10-K; Item 4A of Form 20-F):
   A registrant that is an accelerated filer or a large accelerated filer, and has received written comments from the staff regarding its periodic or current reports at least 180 days before the end of its fiscal year to which the annual report relates, must disclose the substance of any unresolved comments that the registrant believes are material. The disclosure may include other information, such as the registrant’s position with respect to any such comment.
2. Effectiveness of Internal Control over Financial Reporting Required by SOX Section 404 — (Item 9A of Form 10-K; Item 15 of Form 20-F; General Instruction B.6 of Form 40-F):
   Application of these disclosure requirements partly depends on the issuer’s accelerated filer status:

   • Management’s Report: Required to be filed in annual reports by all filers. See Section 4310 for information on Management’s Annual Report on Internal Control Over Financial Reporting.
   • Auditor’s Attestation: Required in annual reports of all accelerated filers (except those that qualify as an EGC) and large accelerated filers. See Section 4320 for information on Auditor’s Report on ICFR for non-EGCs and Section 10240 for information on EGCs. (Last updated: 6/30/2013)

When a company changes its fiscal year, it is required to file a report covering the transition period. [Exchange Act Rule 13a-10, 15d-13 & FRC 102.05]

A transition period is the period between the closing of the registrant's most recent fiscal year and the opening date of its newly selected fiscal year.

Transition reports must include prior year information comparable to the transition period. Comparable year information may be unaudited and may be provided on a condensed basis and in the footnotes to financial statements instead of separate statements. [FRR 35] All information responsive to the textual items of the reporting form (e.g., S-K 101, 103, and 303 for Form 10-K) must be provided in the transition report. [FRR 35]

A transition report filed on Form 10-K must comply with the financial statement requirements of Regulation S-X, including audited statements of comprehensive income, cash flows, and stockholders’ equity for each of the three most recent fiscal years (two most recent fiscal years for Smaller Reporting Companies) and audited balance sheets as of the end of each of the two most recent fiscal years. As provided under S-X 3-06, a transition period of nine to twelve months will satisfy the requirement for one fiscal year. For example, a company with a March 31 year-end decides on January 2, 2023 to change its year-end to December 31, 2022. The company must file a transition report on Form 10-K that includes audited statements of comprehensive income, cash flows, and stockholders’ equity for the nine-month transition period ended December 31, 2022 and for each of the two years ended March 31, 2022, as well as audited balance sheets as of March 31, 2022 and December 31, 2022.

In contrast, a company with a June 30 year-end decides on January 2, 2023 to change its year-end to December 31, 2022. The company must file a transition report on Form 10-K that includes audited statements of comprehensive income, cash flows, and stockholders’ equity for the six-month transition period ended December 31, 2022, and for each of the three years ended June 30, 2022. The company must also file audited balance sheets as of December 31, 2022, June 30, 2022 and June 30, 2021.

No audited reporting period, under any circumstances, may exceed 12 months for domestic issuers.

Even though an issuer complies with Exchange Act requirements following an election to change the fiscal year, Securities Act form provisions may require it to provide more current audited financial statements in a Securities Act registration statement. In other words, the requirement to file audited transition-period financial statements may be accelerated when a Securities Act registration statement is filed, with the requirement based on the former fiscal year-end.

For example, a company with a September 30 year-end decides on January 2, 2023 to change its year-end to December 31, 2022, and files a transition report on Form 10-Q containing unaudited financial statements for the transition period from October 1, 2022 to December 31, 2022. Under the Exchange Act, audited transition-period financial statements would not need to be filed until the company files its December 31, 2023 Form 10-K. However, a registration statement declared effective after November 14, 2023 (based on the 45-day provision under S-X 3-01) must contain those audited transition-period financial statements.

A business combination accounted for as a reverse acquisition may result effectively in a change in fiscal year. See Topic 12.

An issuer is permitted, but not required, to recast its prior period financial statements in subsequent annual reports on Form 10-K or Form 20-F to conform with the issuer’s newly adopted fiscal year. [FRR 35, n84]

A change from a fiscal year ending as of the last day of the month to a 52-53 week fiscal year commencing within seven days of the month end (or vice-versa) is not deemed a change in fiscal year-end if the new fiscal year commences with the end of the old fiscal year. A transition report would not be required. [FRR 35, n26] (Last updated: 9/30/2010)

Smaller Reporting Companies may choose to provide disclosures under S-X Article 8 rather than under other S-X Articles applicable to Non-Smaller Reporting Companies. The principal differences are that Article 8 does not have a requirement to file supplemental schedules, does not designate specific financial statement format, does not stipulate quantitative thresholds for many disclosures, and does not have a requirement to file separate financial statements of investees as would be required under S-X 3-09. However, the auditor reporting and independence requirements of S-X Article 2 and the full cost oil and gas disclosures required by S-X 4-10 apply to Smaller Reporting Companies. With regard to pro forma financial information, Smaller Reporting Companies should comply with the requirements of S-X 8-05, but may wish to consider the guidance in S-X Article 11.

The annual report does not need to include the separate financial statements of other entities, pro forma data, or schedules required by Articles 3, 8, 11 and 12 of Regulation S-X, or predecessor audit reports. [Rule 14a-3(b)(1)]

May report on a different basis pursuant to SAB Topic 12E.

May present financial statements on statutory basis [S-X 7-02], which cannot be characterized as being in conformity with GAAP. CF-OCA should be consulted on filings containing such financial statements. A mutual insurance company converting to stock form must follow GAAP for stock companies for all periods presented.

An EGC is not required to comply with new or revised financial accounting standards until a company that is not an issuer (as defined under section 2(a) of the Sarbanes-Oxley Act of 2002) is required to comply with such standards, if such standards apply to companies that are not issuers. An EGC that chooses not to take advantage of the extended transition provision must make such choice at the time the company is first required to file a registration statement, periodic report or other report, and must notify the Commission of such choice. Note that the decision to forego the extended transition period is irrevocable. See Topic 10 for additional information. (Last updated: 6/30/2013)

A guarantee of a security is a separate security, and the issuer of a guarantee is subject to the reporting and registration requirements applicable to other issuers. Relief from separate reporting and financial statement requirements is available for subsidiary issuers and guarantors of guaranteed securities in certain circumstances. See Section 2500.

Fiscal year-end is presumed to be calendar year-end if no closing date has been adopted. [S-X 1-02(k)]

Consistent chronological order generally should be followed in presentation of financial data throughout the filing to avoid confusion. [SAB Topic 11E]

Fiscal years may not exceed 12 months. Under S-X 3-06, nine to twelve months of audited financial statements will meet the requirement for one year of audited financial statements:

1. when a registrant has changed its fiscal year (see Section 1365.2), or
2. for financial statements of an acquired business required under S-X 3-05.

A company is not required to furnish selected quarterly financial data pursuant to S-K 302(a) in its initial registration statement under the Securities Act if it does not have any securities registered under Section 12(b) or 12(g) of the Exchange Act. A company that has securities registered under the Exchange Act must comply with S-K 302(a) in any Securities Act or Exchange Act document that calls for that disclosure unless it is a Smaller Reporting Company. A Smaller Reporting Company is not subject to S-K 302(a).

Selected quarterly financial data is not required to be furnished in a Form S-4 for a private target company that is being acquired by a registrant. Since the private company does not have any securities registered under Section 12(b) or 12(g) of the Exchange Act, it is not subject to the disclosure requirements of S-K 302(a).