Subpart 229.1 — General
229.10 — (Item 10) General.
(a) Application of Regulation S-K. This part (together with the
General Rules and Regulations under the Securities Act of 1933, 15 U.S.C. 77a et
seq., as amended (Securities Act), and the Securities Exchange Act of 1934,
15 U.S.C. 78a et seq., as amended (Exchange Act) (parts 230 and 240 of this
chapter), the Interpretative Releases under these Acts (parts 231 and 241 of this chapter)
and the forms under these Acts (parts 239 and 249 of this chapter)) states the
requirements applicable to the content of the non-financial statement portions of:
(1) Registration statements under the Securities Act (part 239 of this
chapter) to the extent provided in the forms to be used for registration under such Act;
and
(2) Registration statements under section 12 (subpart C of part 249 of
this chapter), annual or other reports under sections 13 and 15(d) (subparts D and E of
part 249 of this chapter), going-private transaction statements under section 13 (part 240
of this chapter), tender offer statements under sections 13 and 14 (part 240 of this
chapter), annual reports to security holders and proxy and information statements under
section 14 (part 240 of this chapter), and any other documents required to be filed under
the Exchange Act, to the extent provided in the forms and rules under that Act.
(b) Commission policy on projections. The Commission encourages
the use in documents specified in §§ 230.175 (Rule 175 under the Securities Act) and
240.3b-6 (Rule 3b-6 under the Exchange Act) of this chapter of management's projections of
future economic performance that have a reasonable basis and are presented in an
appropriate format. The guidelines set forth in this paragraph (b) represent the
Commission's views on important factors to be considered in formulating and disclosing
such projections. These guidelines also apply to projections of future economic
performance of persons other than the registrant, such as the target company in a business
combination transaction, that are included in the registrant's Commission filings.
(1) Basis for projections. The Commission believes that
management must have the option to present in Commission filings its good faith assessment
of a registrant's future performance. Management, however, must have a reasonable basis
for such an assessment. Although a history of operations or experience in projecting may
be among the factors providing a basis for management's assessment, the Commission does
not believe that a registrant always must have had such a history or experience in order
to formulate projections with a reasonable basis. An outside review of management's
projections may furnish additional support for having a reasonable basis for a projection.
If management decides to include a report of such a review in a Commission filing, there
also should be disclosure of the qualifications of the reviewer, the extent of the review,
the relationship between the reviewer and the registrant, and other material factors
concerning the process by which any outside review was sought or obtained. Moreover, in
the case of a registration statement under the Securities Act, the reviewer would be
deemed an expert and an appropriate consent must be filed with the registration
statement.
(2) Format for projections. (i) In determining the appropriate
format for projections included in Commission filings, consideration must be given to,
among other things, the financial items to be projected, the period to be covered, and the
manner of presentation to be used. Although traditionally projections have been given for
three financial items generally considered to be of primary importance to investors
(revenues, net income (loss), and earnings (loss) per share), projection information need
not necessarily be limited to these three items. However, management should take care to
assure that the choice of items projected is not susceptible of misleading inferences
through selective projection of only favorable items. Revenues, net income (loss), and
earnings (loss) per share usually are presented together in order to avoid any misleading
inferences that may arise when the individual items reflect contradictory trends. There
may be instances, however, when it is appropriate to present earnings (loss) from
continuing operations in addition to or in lieu of net income (loss). It generally would
be misleading to present sales or revenue projections without one of the foregoing
measures of income (loss). The period that appropriately may be covered by a projection
depends to a large extent on the particular circumstances of the company involved. For
certain companies in certain industries, a projection covering a two- or three-year period
may be entirely reasonable. Other companies may not have a reasonable basis for
projections beyond the current year. Accordingly, management should select the period most
appropriate in the circumstances. In addition, management, in making a projection, should
disclose what, in its opinion, is the most probable specific amount or the most reasonable
range for each financial item projected based on the selected assumptions. Ranges,
however, should not be so wide as to make the disclosures meaningless. Moreover, several
projections based on varying assumptions may be judged by management to be more meaningful
than a single number or range and would be permitted.
(ii) The presentation of projected measures that are not based on historical financial
results or operational history should be clearly distinguished from projected measures
that are based on historical financial results or operational history.
(iii) It generally would be misleading to present projections that are based on
historical financial results or operational history without presenting such historical
financial results or operational history with equal or greater prominence.
(iv) The presentation of projections that include non-GAAP financial measures should
include a clear definition or explanation of those financial measures, a description of
the Generally Accepted Accounting Principles (GAAP) financial measure to which it is most
directly comparable, and an explanation why the non-GAAP measure was selected instead of a
GAAP measure.
(3) Investor understanding. (i) When management chooses to
include its projections in a Commission filing, the disclosures accompanying the
projections should facilitate investor understanding of the basis for and limitations of
projections. In this regard investors should be cautioned against attributing undue
certainty to management's assessment, and the Commission believes that investors would be
aided by a statement indicating management's intention regarding the furnishing of updated
projections. The Commission also believes that investor understanding would be enhanced by
disclosure of the assumptions which in management's opinion are most significant to the
projections or are the key factors upon which the financial results of the enterprise
depend and encourages disclosure of assumptions in a manner that will provide a framework
for analysis of the projection.
(ii) Management also should consider whether disclosure of the accuracy
or inaccuracy of previous projections would provide investors with important insights into
the limitations of projections. In this regard, consideration should be given to
presenting the projections in a format that will facilitate subsequent analysis of the
reasons for differences between actual and forecast results. An important benefit may
arise from the systematic analysis of variances between projected and actual results on a
continuing basis, since such disclosure may highlight for investors the most significant
risk and profit-sensitive areas in a business operation.
(iii) With respect to previously issued projections, registrants are
reminded of their responsibility to make full and prompt disclosure of material facts,
both favorable and unfavorable, regarding their financial condition. This responsibility
may extend to situations where management knows or has reason to know that its previously
disclosed projections no longer have a reasonable basis.
(iv) Since a registrant's ability to make projections with relative
confidence may vary with all the facts and circumstances, the responsibility for
determining whether to discontinue or to resume making projections is best left to
management. However, the Commission encourages registrants not to discontinue or to resume
projections in Commission filings without a reasonable basis.
(c) Commission policy on security ratings. In view of the
importance of security ratings (ratings) to investors and the marketplace, the
Commission permits registrants to disclose, on a voluntary basis, ratings assigned by
rating organizations to classes of debt securities, convertible debt securities and
preferred stock in registration statements and periodic reports. Set forth herein are the
Commission's views on important matters to be considered in disclosing security
ratings.
(1) Securities Act filings. (i) If a registrant includes in a
registration statement filed under the Securities Act any rating(s) assigned to a class of
securities, it should consider including: (A) Any other rating intended for public
dissemination assigned to such class by a nationally recognized statistical rating
organization (NRSRO) (additional NRSRO rating) that is available on the date of the
initial filing of the document and that is materially different from any rating disclosed;
and (B) the name of each rating organization whose rating is disclosed; each such rating
organization's definition or description of the category in which it rated the class of
securities; the relative rank of each rating within the assigning rating organization's
overall classification system; and a statement informing investors that a security rating
is not a recommendation to buy, sell or hold securities, that it may be subject to
revision or withdrawal at any time by the assigning rating organization, and that each
rating should be evaluated independently of any other rating. The registrant also should
include the written consent of any rating organization that is not a NRSRO whose rating is
included. With respect to the written consent of any NRSRO whose rating is included, see
Rule 436(g) under the Securities Act (§ 230.436(g) of this chapter).
(ii) If a change in a rating already included is available subsequent to
the filing of the registration statement, but prior to its effectiveness, the registrant
should consider including such rating change in the final prospectus. If the rating change
is material or if a materially different rating from any disclosed becomes available
during this period, the registrant should consider amending the registration statement to
include the rating change or additional rating and recirculating the preliminary
prospectus.
(iii) If a materially different additional NRSRO rating or a material
change in a rating already included becomes available during any period in which offers or
sales are being made, the registrant should consider disclosing such additional rating or
rating change by means of post-effective amendment or sticker to the prospectus pursuant
to Rule 424(b) under the Securities Act (§ 230.424(b) of this chapter), unless, in the
case of a registration statement on Form S-3 (§ 239.13 of this chapter), it has been
disclosed in a document incorporated by reference into the registration statement
subsequent to its effectiveness and prior to the termination of the offering.
(2) Exchange Act filings. (i) If a registrant includes in a
registration statement or periodic report filed under the Exchange Act any rating(s)
assigned to a class of securities, it should consider including the information specified
in paragraphs (c)(1)(i)(A) and (B) of this section.
(ii) If there is a material change in the rating(s) assigned by any
NRSRO(s) to any outstanding class(es) of securities of a registrant subject to the
reporting requirements of section 13(a) or 15(d) of the Exchange Act, the registrant
should consider filing a report on Form 8-K (§ 249.308 of this chapter) or other
appropriate report under the Exchange Act disclosing such rating change.
(d) [Reserved]
(e) Use of non-GAAP financial measures in Commission filings. (1)
Whenever one or more non-GAAP financial measures are included in a filing with the
Commission:
(i) The registrant must include the following in the filing:
(A) A presentation, with equal or greater prominence, of the most
directly comparable financial measure or measures calculated and presented in accordance
with Generally Accepted Accounting Principles (GAAP);
(B) A reconciliation (by schedule or other clearly understandable
method), which shall be quantitative for historical non-GAAP measures presented, and
quantitative, to the extent available without unreasonable efforts, for forward-looking
information, of the differences between the non-GAAP financial measure disclosed or
released with the most directly comparable financial measure or measures calculated and
presented in accordance with GAAP identified in paragraph (e)(1)(i)(A) of this
section;
(C) A statement disclosing the reasons why the registrant's management
believes that presentation of the non-GAAP financial measure provides useful information
to investors regarding the registrant's financial condition and results of operations;
and
(D) To the extent material, a statement disclosing the additional
purposes, if any, for which the registrant's management uses the non-GAAP financial
measure that are not disclosed pursuant to paragraph (e)(1)(i)(C) of this section; and
(ii) A registrant must not:
(A) Exclude charges or liabilities that required, or will require, cash
settlement, or would have required cash settlement absent an ability to settle in another
manner, from non-GAAP liquidity measures, other than the measures earnings before interest
and taxes (EBIT) and earnings before interest, taxes, depreciation, and amortization
(EBITDA);
(B) Adjust a non-GAAP performance measure to eliminate or smooth items
identified as non-recurring, infrequent or unusual, when the nature of the charge or gain
is such that it is reasonably likely to recur within two years or there was a similar
charge or gain within the prior two years;
(C) Present non-GAAP financial measures on the face of the registrant's
financial statements prepared in accordance with GAAP or in the accompanying notes;
(D) Present non-GAAP financial measures on the face of any pro
forma financial information required to be disclosed by Article 11 of Regulation S-X
(17 CFR 210.11-01 through 210.11-03); or
(E) Use titles or descriptions of non-GAAP financial measures that are
the same as, or confusingly similar to, titles or descriptions used for GAAP financial
measures; and
(iii) If the filing is not an annual report on Form 10-K or Form 20-F
(17 CFR 249.220f), a registrant need not include the information required by paragraphs
(e)(1)(i)(C) and (e)(1)(i)(D) of this section if that information was included in its most
recent annual report on Form 10-K or Form 20-F or a more recent filing, provided that the
required information is updated to the extent necessary to meet the requirements of
paragraphs (e)(1)(i)(C) and (e)(1)(i)(D) of this section at the time of the registrant's
current filing.
(2) For purposes of this paragraph (e), a non-GAAP financial measure is
a numerical measure of a registrant's historical or future financial performance,
financial position or cash flows that:
(i) Excludes amounts, or is subject to adjustments that have the effect
of excluding amounts, that are included in the most directly comparable measure calculated
and presented in accordance with GAAP in the statement of comprehensive income, balance
sheet or statement of cash flows (or equivalent statements) of the issuer; or
(ii) Includes amounts, or is subject to adjustments that have the effect
of including amounts, that are excluded from the most directly comparable measure so
calculated and presented.
(3) For purposes of this paragraph (e), GAAP refers to generally
accepted accounting principles in the United States, except that:
(i) In the case of foreign private issuers whose primary financial
statements are prepared in accordance with non-U.S. generally accepted accounting
principles, GAAP refers to the principles under which those primary financial statements
are prepared; and
(ii) In the case of foreign private issuers that include a non-GAAP
financial measure derived from or based on a measure calculated in accordance with U.S.
generally accepted accounting principles, GAAP refers to U.S. generally accepted
accounting principles for purposes of the application of the requirements of this
paragraph (e) to the disclosure of that measure.
(4) For purposes of this paragraph (e), non-GAAP financial measures
exclude:
(i) Operating and other statistical measures; and
(ii) Ratios or statistical measures calculated using exclusively one or
both of:
(A) Financial measures calculated in accordance with GAAP; and
(B) Operating measures or other measures that are not non-GAAP financial
measures.
(5) For purposes of this paragraph (e), non-GAAP financial measures
exclude financial measures required to be disclosed by GAAP, Commission rules, or a system
of regulation of a government or governmental authority or self-regulatory organization
that is applicable to the registrant. However, the financial measure should be presented
outside of the financial statements unless the financial measure is required or expressly
permitted by the standard-setter that is responsible for establishing the GAAP used in
such financial statements.
(6) The requirements of paragraph (e) of this section shall not apply to
a non-GAAP financial measure included in disclosure relating to a proposed business
combination, the entity resulting therefrom or an entity that is a party thereto, if the
disclosure is contained in a communication that is subject to § 230.425 of this chapter, §
240.14a-12 or § 240.14d-2(b)(2) of this chapter or § 229.1015 of this chapter.
(7) The requirements of paragraph (e) of this section shall not apply to
investment companies registered under section 8 of the Investment Company Act of 1940 (15
U.S.C. 80a-8).
Note to paragraph (e).
A non-GAAP financial measure that would otherwise be
prohibited by paragraph (e)(1)(ii) of this section is permitted in a filing of
a foreign private issuer if:
1. The non-GAAP financial measure relates to the GAAP used
in the registrant's primary financial statements included in its filing with
the Commission;
2. The non-GAAP financial measure is required or expressly
permitted by the standard-setter that is responsible for establishing the GAAP
used in such financial statements; and
3. The non-GAAP financial measure is included in the annual
report prepared by the registrant for use in the jurisdiction in which it is
domiciled, incorporated or organized or for distribution to its security
holders.
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Deloitte Guidance and Links
(f) Smaller reporting companies. The requirements of this part apply to smaller reporting companies. A smaller reporting company may comply with either the requirements applicable to smaller reporting companies or the requirements applicable to other companies for each item, unless the requirements for smaller reporting companies specify that smaller reporting companies must comply with the smaller reporting company requirements. The following items of this part set forth requirements for smaller reporting companies that are different from requirements applicable to other companies:
Item 101 | Description of business. |
Item 201 | Market price of and dividends on registrant's common equity and related stockholder matters. |
Item 302 | Supplementary financial information. |
Item 305 | Quantitative and qualitative disclosures about market risk. |
Item 402 | Executive compensation. |
Item 404 | Transactions with related persons, promoters and certain control persons. |
Item 407 | Corporate governance. |
Item 503 | Prospectus summary. |
Item 504 | Use of proceeds. |
Item 601 | Exhibits. |
(1) Definition of smaller reporting company. As used in this part, the term smaller reporting company means an issuer that is not an investment company, an asset-backed issuer (as defined in § 229.1101), or a majority-owned subsidiary of a parent that is not a smaller reporting company and that:
(i) Had a public float of less than $250 million; or
(ii) Had annual revenues of less than $100 million and either:
(A) No public float; or
(B) A public float of less than $700 million.
(2) Determination. Whether an issuer is a smaller reporting company is determined on an annual basis.
(i) For issuers that are required to file reports under section 13(a) or 15(d) of the Exchange Act:
(A) Public float is measured as of the last business day of the issuer's most recently completed second fiscal quarter and computed by multiplying the aggregate worldwide number of shares of its voting and non-voting common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in the principal market for the common equity;
(B) Annual revenues are as of the most recently completed fiscal year for which audited financial statements are available; and
(C) An issuer must reflect the determination of whether it came within the definition of smaller reporting company in its quarterly report on Form 10-Q for the first fiscal quarter of the next year, indicating on the cover page of that filing, and in subsequent filings for that fiscal year, whether it is a smaller reporting company, except that, if a determination based on public float indicates that the issuer is newly eligible to be a smaller reporting company, the issuer may choose to reflect this determination beginning with its first quarterly report on Form 10-Q following the determination, rather than waiting until the first fiscal quarter of the next year.
(ii) For determinations based on an initial registration statement under the Securities Act or Exchange Act for shares of its common equity:
(A) Public float is measured as of a date within 30 days of the date of the filing of the registration statement and computed by multiplying the aggregate worldwide number of shares of its voting and non-voting common equity held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number of shares of its voting and non-voting common equity included in the registration statement by the estimated public offering price of the shares;
(B) Annual revenues are as of the most recently completed fiscal year for
which audited financial statements are available; and
(C) The issuer must reflect the determination of whether it came within the definition of smaller reporting company in the registration statement and must appropriately indicate on the cover page of the filing, and subsequent filings for the fiscal year in which the filing is made, whether it is a smaller reporting company. The issuer must re-determine its status at the end of its second fiscal quarter and then reflect any change in status as provided in paragraph (f)(2)(i)(C) of this section. In the case of a determination based on an initial Securities Act registration statement, an issuer that was not determined to be a smaller reporting company has the option to re-determine its status at the conclusion of the offering covered by the registration statement based on the actual offering price and number of shares sold.
(iii) Once an issuer determines that it does not qualify for smaller reporting company status because it exceeded one or more of the current thresholds, it will remain unqualified unless when making its annual determination either:
(A) It determines that its public float was less than $200 million; or
(B) It determines that its public float and its annual revenues meet the requirements for subsequent qualification included in the following chart:
Prior annual revenues | Prior public float | |
None or less than $700 million | $700 million or more | |
Less than $100 million | Neither threshold exceeded | Public float—Less than $560 million; and Revenues—Less than $100 million. |
$100 million or more | Public float—None or less than $700 million; and Revenues—Less than $80 million | Public float—Less than $560 million; and Revenues—Less than $80 million. |
Instruction 1 to paragraph (f): A registrant that qualifies as a smaller reporting company under the public float thresholds identified in paragraphs (f)(1)(i) and (f)(2)(iii)(A) of this section will qualify as a smaller reporting company regardless of its revenues.
Instruction 2 to paragraph (f): A foreign private issuer is not eligible
to use the requirements for smaller reporting companies unless it uses the forms and rules
designated for domestic issuers and provides financial statements prepared in accordance
with U.S. Generally Accepted Accounting Principles.
(iv) Upon the consummation of a de-SPAC transaction, as defined in § 229.1601(a) (Item
1601(a) of Regulation S-K), an issuer must re-determine its status as a smaller reporting
company pursuant to the thresholds set forth in paragraph (f)(1) of this section prior to
its first filing, other than pursuant to Items 2.01(f), 5.01(a)(8), and/or 9.01(c) of Form
8-K, following the de-SPAC transaction and reflect this re-determination in its filings,
beginning 45 days after consummation of the de-SPAC transaction.
(A) Public float is measured as of a date within four business days after the consummation
of the de-SPAC transaction and is computed by multiplying the aggregate worldwide number of
shares of its voting and non-voting common equity held by non-affiliates as of that date by
the price at which the common equity was last sold, or the average of the bid and asked
prices of common equity, in the principal market for the common equity; and
(B) Annual revenues are the annual revenues of the target company, as defined in
§ 229.1601(d) (Item 1601(d) of Regulation S-K), as of the most recently completed fiscal
year reported in the Form 8-K filed pursuant to Items 2.01(f), 5.01(a)(8), and/or 9.01(c) of
Form 8-K.
[47 FR 11401, Mar. 16, 1982, as amended at 52 FR 21260, June 5, 1987; 58 FR
14665, Mar. 18, 1993; 58 FR 62029, Nov. 23, 1993; 60 FR 32824, June 23, 1995; 64 FR 61443,
Nov. 10, 1999; 68 FR 4831, Jan. 30, 2003; 70 FR 1593, Jan. 7, 2005; 73 FR 956, Jan. 4,
2008; 76 FR 46617, Aug. 3, 2011; 83 FR 31992, July 10, 2018; 83 FR 50148, Oct. 4, 2018; 84
FR 12674, Apr. 2, 2019; 85 FR 17178, March 26, 2020; 86 FR 2080, Jan. 11, 2021; 89 FR
14158, Feb. 26, 2024]