Topic 6: Foreign Private Issuers

6110.2 Foreign Private Issuer [Regulation C, Rule 405 and Exchange Act Rule 3b-4]: The term foreign private issuer means any foreign issuer other than a foreign government except an issuer meeting the following conditions:

1. More than 50% of the outstanding voting securities of such issuer are directly or indirectly owned of record by residents of the United States; and
2. Any of the following:

   1. The majority of the executive officers or directors are United States citizens or residents;
   2. More than 50% of the assets of the issuer are located in the United States; or
   3. The business of the issuer is administered principally in the United States.

(Last updated: 9/30/2011)

6110.3 Registrants may test for compliance with the foreign private issuer definition once per year. The test is required to be performed as of the last business day of the registrant's most recently completed second fiscal quarter. [Regulation C, Rule 405 and Exchange Act Rule 3b-4] Consequences of failing to meet the foreign private issuer definition are described in Section 6120.2. (Last updated: 9/30/2011)

6110.4 Foreign Business [S-X 1-02(l)]: A foreign business is not organized under the laws of the U.S. or any state thereof, is majority owned by persons who are not U.S. citizens or residents and:

1. More than 50% of its assets are located outside the U.S. or
2. A majority of its executive officers and directors are not U.S. citizens or residents.

6120.1 Foreign private issuers are eligible to use Form 20-F and Forms F-1, F-3, and F-4 which provide certain financial statement and disclosure accommodations.

Question: Can a foreign private issuer elect to use the registration and reporting forms that domestic companies use?

Answer: Yes. However, if it elects to do so, it must comply with all of the requirements of the "domestic company" forms. A foreign private issuer that voluntarily files on domestic forms is not required to prepare its financial statements in accordance with U.S. GAAP (see section 6120.6).

6120.2 A foreign issuer — other than a foreign government — that does not meet the definition of a foreign private issuer must use the same registration and reporting forms as a domestic registrant. A foreign issuer that ceases to meet the foreign private issuer definition becomes subject to the reporting requirements for a domestic registrant. The test for compliance with the foreign private issuer definition is required to be performed as of the last business day of the registrant’s most recently completed second fiscal quarter (the determination date). Reports filed or furnished during the remainder of the fiscal year in which the registrant ceased to meet the definition may continue to be made using forms and requirements applicable to foreign private issuers. Beginning on the first day of the fiscal year following the determination date, the registrant must use the forms and follow the requirements prescribed for domestic registrants. [Regulation C, Rule 405 and Exchange Act Rule 3b-4] For example, if a calendar fiscal year registrant determines on June 30, 2022 that it is no longer a foreign private issuer, it would become subject to domestic reporting requirements on January 1, 2023. It would not be required to file Forms 8-K or 10-Q during the period from June 30, 2022 through December 31, 2022. However, it would be required to file reports on Form 8-K for events occurring on or after January 1, 2023, file quarterly reports on Form 10-Q for quarters ended after January 1, 2023, and file its annual report for the year ended December 31, 2022 on Form 10-K rather than Form 20-F. The financial statements in the Forms 10-Q and 10-K would need to be presented in conformity with U.S. GAAP for all required periods. The due dates of the Forms 10-Q and 10-K would be based on the issuer’s status as a large accelerated filer, accelerated filer, or non-accelerated filer, tested as of the determination date described above. See Section 1330 for the due dates applicable to each category of filer.

6120.3 [Reserved]

6120.4 If the registrant is no longer eligible to file as a foreign private issuer, the financial statements should be recast into U.S. GAAP for all periods presented in the financial statements. Consideration should be given as to the appropriate currency in which the registrant should report. These registrants must use the U.S. dollar as their reporting currency, unless another reporting currency is more appropriate (e.g., where substantially all of the registrant’s operations are conducted in a single foreign currency). (S-X 3-20(a)(2)). (Last updated: 12/31/2022)

6120.5 With respect to Canadian registrants, IFRS has been incorporated into Canadian GAAP for publicly accountable enterprises for fiscal years beginning on or after January 1, 2011. Financial statement requirements for Canadian registrants are the same as required for other registrants. If the Canadian registrant is a foreign private issuer, it may prepare its financial statements in accordance with IFRS as issued by the IASB, or U.S. GAAP. A Canadian company that is not a foreign private issuer must use U.S. GAAP in filings with the SEC. (Last updated: 12/31/2022)

6120.6 Foreign private issuers that voluntarily file on domestic forms may file financial statements prepared under home-country GAAP and provide a reconciliation to U.S. GAAP under Item 18 of Form 20-F. Foreign private issuers that voluntarily file on domestic forms may file financial statements prepared under IFRS as issued by the IASB without reconciliation to U.S. GAAP. [S-X 4­01(a)(2)] In both cases the filings should prominently disclose that the company meets the foreign private issuer definition but is voluntarily filing on domestic forms. (Last updated: 9/30/2009)

6120.7 Canadian and other foreign private issuers must provide financial statements prepared according to U.S. GAAP in order to use scaled rules available to smaller reporting companies. [S-X 8-01] Note that scaled disclosure rules may be used only if the issuers file on a form available to U.S. domestic companies (e.g., Form 10-K). [S-X 8-01, Note 1]

6120.8 Reincorporation of a foreign private issuer as a U.S. entity generally will require a Securities Act registration statement on a domestic form (S-4) for the exchange of shares with the new domestic issuer. All periods must be restated to U.S. GAAP and U.S. dollars. See Section 6120.4.

6120.9 Deregistration rules differ for foreign private issuers versus domestic issuers. Generally, foreign private issuers are permitted to deregister when trading volume in the U.S., rather than number of U.S. shareholders, falls below specified levels. Refer to Exchange Act Rule 12h-6.

6120.10 Foreign private issuers that file on Form 20-F and foreign private issuers who voluntarily file on Form 10-K are not subject to executive compensation disclosures required by S-K 402, and may, instead, follow Form 20-F executive compensation disclosures. However, a foreign-domiciled registrant that does not meet the foreign private issuer definition must file on 10-K and is required to comply with S-K 402.

6210.1 Audited Financial Statements Required in a Registration Statement or Annual Report:

6210.2 Unaudited Interim Financial Statements Required:

(Last updated: 12/31/2011)

1. Registration statement
   General Rule — Interim financial statements are required in a registration statement if the effective date of the registration statement is more than nine months after the end of the last audited financial year. In this circumstance the registration statement 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. See exceptions to this general rule in Section 6220.

   Financial Statement	Period Required
   Balance Sheet	As of an interim date that complies with the requirements described in the paragraph preceding this table.
   Statement of Comprehensive Income and Cash Flow Statement	For the period from the latest fiscal year end to the interim balance sheet date and corresponding period in the prior year.
   Shareholders' Equity	For the period from the latest fiscal year end to the interim balance sheet. Presentation of the corresponding period in the prior year is not required.

2. Periodic Interim Reports: Foreign private issuers are not subject to the quarterly reporting requirements of Exchange Act Rules 13a-13 and 15d-13. Foreign private issuers that file annual reports on Form 20-F are required only to furnish promptly, in a Form 6-K, material information:

   1. Distributed to stockholders or to a national exchange, if made public by that exchange, or
   2. Required to be made public by its domestic laws. [Exchange Act Rules 15d-13(b) and 13a-13(b)]

6220.2 The 15-month period for audited statements is extended to 18 months, and the nine month period for interim statements is extended to 12 months, for the following offerings:

1. Exercise of outstanding rights granted pro rata to all existing security holders;
2. Dividend or interest reinvestment plan; or
3. Conversion of outstanding convertible securities or exercise of outstanding transferable warrants. [Item 8 of Form 20-F]

6220.3 Special Rule for Foreign Private Issuer IPOs — Audited financial statements in initial public offerings must be no more than 12 months old at the time of filing and upon the effectiveness of the registration statement. However, this rule applies only where the registrant is not public in any jurisdiction. The registrant may comply with the 15-month requirement if the registrant is able to represent adequately that compliance with the 12-month requirement is not required in any other jurisdiction and it is impracticable or involves undue hardship.

The representation must be filed as an exhibit to the registration statement. [Item 8 of Form 20-F] (Last updated: 10/30/2020)

6220.4 The age requirements in Item 8 of Form 20-F also apply to financial statements of (Last updated: 12/31/2022):

1. Foreign businesses acquired by both foreign and domestic registrants under S-X 3-05, including filings by domestic registrants under Items 2.01 and 9.01 of Form 8-K (see Sections 2045.14 and 2045.15);
2. Foreign target businesses required in Form S-4 or Form F-4;
3. Foreign equity investees of both foreign and domestic registrants under S-X 3-09; and
4. Foreign businesses that are acquired real estate operations under S-X 3-14.

6220.5 A foreign private issuer that has been in existence less than a year must include an audited balance sheet that is no more than nine months old. If the foreign private issuer has commenced operations, audited statements of comprehensive income, stockholders' equity and cash flows for the period from the date of inception to the date of the audited balance sheet also are required.

6220.6 More Current Published Information

1. If financial information reporting revenues and income for an annual or interim period more current than otherwise required by Item 8 of Form 20-F is made available to shareholders, exchanges, or others in any jurisdiction, that information should be included in the registration statement. The more current information is not required to be reconciled to U.S. GAAP. However, a narrative explanation of differences in accounting principles should be provided, and material new reconciling items should be quantified. Differences between foreign and U.S. GAAP can be identified by cross-reference to U.S. GAAP reconciliation footnotes elsewhere in the filing. Note that the reconciliation requirements do not apply to issuers filing audited financial statements prepared under IFRS as issued by the IASB. See Section 6300.
2. Occasionally, the interim information that is publicly distributed in the issuer’s home country will be prepared using accounting standards that are different from those used in the U.S. registration statement. For example, a foreign issuer may use U.S. GAAP in its primary financial statements in filings with the SEC, but reports in a foreign GAAP in its home country. The company releases more recent earnings information in its home country in foreign GAAP. Item 8.A.5 requires that information to be included in the prospectus. In this instance, the U.S. investor has not had the benefit of knowing the reconciling items between home-country GAAP and U.S. GAAP. Therefore, the information disclosed pursuant to Item 8.A.5 would need to be supplemented with a description and quantification of differences in accounting principles. In this situation, an issuer may either (a) reconcile the Item 8.A.5 information to U.S. GAAP or (b) provide a reconciliation from U.S. GAAP to foreign GAAP (reverse reconciliation) for at least the most recent fiscal year required in the registration statement. (Last updated: 9/30/2009)
3. Inclusion of published information under Item 8.A.5 does not ordinarily trigger a requirement to include full interim financial statements more recent than otherwise required. For example, if complete financial statements related to the most recent quarter (but not the comparative period) are distributed in a foreign issuer’s home country, that information must be included in the U.S. registration statement. Comparative prior period information is not required because the information provided is included only because of Item 8.A.5. In order to avoid confusing U.S. readers, the registrant should include disclosure explaining why the information is provided particularly when the information is placed with other financial statements and may look incomplete. (Last updated 12/31/2009)
4. However, if the information provided contains a reconciliation to U.S. GAAP, the staff believes that inclusion of reconciled information for the comparative prior periods generally will also be necessary to prevent the current period information from being misleading. A foreign private issuer is not ordinarily required to provide U.S. GAAP information in its home jurisdiction. Accordingly, when a foreign private issuer presents more current U.S. GAAP information, it effectively has decided to present interim financial statements, and is also required to present comparatives as required by Item 8.A.5 of Form 20-F. In these circumstances, the current and comparative interim period would need to be covered by MD&A and pro forma information would need to be updated to that date. (Last updated 12/31/2009)

6220.7 Acquired and to be Acquired Foreign Businesses under S-X 3-05

1. Financial statements of acquired and to be acquired foreign businesses required under S-X 3-05 must comply with the age of financial statement requirements at the time the registration statement is declared effective. For a calendar year-end entity, this means that if a registration statement were to become effective prior to October 1, 20XX, financial statements for any interim period would not be required under S-X 3-05 for a foreign business.
2. However, interim financial statements for the period preceding the acquisition date may not be omitted solely on the basis that the acquisition occurred during the first nine months of the current year; consideration must be given to the requirements of Item 8.A.5. of Form 20-F. The financial statements generally need not be updated if the omitted period is less than six months, and the acquired business does not prepare quarterly financial statements under its home-country reporting requirements.

6220.8 Age of Pro Formas in Cross-border Business Combinations

1. The age of the pro forma financial information included in a registration statement is based on the age of financial statements requirement applicable to the registrant. If a foreign private issuer files a Form F-4 and the target company is a U.S. domestic registrant, the age of the pro forma information may be determined by reference to Item 8 of Form 20-F. By contrast, if a U.S. domestic registrant files a Form S-4 and the target company is a foreign private issuer, the age of the pro forma information must be determined by reference to S-X 3-12.
2. Application of the age of financial statement rules may require the foreign target company to include in a Form S-4 a period in the pro forma information that would be more current than its separate historical financial statements. However, S-X Article 11 permits the ending date of the periods included for the target company to differ from those of the registrant by up to 93 days. Registrants are permitted to use combinations of periods that involve overlaps or gaps in the information of the target company of up to 93 days, provided that the resulting annual and interim periods are of the same length required for the registrant, and there are no overlaps or gaps in the registrant's information. However, registrants are not permitted to omit an interim pro forma presentation because of different fiscal periods.

6220.9 In certain circumstances, the staff will consider special processing needs for cross-border offerings which involve special problems of coordination among several national jurisdictions. Foreign issuers should direct requests for special processing to the Division's Office of International Corporate Finance in advance of filing.

6230.2 The requirement for current financial statements includes all required financial statements, including those required under S-X 3-05, 3-09, 3-10 and 3-14, target company financial statements on a Form F-4, as well as disclosures required by S-X 13-01 and 13-02. However, the staff may consider requests for relief in circumstances where this would result in the need to provide financial statements of other entities more current than those that would be provided by a similarly-situated domestic registrant. (Last updated: 12/31/2022)

6230.3 S-K 512(a)(4) does not require in a post-effective amendment the inclusion of financial statements of entities that were not required in the original effective registration statement (for example, subsequently acquired businesses). However, the "fundamental change" provisions of S-K 512(a)(1) may require such financial statements.

6230.4 F-3 eligible issuers filing on Form F-3 or F-4 may incorporate by reference reports filed or furnished to the SEC that contain the updated financial statements rather than file a post-effective amendment. [S-K 512(a)(4)]

6240.1 General Rule:

6250.1 Transition reporting is described in Sections 1360 and 1365. Transition reports for foreign private issuers are filed on Form 20-F as follows:

(Last updated: 9/30/2011)

6250.2 The staff may consider requests for a transition period of more than 12 months if a longer period is accepted by the issuer's home-country regulator. Issuers that receive an accommodation are required to provide complete unaudited financial statements with all of the applicable (i.e., Article 5 level) disclosures for both the 12-month period and the remaining portion of the transition period.

6250.3 Foreign private issuers filing a registration statement after electing to change their fiscal year end may need to provide more current audited financial statements than are required under the Exchange Act transition reporting rules in order to comply with the age of financial statement requirements in the registration statement. A foreign private issuer's most recently audited financial statements cannot exceed the age specified by Item 8 of Form 20-F (generally 15 months) at the registration statement's date of effectiveness.

6310.2 Eligibility to omit reconciliation: The accounting policy footnote must state compliance with IFRS as issued by the IASB and the auditor's report must opine on compliance with IFRS as issued by the IASB. The foreign private issuer may state, and the auditor may opine on, compliance with both IFRS as issued by the IASB and home-country accounting standards (e.g., IFRS as endorsed in the EU) if there is no difference. [Item 17c of Form 20-F]

6310.3 Foreign private issuers that comply with another basis of reporting (e.g., home-country GAAP) are not eligible to omit the U.S. GAAP reconciliation. In addition, foreign issuers that are not foreign private issuers or domestic subsidiary issuers of foreign companies must continue to provide the U.S. GAAP reconciliation.

6320.2 Reconciliation to IFRS as issued by the IASB in lieu of full compliance with IFRS as issued by the IASB is not permitted. (Last updated: 9/30/2011)

6320.3 [Reserved]

6320.4 Certain transactions and industry-specific issues, for example, insurance contracts, extractive activities, common control mergers, reorganizations, and recapitalizations are not addressed by specific IASB standards. Consistent with IAS 1 and IAS 8, the registrant must provide full and transparent disclosure about the accounting policies selected and the effects of those policies on the IFRS financial statements.

6320.5 IFRS filers need not apply SABs that related specifically to U.S. GAAP (e.g., SAB 104). However, in selecting accounting policies under IAS 8, a registrant may apply SABs that relate to U.S. GAAP and otherwise meet the IAS 8 requirements. Note that SABs related to IFRS, filing requirements, and auditing apply. [Release No. 33-8879]

6320.6 Applicability of Regulation S-X Form and Content Requirements - Foreign private issuers that file financial statements prepared in accordance with IFRS as issued by the IASB must comply with IASB requirements for form and content within the financial statements, rather than with the specific presentation and disclosure provisions in Articles 4, 5, 6, 7, 9, and 10 of Regulation S-X. However, foreign private issuers must comply with all other applicable S-X requirements including, but not limited to, the applicable Article 12 schedule requirements and the Article 3 requirements of financial statements of other entities. (See Release No. 33-8879, footnote 136) (Last updated: 12/31/2012)

6330.2 For pre-effective registration statements and post-effective amendments with annual financial statements more than nine months old, reconciliation is not required for an interim period where the issuer complies with and explicitly states compliance with IAS 34. Note: The annual statements must also be prepared using IFRS as issued by the IASB. [Instruction 4 to Item 8.A.5 of Form 20-F]

In a foreign private issuer's first year of reporting in IFRS, the registrant may file two years rather than three years of statements of profit or loss and other comprehensive income, changes in shareholders equity and cash flows prepared in accordance with IFRS as issued by the IASB, with appropriate related disclosure. As a reminder, IFRS 1 requires an entity’s first IFRS financial statements to include at least three statements of financial position. [General Instruction G(a) to Form 20-F] (Last updated: 12/31/2010)

6340.2 The one-time accommodation available for first-time IFRS implementers and the guidance found in Instruction G to Form 20-F apply not only to registrants, but also to foreign businesses whose financial statements are required under S-X 3-05, 3-09, 3-10, and 3-14. (Last updated: 12/31/2022)

6340.3 All first-time adopters of IFRS are required to provide certain expanded disclosures about their use of elective transitional treatments under IFRS 1, as well as meet certain presentation requirements with respect to their transitional reconciliation from previous (home-country) GAAP to IFRS under the disclosure requirements of IFRS 1, First-time Adoption of International Financial Reporting Standards. [Instruction 4 to Item 5 of Form 20-F]

6340.4 During the period an issuer is changing the body of accounting standards used to prepare its financial statements from previous GAAP to IFRS, a situation may arise in which the most recent annual financial statements are prepared under previous GAAP and any interim financial statements might be prepared under IFRS. Because the most recent annual and interim periods may not be comparable, financial statements in transitional registration statements for first-time adopters may be prepared under one of three options:

1. 3 years of previous GAAP annual financial statements, and previous GAAP interim statements for the current and comparable prior period, all with reconciliation to U.S. GAAP;
2. 2 years of IFRS annual financial statements and IFRS interim statements for the current and comparable prior period; or
3. 3 years of previous GAAP financial statements, including reconciliations to U.S. GAAP, IFRS interim statements for the current and comparable prior period, and U.S. GAAP condensed information for the most recent year, current interim period, and the comparable prior interim period.

   [General Instruction G. (f)(2) to Form 20-F] (Last updated: 6/30/2011)

6340.5 A first-time adopter that is unable to provide information that complies with one of the three options noted above should contact the Office of International Corporate Finance in the Division of Corporation Finance if it has comparable financial information based on a combination of previous GAAP, IFRS as issued by the IASB and U.S. GAAP available. [Instruction to General Instruction G.(f)(2) to Form 20-F] The first-time adopter should develop an approach specific to its facts and circumstances that provides a bridge between the annual previous GAAP financial information reconciled to U.S. GAAP and the IFRS financial information. First-time adopters should clearly set forth their proposed approach when consulting the staff. While not considered inclusive of all acceptable alternatives, the following are examples of approaches that could provide an appropriate level of information to achieve a bridge between these annual and interim periods.

1. Bridging forward to IFRS:

   • Previous GAAP annual financial statements with a U.S. GAAP reconciliation for the three most recent fiscal year ends.
   • IFRS interim financial statements (including comparative periods and cumulative year to date periods), compliant with IAS 34 and enhanced with IFRS 1 reconciliations and disclosures typically included in an annual set of IFRS first-time adoption financial statements.
2. Bridging back to U.S. GAAP:

   • Previous GAAP annual financial statements with a U.S. GAAP reconciliation for the three most recent fiscal year ends.
   • IFRS interim financial statements compliant with IAS 34 reconciled to U.S. GAAP (including comparative periods and cumulative year to date periods). (Last updated: 6/30/2011)

6345.1 Some registrants have presented financial statements in more than one GAAP prior to their first-time adoption of IFRS as issued by the IASB; for example, in home-country GAAP in their local market and in U.S. GAAP in their SEC filings. These registrants need to determine whether home-country GAAP or U.S. GAAP is their “previous GAAP” for purposes of applying IFRS 1. If they determine that U.S. GAAP is the previous GAAP, their IFRS 1 reconciliation of previous GAAP to IFRS as issued by the IASB will be U.S. GAAP. If they determine that home-country GAAP is the previous GAAP, however, the staff does not believe the IFRS 1 reconciliation of previous GAAP (home-country GAAP) to IFRS as issued by the IASB is sufficient for SEC filings that have previously only presented U.S. GAAP information. In this instance, the staff believes an additional reconciliation from U.S. GAAP to IFRS as issued by the IASB should be provided to reasonably inform U.S. investors about the changes in the basis of presentation. This reconciliation could be presented directly from U.S. GAAP to IFRS as issued by the IASB in a note to the audited financial statements, or if impracticable in an audited financial statement schedule, for the same dates and periods that the IFRS 1 reconciliation is presented. The reconciliation would be presented in a level of detail consistent with Item 17 of Form 20-F. Alternatively, the reconciliation could be presented in the notes to the audited financial statements as part of a two-step reconciliation that includes the IFRS 1 reconciliation – from U.S. GAAP to previous GAAP, and then from previous GAAP to IFRS as issued by the IASB.

6345.2 Some registrants have adopted IFRS as issued by the IASB in the past in the financial statements presented in their local market, while continuing to present U.S. GAAP in their SEC filings. These registrants would have included the IFRS 1 reconciliation from previous GAAP (home-country GAAP) to IFRS as issued by the IASB in their local market financial statements in the past, but not in the U.S. GAAP financial statements included in SEC filings. If the registrant subsequently decides to present IFRS as issued by the IASB financial statements in its SEC filings, it is not required to present the reconciliation from previous GAAP specified by IFRS 1 because it is no longer a first-time adopter subject to IFRS 1. However, since the historical SEC filings have presented only U.S. GAAP information, bridging disclosures in the form of reconciliation from U.S. GAAP to IFRS as issued by the IASB are generally necessary to inform U.S. investors about the changes in the basis of presentation. This bridging can best be presented by providing a reconciliation directly from U.S. GAAP to IFRS as issued by the IASB in a note to the audited financial statements, or if impracticable, in an audited financial statement schedule, for the comparative balance sheet date and comparative income statement periods preceding the most recent fiscal year. Generally, this reconciliation would be presented in a level of detail consistent with Item 17 of Form 20-F and included as part of the audited financial statements.

6350.2 Significance testing is based on the accounting used by the issuer. This means that the amounts used in the tests for the acquiree or investee (the numerator) must be based on the same basis of accounting as that of the issuer. For example, if the issuer presents its financial statements in home-country GAAP with reconciliation to U.S. GAAP, then the amounts for the acquiree or investee in the numerator of the tests must be based on U.S. GAAP. In some cases, amounts from the acquiree's or investee's historical financial statements will need to be converted to the issuer's basis of accounting. The following table illustrates the basis of accounting on which the tests are based under typical scenarios.

6350.3 Separate Financial Statements of Other Entities: Is Reconciliation to U.S. GAAP Required?

By contrast, the basis of accounting permitted or required in the acquiree's or investee's historical financial statements is based on whether that entity meets the definition of a foreign business. A foreign business may present its financial statements using the requirements applicable to a foreign private issuer. The following table illustrates whether an acquiree or investee must reconcile its financial statements to U.S. GAAP under typical scenarios.

S-X Article 11 Pro Forma Information

6360.2 The staff generally has not objected if an issuer, that otherwise would present its pro formas based on home-country GAAP with a reconciliation to U.S. GAAP, elects to present the pro formas directly in U.S. GAAP.

6410.2 First-time Entrants to U.S. Reporting System

1. If a foreign registrant has not previously filed financial statements with the SEC on a reconciled basis, it is only required to provide reconciliations of the financial statements and selected financial data to U.S. GAAP for the two most recently completed fiscal years and for any interim periods required in the registration statement. In each subsequent year, on a prospective basis, an additional year of the reconciliation is required. This also applies to any other required financial statements where the entity is a foreign business such as those filed pursuant to S-X 3-05, 3-09, 3-10 and 3-14, as well as target company financial statements in Forms F-4, Forms S-4, and proxy statements. Published financial information that is included because it is more current (see Section 6220.6) is ordinarily not required to be reconciled. (Last updated: 12/31/2022)
2. The U.S. GAAP reconciliation (compliant with Item 17 of Form 20-F) must be included for non-reporting foreign target companies in Forms F-4, Forms S-4 and proxy statements unless a reconciliation is unavailable or not obtainable without unreasonable cost or expense. In these cases, a narrative description must be provided of all material variations in accounting principles, practices and methods used in preparing the non-U.S. GAAP financial statements from those accepted in the U.S. [See Instruction 2 to Item 17 of Form S-4, Instruction to paragraphs (b)(5) and (b)(6) of Item 17 of Form F-4, Item 14 of Schedule 14A]

   NOTE: While reconciliations to U.S. GAAP initially are required only for two years, the registrant’s financial statements still need to be presented in the registration statement for all of the periods required by Item 8 of Form 20-F (see Section 10220.1 for EGCs). Similarly, non-EGCs must present selected financial data for five years, even though the oldest three years need not be reconciled to U.S. GAAP. (See Section 10220.2 for exception for EGCs.)

3. First-time registrants that elect to prepare the financial statements in accordance with U.S. GAAP may provide statements of comprehensive income and statements of cash flows for only their two most recent fiscal years. However, selected financial data still needs to be presented for five years under home-country GAAP if U.S. GAAP financial data is not available for the oldest three years, unless the registrant qualifies as an EGC (see Section 10220.2). MD&A need only discuss the two years presented in the financial statements. [Item 8 of Form 20-F]
4. Predecessor financial statements and selected financial data must be presented in the same comprehensive body of accounting as the registrant. A foreign entity that is a predecessor of a U.S. domestic company must present financial statements in U.S. GAAP and U.S. dollars. (Last updated: 6/30/2013)

6410.3 [Reserved]

6410.5 Transactions that Result in a Foreign Private Issuer Ceasing to be a Shell Company

1. A foreign private issuer may cease to be a shell company as a result of a reverse acquisition or merger. In this situation, the transaction, including financial statements of the other party to the transaction, must be reported on a Form 20-F within four business days of the completion of the transaction. The Form 20-F that is filed must include the same information as a registration of securities on Form 20-F. For example, the accommodations in Form 20-F that in certain circumstances permit two years of financial statements rather than three years are applicable. Refer to Topic 12. [Exchange Act Rules 13a-19 and 15d-19, and Instruction A(d) to Form 20-F]
2. If the foreign private issuer shell company engages in a transaction that causes it to lose its status as a foreign private issuer at the same time it ceases to be a shell company, reports filed or furnished during the remainder of the fiscal year may continue to be made using forms and requirements applicable to foreign private issuers. See Sections 6110.3 and 6120.2. (Last updated: 10/20/2014)

6410.6 Financial Statements of Foreign Acquired Businesses or Foreign Equity Investees in Filings by Domestic Issuers or Foreign Private Issuers

1. The reporting requirements of Form 8-K do not apply to foreign private issuers. Financial statements under Rule 3-05 are also not required when filing Form 20-F as an annual report. However, foreign private issuers must comply with S-X 3-05 in registration statements under the 1933 Act (e.g., Form F-1, F-3) and in registration statements on Form 20-F.
2. If financial statements are required to be filed for foreign acquirees or foreign equity investees, these statements may be prepared on a comprehensive basis other than U.S. GAAP or IFRS as issued by the IASB. Reconciliations to U.S. GAAP must be provided when the significance of the foreign acquiree or foreign equity investee to the registrant exceeds 30%. Refer to Topic 2 for the tests of significance. [Item 17(c)(2)(v) and (vi) of Form 20-F]
   When determining whether a reconciliation to U.S. GAAP is required, if the foreign equity investee is significant to the registrant at the 30% level or greater in any of the years being tested, a reconciliation is required for all periods. Whether the U.S. GAAP reconciliation is required to be audited is based upon the audit requirements applicable to the underlying financial statements of the foreign acquiree or equity investee.
   For example, take a foreign equity investee that had previously been significant at a 30% level in prior periods, was significant at the 20% level in 2005, was not significant in 2006, and is significant at the 30% level in 2007. The financial statements provided for the foreign equity investee in the registrant's 2007 filing must include a U.S. GAAP reconciliation for all years. The financial statements, including the reconciliation, must be audited for 2005 and 2007, but not for 2006.
   Note that if this had been the first-time the financial statements of the foreign equity investee were significant at a 30% level, the reconciliation of the financial statements could be provided only for the two most recent years.
3. The 30% significance test does not apply to non-reporting foreign target companies provided in Forms S-4, Forms F-4 and proxy statements.
4. Financial statements of acquired businesses or equity investees that meet the definition of a foreign business may be prepared under International Financial Reporting Standard for Small and Medium-sized Entities (“IFRS for SMEs”), published by the IASB in July 2009, with reconciliation to U.S. GAAP as described in b and c above. The staff would not accept financial statements prepared under IFRS for SMEs for issuers, predecessors of issuers, domestic acquired businesses, or domestic equity method investees. (Last updated: 6/30/2010)

6410.7 If reconciliation is required, the financial statements of foreign acquirees or foreign investees need only comply with the reconciliation requirements of Item 17 of Form 20-F, rather than Item 18. Even though the significance level of an acquisition may require the presentation of three years of audited financial statements in a registration statement or other transactional filing, if the acquiree or investee's financial statements have not previously been required in a SEC filing, the U.S. GAAP reconciliation only needs to be provided for the most recent two years and any required interim period.

6410.8 If three years of audited financial statements of an acquired foreign business would be required based on the level of significance, a registrant may elect to present the acquired business' statements for only two years if they are prepared using U.S. GAAP, rather than home-country GAAP with a reconciliation. The registrant's primary financial statements must also be prepared in accordance with U.S. GAAP if post-acquisition periods are considered in determining the years presented.

6410.9 If a foreign incorporated acquiree or investee does not qualify as a foreign business and financial statements are required under S-X 3-05 or 3-09, those financial statements must be presented in conformity with U.S. GAAP, or:

• home-country GAAP reconciled to U.S. GAAP in accordance with Item 18 of Form 20-F; or
• IFRS as issued by the IASB reconciled to U.S. GAAP in accordance with Item 18 of Form 20-F. If the acquiree or investee does not qualify as a foreign business, but does meet the definition of a foreign private issuer, CF-OCA will consider requests for relief from the reconciliation requirement.

6410.10 A foreign or domestic registrant may apply SAB 80 in determining the periods for which audited financial statements of acquired foreign businesses are required in an IPO. Assuming that the businesses acquired are reporting in the U.S. for the first-time, financial statements of foreign businesses required to be presented under the SAB for three years need only be reconciled to U.S. GAAP for the two most recent fiscal years. Financial statements required to be presented under the SAB for two years must be reconciled to U.S. GAAP for both years. Most recent interim period and corresponding prior year financial statements also would be reconciled to U.S. GAAP.

6410.11 If pro forma financial statements are required, they should be prepared in accordance with U.S. GAAP or reconciled to U.S. GAAP.

6410.12 [Reserved]. (Last updated: 12/31/2022)

6420.1 Selected financial data should also include amounts under U.S. GAAP, if the primary financial statements are presented using home-country GAAP. Non-EGCs should provide the selected data for 5 years. See Section 10220.2 for exception for EGCs.

6420.2 A non-EGC’s selected data for the earliest two years of the five-year period may be omitted if the registrant represents that the information cannot be provided without unreasonable effort or expense, and states the reasons for the omission in the filing. [Item 3.A of Form 20-F and Instruction 2 to Item 3.A] See Section 10220.2 for guidance regarding selected financial data disclosure for EGCs.

6510.2 A quantified description of balance sheet differences under home-country GAAP in comparison to U.S. GAAP. Most companies elect to present this information in the form of a reconciliation of shareholders' equity, but they may also provide restated balances of individual balance sheet line items, or describe, in numerical terms, how balance sheet line items would specifically change under U.S. GAAP.

6510.3 Common deficiencies include:

6510.4 A reconciliation of net income from home-country GAAP to U.S. GAAP that quantifies and describes each significant difference.

6510.5 Disclosure of basic and diluted EPS calculated in accordance with U.S. GAAP, if materially different from home-country GAAP. (Last updated: 9/30/2011)

6510.6 A cash flow statement prepared under U.S. GAAP or IAS 7, or a reconciliation of a cash flow statement or statement of changes in financial position that quantifies the material differences in the statement presented as compared to U.S. GAAP. Some of the more common deficiencies in this disclosure include:

1. Failure to identify noncash investing and financing activities;
2. Presentation of items on a net rather than gross basis;
3. Inadequate discussion of the differences in the definitions of "cash" and "cash equivalents"; and
4. Differences in classification.

6510.7 Issuers are encouraged to prepare a supplemental statement of cash flows prepared in accordance with U.S. GAAP to confirm the adequacy of the disclosure of the reconciling items.

6510.8 Information required by supplemental schedule may be presented in accordance with either home-country GAAP or U.S. GAAP. A reconciliation from the home-country GAAP to U.S. GAAP is not required.

6510.9 S-X Article 11 pro forma financial statements either should be prepared on a U.S. GAAP basis or be accompanied by reconciliations to U.S. GAAP prepared in a manner consistent with Item 17. Reconciliations of pro forma information to U.S. GAAP are required even if the historical financial statements of the acquired business are not required to be reconciled. See Section 6220.8 for guidance concerning age of pro forma information. A method consistent with ASC 830 should be used to translate currencies.

6510.10 Disclosure of the accounting method used in the reconciliation to U.S. GAAP for stock-based compensation given to employees and to non-employees. Other than this information, non-issuer financial statements under Item 17 are not required to provide the disclosures set forth in ASC 718. (Last updated: 9/30/2011)

6510.11 [Reserved] (Last updated: 6/30/2011)

6510.12 [Reserved] (Last updated: 10/20/2014)

6510.13 Certain GAAPs do not require the restatement of previously issued financial statements upon discovery of an error that relates to prior periods. For example, some GAAPs permit or require cumulative adjustment in the current period statement of comprehensive income, which would ordinarily cause comparative periods to continue to be materially misstated. That treatment would not be acceptable in SEC filings. (Last updated: 12/31/2010)

6520.2 Pervasive Impact of Differences Between Home-Country and U.S. GAAP

1. If differences between home-country and U.S. GAAP have such a pervasive impact on the financial statements that they render a normal reconciliation (as described above) confusing to investors, full or condensed financial statements prepared in accordance with U.S. GAAP may be necessary in order for the reader to fully understand the impact of the differences in accounting.
   For example: A business combination accounted for as a purchase of another company by the registrant under home-country GAAP but as a reverse acquisition under U.S. GAAP (the registrant is acquired by another company) would most easily be understood if the registrant included, in addition to a description of the differences in accounting, audited financial statements prepared under U.S. GAAP. Those financial statements would reflect the change in basis of the registrant on the acquisition date and present the financial statements of the accounting acquirer prior to the date of acquisition as the financial statements of the registrant. See Topic 12 for additional guidance related to reverse acquisitions.
2. Similarly, expanded presentation formats and disclosures may be necessary in other circumstances, such as differences between home-country and U.S. GAAP in the application of pooling versus purchase accounting, in the non-consolidation versus consolidation of an entity, or in the classification of a business as continuing operations versus discontinued operations. (Last updated 9/30/2009)

6530.1 Statements of comprehensive income prepared using either U.S. GAAP or home-country GAAP are required under both Item 17 and Item 18. These statements may be presented in either format permitted by ASC 220. Reconciliation to U.S. GAAP is encouraged, but not required.

6530.2 ASC 220-10-45-14A requires the presentation of the changes in the accumulated balance for each of the components of other comprehensive income either on the face of the financial statements or in the footnotes. This requirement does not apply to financial statements under Item 17. (Last updated: 9/30/2011)

6530.3 In certain countries, equity components under home-country GAAP are included in retained earnings and are not separately tracked. Reconstruction of these amounts may not be practical. Depending on the facts and circumstances, the staff will generally not object if an issuer concludes, and discloses in its filings, that it is not practical to present the changes in the accumulated balance for each of the components of its other comprehensive income specified by ASC 220-10-45-14A.

The SEC will allow without reconciliation to U.S. GAAP a foreign issuer's cash flow statement that is prepared in accordance with IAS 7, "Cash Flow Statements," as amended. [Item 17(c)(2)(iii) of Form 20-F] A reconciliation of home-country cash flow presentation to IAS 7 does not meet the requirements of the form.

6540.2 Accounting for Effects of Hyperinflation

1. A foreign private issuer that accounts in its primary financial statements for its operations in a hyperinflationary economy in accordance with IAS 21, The Effects of Changes in Foreign Exchange Rates, as amended, may omit quantification of any differences that would have resulted from application of the U.S. standard, ASC 830. [Item 17(c)(2)(iv)(B) of Form 20-F]
2. IAS 21 requires that amounts in the financial statements of the hyperinflationary operation be restated for the effects of changing prices in accordance with IAS 29, Financial Reporting in Hyperinflationary Economies, and then translated to the reporting currency. The accommodation is only available if the issuer uses the historical cost/constant currency method of IAS 29. This accommodation relates to financial statements prepared in a stable reporting currency, not to financial statements price-level adjusted for inflation.

6540.3 [Reserved]

(Last updated: 9/30/2011)

6540.4 Effects of Proportional (Pro Rata) Consolidation

1. Foreign private issuers that use proportional consolidation under home-country GAAP for investments in joint ventures that would be equity method investees under U.S. GAAP may omit reconciling differences related to classification or display and instead provide summarized footnote disclosure of the amounts proportionately consolidated, such as:

   1. Current assets/liabilities;
   2. Noncurrent assets/liabilities;
   3. Net sales;
   4. Gross profit;
   5. Net income; and
   6. Cash flow information resulting from operating, financing, and investing activities.
   [Item 17(c)(2)(vii) of Form 20-F]
2. The disclosure should allow a reader to reconstruct a U.S. GAAP balance sheet. Summarized totals from the investee financial statements (rather than the amounts proportionally consolidated by the registrant) do not satisfy this condition.

   NOTE: This accommodation for proportionately consolidated joint ventures only applies if 1) the joint venture is an operating entity, and 2) its significant financial operating policies are, by contractual arrangement, jointly controlled by all parties having an equity interest in the entity.

3. Separate financial statements of a joint venture being proportionally consolidated are not required.

6620.2 The currency in which dividends are declared, if different from the reporting currency, must be disclosed.

6620.3 A description of material exchange restrictions or controls relating to the reporting currency, and the currency of the issuer's domicile or the currency in which the issuer will pay dividends, if different, must be provided.

6620.4 [Reserved] (Last updated 10/30/2020)

6620.5 Dollar equivalent or convenience translations are generally not permitted, except that a convenience translation may be presented only for the most recent fiscal year and any subsequent interim period. Translation should be made at the exchange rate on the balance sheet date or most recent date practicable, if materially different. The rate used for the convenience translation should generally be the rate that the issuer would use if dividends were to be paid in U.S. dollars.

6620.6 An issuer filing a registration statement on Form F-3 that incorporates financial statements previously filed on Form 20-F does not need to amend or otherwise modify these statements to reflect a more current exchange rate in presenting the convenience translation.

6620.7 While S-X 3-20 allows foreign private issuers to prepare financial statements in the currency it believes is appropriate, it does not address financial statements of acquirees or equity investees. However, these financial statements can be prepared either in the same currency as the issuer or in the currency that normally is used for preparation of such entities’ financial statements. Accordingly, a domestic issuer can prepare financial statements of an acquiree or investee in U.S. dollars. (Last updated: 12/31/2010)

6630.2 If the reporting currency used in a registrant's financial statements is different from that of its predecessor, the predecessor's financial statements should be recast using the registrant's reporting currency.

6710.2 The quantified effects of applying price-level accounting are not eliminated in the reconciliation to U.S. GAAP. In other words, registrants that apply price-level accounting are not required to quantify and remove the effects of inflation as part of the reconciliation to U.S. GAAP. This accommodation applies to all issuers who price-level adjust in conformity with their home-country GAAP even if the currency of the primary economic environment is not hyperinflationary as defined under U.S. GAAP. [Form 20-F Item 17(c)(2)(iv)]

Question: What is a hyperinflationary environment?

Answer: A hyperinflationary economy has cumulative inflation of approximately 100% or more over the most recent three-year period. See ASC 830 for further guidance.

6710.3 Issuers in a hyperinflationary economy that elect to report in accordance with U.S. GAAP can report in either the hyperinflationary currency or a stable currency.

6720.2 If a company updates a registration statement to include interim financial information, the prior annual financial information must be recast in equivalent purchasing power units. A company that incorporates by reference a prior annual report on Form 20-F need not amend the prior filing, but must file restated financial statements in the registration statement or under cover of a Form 6-K that is incorporated by reference.

6720.3 If the rate of inflation during the interim period is very low such that the effect of restatement does not materially affect apparent trends and is clearly immaterial, the staff has not insisted that prior period financial information be restated. If the information is not restated, the rate of inflation and the reason why restatement was not considered to be necessary should be disclosed.

6720.4 The cash flow statements of issuers that prepare price-level adjusted financial statements should present the effects of inflation on cash flows separately from their operating, investing and financing activities. The presentation of a "fourth" cash flow statement category, which separately captures these effects, meets this objective. Price-level adjusted cash flow statements that include the effects of inflation in the line items comprising the three major categories may make the presentation less meaningful and possibly misleading.

Example of a Potentially Misleading Presentation: The financing activities section of the cash flows statement, if price-level adjusted for inflation, may depict reductions of foreign-currency denominated debt because of the recasting of prior balance sheet amounts, even though no cash repayments may have actually occurred.

6720.5 If interim financial information more current than otherwise required by SEC rules is included in a registration statement solely to comply with Instruction 3 to Item 8.A.5 of Form 20-F, the staff encourages, but will not insist, that prior periods be restated. The staff expects companies to provide disclosure necessary to prevent the updated data from being misleading in relation to prior period financial information. For example, the registrant should provide supplemental selected financial data recast in equivalent purchasing power units, accompanied by disclosure of the rate of inflation that would be used to restate all prior financial information in equivalent purchasing power units.

6820.2 The report of the independent accountant, except for MJDS filers in Canada, should include a statement that the audit was conducted “in accordance with the standards of the Public Company Accounting Oversight Board (United States).” The staff will not object if the report also refers to compliance with home-country applicable professional standards. [Instruction 2 to Item 8.A.2 of Form 20-F]

6820.3 Reports of independent accountants issued for MJDS filers may still refer solely to Canadian GAAS when filed on MJDS forms. [Release No. 33-6902] However, if financial statements of an MJDS filer are included in a non-MJDS form, such as Rule 3-05 financial statements in a domestic registrant’s Form 8­K or a foreign private issuer’s Form F-3, then the audit must be conducted, at a minimum, in accordance with, and the audit report must refer to, applicable professional standards for non-issuers.

6820.4 The reconciliation to U.S. GAAP must be audited. The staff recommends that the report of the independent accountant refer explicitly to the reconciliation, but the absence of that reference does not relieve the auditor of its responsibility to examine the reconciliation. The reconciliation footnote may not be labeled "unaudited." Pursuant to SEC rules and auditing standards, omission of a material item that is required to reconcile the financial statements to U.S. GAAP pursuant to Item 17 or Item 18 of Form 20-F, or any otherwise inaccurate presentation of that reconciliation, would require a clear reference in the auditor's report identifying the omission or inaccuracy. [Release No. 33-7119]

6820.5 The correction of a material misstatement in a previously filed U.S. GAAP reconciliation should be recognized in the auditor’s report through the addition of an explanatory paragraph. [AS 6, paragraph 9] (Last updated: 12/31/2010)

6820.6 The staff expects that there would be no material difference between net income and shareholders’ equity amounts reported in a reconciliation to U.S. GAAP and the corresponding amounts that would be reported if the financial statements were presented directly in U.S. GAAP. Accordingly, neither the auditor’s report nor the notes to the financial statements should characterize U.S. GAAP net income or shareholders’ equity amounts as “estimated” or “approximated.” (Last updated: 12/31/2010)

6820.7 If the report includes reference to another accountant, the separate audit report of that accountant must be included. Financial statements of subsidiaries or investees of a foreign private issuer are sometimes prepared in differing GAAPs than that of the registrant. The audit report should be clear as to which auditor is taking responsibility for auditing the conversion of the GAAP of the subsidiary or investee to the GAAP of the issuer, as well as auditing the U.S. GAAP reconciliation.

6820.8 Some foreign private issuers or acquired foreign businesses are jointly audited by more than one firm. Both auditors sign the report and take full responsibility for the audit. Each auditor must comply with all requirements of S-X 2-01, including the U.S. independence requirements. In certain cases, one of the firms may be a U.S. firm.

Foreign private issuers are required to provide disclosures in the event of a change in their independent accountants. The disclosure requirements are contained in Item 16F of Form 20-F. The required disclosures are substantially the same as those required for domestic issuers by S-K 304. However, the disclosures and related auditor’s letter must be filed as part of the annual report on Form 20-F and any registration statements, rather than in a Form 8-K. [Release No. 33-8959]