Topic 13: Effects of Subsequent Events on Financial Statements Required in Filings
13100 General
(Last updated: 9/30/2009)
Certain events that occur after the end of a fiscal year will require
retrospective revision of that year’s financial statements (the “pre-event
financial statements”) if they are reissued after financial statements covering
the period during which the event occurred have been filed. Such events include
reporting a discontinued operation, a change in reportable segments, or a change
in accounting principle for which retrospective application is either required
or elected.
13110.1 Reissuance of the pre-event financial
statements is required if those financial statements are required to be included
or incorporated by reference into a registration or proxy statement (with the
exception of Form S-8 as noted below) along with financial statements covering
the period during which the event occurred (the "post-event" financial
statements).
13110.2 In the case of a registration statement on Form S-3, Item 11(b)(ii) of that form would specifically require retrospective revision of the pre-event audited financial statements that were incorporated by reference to reflect a subsequent change in accounting principle (or consistent with staff practice, discontinued operations and changes in segment presentation) if the Form S-3 also incorporates by reference post-event interim financial statements. If post-event financial statements have not been filed, the registrant would not revise the pre-event financial statements in connection with the Form S-3, however, pro forma financial statements in accordance with Article 11 of Regulation S-X may, in certain circumstances, be required. In contrast, a prospectus supplement used to update a delayed or continuous offering registered on Form S-3 (e.g., a shelf takedown) is not subject to the Item 11(b)(ii) updating requirements. Rather, registrants must update the prospectus in accordance with S-K 512(a) with respect to any fundamental change. It is the responsibility of management to determine what constitutes a fundamental change.
13110.3 If the pre-event financial statements are not
reissued in connection with any filing under the Securities Act or Exchange Act,
annual information does not need to be retrospectively revised until that
information is included in the registrant’s next Annual Report on Form 10-K.
13110.4 Retrospectively revised quarterly information is required in Form 10-Qs filed with post-event financial statements.
13110.5 For the information of investors, once post-event financial statements have been filed with the SEC, a registrant may elect (if reissuance is not required) to file under cover of Form 8-K
(Item 8.01) audited retrospectively revised financial statements for the pre-event periods.
NOTE to SECTION 13100: The requirement to revise financial
statements for Form S-3 and the exception for Form S-8
noted below are derived from the Division of Corporation
Finance’s Compliance and Disclosure Interpretations
August 14, 2009, Securities Act Forms Q126.40: After its Form 10-K is filed, a registrant has a change in accounting principles
(or changes in segment presentation or discontinued
operations), which will cause the financial presentation
in its subsequent Form 10-Qs to differ from that in the
Form 10-K. In this situation, Item 11(b)(ii) of Form S-3
would require the annual audited financial statements
filed in the Form 10-K to be restated to reflect the
change in accounting principles (or changes in segment
presentation or discontinued operations). Would General
Instruction G.2 of Form S-8, which requires that
“material changes in the registrant’s affairs” be
disclosed in the registration statement, also require
such restatement? Not necessarily. Form S-8 does not contain express language similar to Item 11(b)(ii) of Form
S-3, requiring the restatement of financial statements to reflect specified
events. The fact that financial statements eventually will be retroactively
restated does not necessarily mean that there are “material changes in the
registrant’s affairs,” thereby requiring the financial statements to be restated
for inclusion, or incorporation by reference, in a Form S-8. In other words,
financial statements for which Item 11(b)(ii) of Form S-3 would require
restatement may not necessarily need to be restated for incorporation by
reference in a Form S-8. The registrant is responsible for determining if there
has been a material change and, if so, the related information that is required
to be disclosed in a Form S-8. Correspondingly, it is the auditor’s
responsibility to determine if it will issue a consent to use of its report in a
Form S-8 if there has been a change in the financial statements in a
subsequent Form 10-Q where the financial statements in the Form 10-K have
not been retroactively restated. |
13110.6 Form 10-K/A ordinarily should not be used
to file retrospectively revised financial statements that reflect a subsequent
change in accounting principle, discontinued operations or change in segment
presentation. However, the staff will not object if a registrant, in a Form
10-K/A filed to correct a material error, also reflects the retrospective
effects of accounting changes (or consistent with staff practice, discontinued
operations and changes in segment presentation) that have been reflected in
filings with the SEC subsequent to the original Form 10-K. If the Form 10-K/A is
incorporated by reference into a registration statement, then the correction of
the error and the accounting change would be required to be presented in
the Form 10-K/A. In these circumstances, the financial statements in the Form
10-K/A should clearly distinguish the effects of the material error from those
of any subsequent accounting change. (Last updated: 9/30/2010)
13200 Discontinued Operations
(Last updated: 9/30/2008)
13210.1 If financial statements as of a date on or after
the date a component of the registrant has been disposed of or classified as
held for sale are required in a registration or proxy statement, retrospective
reclassification of all prior periods to report the results of that component in
discontinued operations in accordance with ASC 205-20 is required. This guidance
is applicable even where the filing incorporates by reference annual audited
financial statements issued prior to the classification of the component in
discontinued operations. The auditor's consent to incorporation of those
financial statements in a registration or proxy statement is deemed a reissuance
that requires consideration of the effects of subsequent events. Moreover, the
financial statements prepared by management and included in the filing are
required to comply with U.S. GAAP at the date of effectiveness or mailing,
necessitating retrospective reclassification pursuant to ASC 205-20.
13210.2 Predecessor financial statements are required to be retrospectively reclassified to reflect the impact of a successor’s discontinued operations. Registrants should contact the staff if unusual facts and circumstances may prohibit the company’s ability to reclassify predecessor fiscal periods. (Last updated: 3/31/2010)
13300 Changes in Segments
(Last updated: 3/31/2009)
13310.1 If management changes the structure of its
internal organization in a manner that causes the composition of its reportable
segments to change, the corresponding information for prior periods should be
retrospectively revised if practicable in accordance with ASC 280. If annual
financial statements are required in a registration or proxy statement that
includes subsequent periods managed on the basis of the new organization
structure, the annual audited financial statements should include a revised
segment footnote that reflects the new reportable segments. The registrant's
Description of Business and MD&A should be similarly revised. The revised
annual financial statements and related disclosures may be included in the
registration or proxy statement or in a Form 8-K incorporated by reference.
13400 Change in the Reporting Entity or a Business Combination Accounted for in a Manner Similar to a Pooling of Interests
(Last updated: 3/31/2010)
13410.1
ASC 250
requires that a change in the reporting entity or the consummation of a
transaction accounted for in a manner similar to a pooling of interests, i.e., a
reorganization of entities under common control, be retrospectively applied to
the financial statements of all prior periods when the financial statements are
issued for a period that includes the date the change in reporting entity or the
transaction occurred.
13410.2 If a change in the reporting entity or a reorganization occurs for a currently reporting registrant after a year-end balance sheet date but before that year-end Form 10-K is filed, the financial statements in the Form 10-K should not be retrospectively revised to reflect the change in reporting entity or the reorganization. However, the issuer may elect to provide supplemental audited combined financial statements of the entities to be reorganized. Unusual situations can be discussed with CF-OCA.
13410.3 In an initial registration statement, if a change in the reporting entity or a reorganization will occur at or after effectiveness of the registration statement but no later than closing of the IPO, the staff will consider requests to present consolidated or combined financial statements as the primary financial statements of the registrant in lieu of the separate financial statements of the registrant and of the entities to be reorganized based on the particular facts and circumstances.
13500 Stock Splits
(Last updated: 9/30/2008)
Stock splits also require retrospective presentation. Ordinarily, the staff would not require retrospective revision of previously filed financial statements that are incorporated by reference into a registration or proxy statement for reasons solely attributable to a stock split. Instead, the registration or proxy statement may include selected financial data which includes relevant per share information for all periods, with the stock split prominently disclosed.
13600 MEASUREMENT PERIOD ADJUSTMENTS
(Last updated: 9/30/2009)
13610 Financial Statement Requirements in Registration
Statements Pursuant to Retrospective Adjustments to Provisional Amounts in a
Business Combination
If a registrant determines it must make a material retrospective adjustment to
provisional amounts it previously reflected in its financial statements pursuant
to the requirements of ASC
805-10-25 and this adjustment has not yet been reflected in
any historical financial statements, the registrant should provide or
incorporate by reference revised financial statements reflecting the
retrospective adjustment if the adjustment is material. If this retrospective
adjustment has been reflected in subsequent interim historical financial
statements, but the acquisition occurred in the preceding fiscal year and the
adjustments are not reflected in the annual financial statements, the registrant
should provide revised audited financial statements for the year of acquisition
reflecting the adjustments. The revised financial statements are generally filed
via Form 8-K.