Appendix A — Regulation S-X, Rules 1-02(l), 1-02(w), 1-02(bb), 3-09, 3-13, 4-08(g), 5-03(b)(12), 8-03, and 10-01(b)(1)
Rules 1-02(l), 1-02(w), 1-02(bb), 3-09, 3-13, 4-08(g), 5-03(b)(12),
8-03, and 10-01(b)(1) are reproduced below.
SEC Regulation S-X, Rule 1-02(l)
§210.1-02 — Definitions
of Terms Used in Regulation S-X (17 CFR Part
210).
. . .
(l) Foreign business. A business that
is majority owned by persons who are not citizens or
residents of the United States and is not organized under
the laws of the United States or any state thereof, and
either:
(1) More than 50 percent of its assets are
located outside the United States; or
(2) The majority of its executive officers
and directors are not United States citizens or
residents.
SEC Regulation S-X, Rule 1-02(w)
§210.1-02 — Definitions
of Terms Used in Regulation S-X (17 CFR Part 210).
. . .
(w) Significant subsidiary.
(1) The term significant subsidiary
means a subsidiary, including its subsidiaries, which meets
any of the conditions in paragraph (w)(1)(i), (ii), or (iii)
of this section; however if the registrant is a registered
investment company or a business development company, the
tested subsidiary meets any of the conditions in paragraph
(w)(2) of this section instead of any of the conditions in
this paragraph (w)(1). A registrant that files its financial
statements in accordance with or provides a reconciliation
to U.S. Generally Accepted Accounting Principles (U.S. GAAP)
must use amounts determined under U.S. GAAP. A foreign
private issuer that files its financial statements in
accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board
(IFRS-IASB) must use amounts determined under IFRS-IASB.
(i) Investment test.
(A) For acquisitions, other than those
described in paragraph (w)(1)(i)(B) of this section, and
dispositions this test is met when the registrant’s and its
other subsidiaries’ investments in and advances to the
tested subsidiary exceed 10 percent of the aggregate
worldwide market value of the registrant’s voting and
non-voting common equity, or if the registrant has no such
aggregate worldwide market value the total assets of the
registrant and its subsidiaries consolidated as of the end
of the most recently completed fiscal year.
(1) For acquisitions, the
“investments in” the tested subsidiary is the consideration
transferred, adjusted to exclude the registrant’s and its
other subsidiaries’ proportionate interest in the carrying
value of assets transferred by the registrant and its
subsidiaries consolidated to the tested subsidiary that will
remain with the combined entity after the acquisition. It
must include the fair value of contingent consideration if
required to be recognized at fair value by the registrant at
the acquisition date under U.S. GAAP or IFRS-IASB, as
applicable; however if recognition at fair value is not
required, it must include all contingent consideration,
except contingent consideration for which the likelihood of
payment is remote.
(2) For dispositions, the “investments in” the tested
subsidiary is the fair value of the consideration, including
contingent consideration, for the disposed subsidiary when
comparing to the aggregate worldwide market value of the
registrant’s voting and non-voting common equity, or, when
the registrant has no such aggregate worldwide market value,
the carrying value of the disposed subsidiary when comparing
to total assets of the registrant.
(3) When determining the aggregate worldwide market
value of the registrant’s voting and non-voting common
equity, use the average of such aggregate worldwide market
value calculated daily for the last five trading days of the
registrant’s most recently completed month ending prior to
the earlier of the registrant’s announcement date or
agreement date of the acquisition or disposition.
(B) For a combination between entities or businesses under
common control, this test is met when either the net book
value of the tested subsidiary exceeds 10 percent of the
registrant’s and its subsidiaries’ consolidated total assets
or the number of common shares exchanged or to be exchanged
by the registrant exceeds 10 percent of its total common
shares outstanding at the date the combination is initiated.
(C) In all other cases, this test is met when the
registrant’s and its other subsidiaries’ investments in and
advances to the tested subsidiary exceed 10 percent of the
total assets of the registrant and its subsidiaries
consolidated as of the end of the most recently completed
fiscal year.
(ii) Asset test. This test is met
when the registrant’s and its other subsidiaries’
proportionate share of the tested subsidiary’s consolidated
total assets . . . exceeds 10 percent of such total assets
of the registrant and its subsidiaries consolidated as of
the end of the most recently completed fiscal year.
(iii) Income test.
(A) This test is met when:
(1) The absolute value of the
registrant’s and its other subsidiaries’ equity in the
tested subsidiary’s consolidated income or loss from
continuing operations before income taxes . . . attributable
to the controlling interests exceeds 10 percent of the
absolute value of such income or loss of the registrant and
its subsidiaries consolidated for the most recently
completed fiscal year; and
(2) The registrant’s and its other
subsidiaries’ proportionate share of the tested subsidiary’s
consolidated total revenue from continuing operations . . .
exceeds 10 percent of such total revenue of the registrant
and its subsidiaries consolidated for the most recently
completed fiscal year. This paragraph
(w)(1)(iii)(A)(2) does not apply if either the
registrant and its subsidiaries consolidated or the tested
subsidiary did not have material revenue in each of the two
most recently completed fiscal years.
(B) When determining the income component in
paragraph (w)(1)(iii)(A)(1) of this section:
(1) If a net loss from continuing
operations before income taxes . . . attributable to the
controlling interest has been incurred by either the
registrant and its subsidiaries consolidated or the tested
subsidiary, but not both, exclude the equity in the income
or loss from continuing operations before income taxes . . .
of the tested subsidiary attributable to the controlling
interest from such income or loss of the registrant and its
subsidiaries consolidated for purposes of the
computation;
(2) Compute the test using the
average described in this paragraph (w)(1)(iii)(B)(2)
if the revenue component in paragraph
(w)(1)(iii)(A)(2) of this section does not apply
and the absolute value of the registrant’s and its
subsidiaries’ consolidated income or loss from continuing
operations before income taxes . . . attributable to the
controlling interests for the most recent fiscal year is at
least 10 percent lower than the average of the absolute
value of such amounts for each of its last five fiscal
years; and
(3) Entities reporting losses must
not be aggregated with entities reporting income where the
test involves combined entities, as in the case of
determining whether summarized financial data must be
presented or whether the aggregate impact specified in §§
210.3-05(b)(2)(iv) and 210.3-14(b)(2)(i)(C) is met, except
when determining whether related businesses meet this test
for purposes of §§ 210.3-05 and 210.8-04.
(2) For a registrant that is a registered investment company
or a business development company, the term significant
subsidiary means a subsidiary, including its
subsidiaries, which meets any of the following conditions
using amounts determined under U.S. GAAP and, if applicable,
section 2(a)(41) of the Investment Company Act of 1940 (15
U.S.C. 80a-2(a)(41)):
(i) Investment test. The value of the
registrant’s and its other subsidiaries’ investments in and
advances to the tested subsidiary exceed 10 percent of the
value of the total investments of the registrant and its
subsidiaries consolidated as of the end of the most recently
completed fiscal year; or
(ii) Income test. The absolute value
of the sum of combined investment income from dividends,
interest, and other income, the net realized gains and
losses on investments, and the net change in unrealized
gains and losses on investments from the tested subsidiary
(except, for purposes of § 210.6-11, the absolute value of
the change in net assets resulting from operations of the
tested subsidiary), for the most recently completed fiscal
year exceeds:
(A) 80 percent of the absolute value of the change in net
assets resulting from operations of the registrant and its
subsidiaries consolidated for the most recently completed
fiscal year; or
(B) 10 percent of the absolute value of the change in net
assets resulting from operations of the registrant and its
subsidiaries consolidated for the most recently completed
fiscal year and the investment test (paragraph (w)(2)(i) of
this section) condition exceeds 5 percent. However, if the
absolute value of the change in net assets resulting from
operations of the registrant and its subsidiaries
consolidated is at least 10 percent lower than the average
of the absolute value of such amounts for each of its last
five fiscal years, then the registrant may compute both
conditions of the income test using the average of the
absolute value of such amounts for the registrant and its
subsidiaries consolidated for each of its last five fiscal
years.
SEC Regulation S-X, Rule 1-02(bb)
§210.1-02 — Definitions
of Terms Used in Regulation S-X (17 CFR Part 210).
. . .
(bb) Summarized financial
information.
(1) Except as provided in paragraph (bb)(2) of this section,
summarized financial information referred to in
this part shall mean the presentation of summarized
information as to the assets, liabilities and results of
operations of the entity for which the information is
required. Summarized financial information shall include the
following disclosures . . . :
(i) Current assets, noncurrent assets,
current liabilities, noncurrent liabilities, and, when
applicable, redeemable preferred stocks (see § 210.5-02.27)
and noncontrolling interests (for specialized industries in
which classified balance sheets are normally not presented,
information shall be provided as to the nature and amount of
the majority components of assets and liabilities);
(ii) Net sales or gross revenues, gross
profit (or, alternatively, costs and expenses applicable to
net sales or gross revenues), income or loss from continuing
operations, net income or loss, and net income or loss
attributable to the entity (for specialized industries,
other information may be substituted for sales and related
costs and expenses if necessary for a more meaningful
presentation); and
(2) Summarized financial information for
unconsolidated subsidiaries and 50 percent or less owned
persons referred to in and required by § 210.10-01(b) for
interim periods shall include the information required by
paragraph (bb)(1)(ii) of this section.
SEC Regulation S-X, Rule 3-09
§210.3-09 — Separate
Financial Statements of Subsidiaries Not Consolidated
and 50 Percent or Less Owned Persons.
(a) If any of the conditions set forth in §
210.1-02(w), substituting 20 percent for 10 percent in the
tests used therein to determine a significant subsidiary,
are met for a majority-owned subsidiary not consolidated by
the registrant or by a subsidiary of the registrant,
separate financial statements of such subsidiary must be
filed. Similarly, if either the first or third condition set
forth in § 210.1-02(w)(1), substituting 20 percent for 10
percent, is met by a 50 percent or less owned person
accounted for by the equity method either by the registrant
or a subsidiary of the registrant, separate financial
statements of such 50 percent or less owned person must be
filed.
(b) Insofar as practicable, the separate
financial statements required by this section shall be as of
the same dates and for the same periods as the audited
consolidated financial statements required by §§ 210.3-01
and 3-02. However, these separate financial statements are
required to be audited only for those fiscal years in which
either the first or third condition set forth in §
210.1-02(w), substituting 20 percent for 10 percent, is met.
For purposes of a filing on Form 10-K (§ 249.310 of this
chapter):
(1) If the registrant is an accelerated
filer (as defined in § 240.12b-2 of this chapter) but the 50
percent or less owned person is not an accelerated filer,
the required financial statements may be filed as an
amendment to the report within 90 days, or within six months
if the 50 percent or less owned person is a foreign
business, after the end of the registrant’s fiscal year.
(2) If the fiscal year of any 50 percent or
less owned person ends within the registrant’s number of
filing days before the date of the filing, or if the
fiscal year ends after the date of the filing, the required
financial statements may be filed as an amendment to the
report within the subsidiary’s number of filing days,
or within six months if the 50 percent or less owned person
is a foreign business, after the end of such subsidiary’s or
person’s fiscal year.
(3) The term registrant’s number of
filing days means:
(i) 60 days (75 days for fiscal years ending
before December 15, 2006) if the registrant is a large
accelerated filer;
(ii) 75 days if the registrant is an
accelerated filer; and
(iii) 90 days for all other registrants.
(4) The term subsidiary’s number of
filing days means:
(i) 60 days (75 days for fiscal years ending
before December 15, 2006) if the 50 percent or less owned
person is a large accelerated filer;
(ii) 75 days if the 50 percent or less owned
person is an accelerated filer; and
(iii) 90 days for all other 50 percent or
less owned persons.
(c) Notwithstanding the requirements for
separate financial statements in paragraph (a) of this
section, where financial statements of two or more
majority-owned subsidiaries not consolidated are required,
combined or consolidated statements of such subsidiaries may
be filed subject to principles of inclusion and exclusion
which clearly exhibit the financial position, cash flows and
results of operations of the combined or consolidated group.
Similarly, where financial statements of two or more 50
percent or less owned persons are required, combined or
consolidated statements of such persons may be filed subject
to the same principles of inclusion or exclusion referred to
above.
(d) If the 50 percent or less owned person
is a foreign business, financial statements of the business
meeting the requirements of Item 17 of Form 20-F (§ 249.220f
of this chapter) will satisfy this section.
SEC Regulation S-X, Rule 3-13
§210.3-13 — Filing of
Other Financial Statements in Certain Cases.
The Commission may, upon the informal
written request of the registrant, and where consistent with
the protection of investors, permit the omission of one or
more of the financial statements herein required or the
filing in substitution therefor of appropriate statements of
comparable character. The Commission may also by informal
written notice require the filing of other financial
statements in addition to, or in substitution for, the
statements herein required in any case where such statements
are necessary or appropriate for an adequate presentation of
the financial condition of any person whose financial
statements are required, or whose statements are otherwise
necessary for the protection of investors.
SEC Regulation S-X, Rule 4-08(g)
§210.4-08 — General
Notes to Financial Statements.
. . .
(g) Summarized financial information of
subsidiaries not consolidated and 50 percent or less
owned persons.
(1) The summarized information as to assets, liabilities and
results of operations as detailed in § 210.1-02(bb) shall be
presented in notes to the financial statements on an
individual or group basis for:
(i) Subsidiaries not consolidated; or
(ii) For 50 percent or less owned persons
accounted for by the equity method by the registrant or by a
subsidiary of the registrant, if the criteria in §
210.1-02(w) for a significant subsidiary are met:
(A) Individually by any subsidiary not
consolidated or any 50% or less owned person; or
(B) On an aggregated basis by any
combination of such subsidiaries and persons.
(2) Summarized financial information shall
be presented insofar as is practicable as of the same dates
and for the same periods as the audited consolidated
financial statements provided and shall include the
disclosures prescribed by § 210.1-02(bb). Summarized
information of subsidiaries not consolidated shall not be
combined for disclosure purposes with the summarized
information of 50 percent or less owned persons.
SEC Regulation S-X, Rule 5-03(b)(12)
§210.5-03 — Statements
of Comprehensive Income.
. . .
(b)(12) Equity in earnings of
unconsolidated subsidiaries and 50 percent or less owned
persons. State, parenthetically or in a note, the
amount of dividends received from such persons. If justified
by the circumstances, this item may be presented in a
different position and a different manner (see §
210.4-01(a)).
SEC Regulation S-X, Rule 8-03
§210.8-03 — Interim
Financial Statements.
Interim financial statements may be
unaudited; however, before filing, interim financial
statements included in quarterly reports on Form 10-Q (§
249.308(a) of this chapter) must be reviewed by an
independent public accountant using applicable professional
standards and procedures for conducting such reviews, as may
be modified or supplemented by the Commission. If, in any
filing, the issuer states that interim financial statements
have been reviewed by an independent public accountant, a
report of the accountant on the review must be filed with
the interim financial statements. Interim financial
statements shall include a balance sheet as of the end of
the issuer’s most recent fiscal quarter, a balance sheet as
of the end of the preceding fiscal year, and statements of
comprehensive income and statements of cash flows for the
interim period up to the date of such balance sheet and the
comparable period of the preceding fiscal year.
(a) Condensed format. Interim
financial statements may be condensed as follows:
(1) Balance sheets should include separate
captions for each balance sheet component presented in the
annual financial statements that represents 10% or more of
total assets. Cash and retained earnings should be presented
regardless of relative significance to total assets.
Registrants that present a classified balance sheet in their
annual financial statements should present totals for
current assets and current liabilities.
(2) Statements of comprehensive income (or
the statement of net income if comprehensive income is
presented in two separate but consecutive financial
statements) should include net sales or gross revenue, each
cost and expense category presented in the annual financial
statements that exceeds 20% of sales or gross revenues,
provision for income taxes, and discontinued operations.
(Financial institutions should substitute net interest
income for sales for purposes of determining items to be
disclosed.)
(3) Cash flow statements should include cash
flows from operating, investing and financing activities as
well as cash at the beginning and end of each period and the
increase or decrease in such balance.
(4) Additional line items may be presented
to facilitate the usefulness of the interim financial
statements, including their comparability with annual
financial statements.
(5) Provide the information required by §
210.3-04 for the current and comparative year-to-date
periods, with subtotals for each interim period.
(b) Disclosure required and additional
instructions as to content —
(1) Footnotes. Footnote and other
disclosures should be provided as needed for fair
presentation and to ensure that the financial statements are
not misleading.
(2) [Reserved]
(3) Significant equity investees.
Sales, gross profit, net income (loss) from continuing
operations, net income, and net income attributable to the
investee must be disclosed for equity investees that
constitute 20 percent or more of a registrant’s consolidated
assets, equity or income from continuing operations
attributable to the registrant.
(4) [Reserved]
(5) Material accounting changes. The
registrant’s independent accountant must provide a letter in
the first Form 10-Q (§ 249.308a of this chapter) filed after
the change indicating whether or not the change is to a
preferable method. Disclosure must be provided of any
retroactive change to prior period financial statements,
including the effect of any such change on income and income
per share.
(6) Financial statements of and
disclosures about guarantors and issuers of guaranteed
securities. The requirements of § 210.3-10 are
applicable to financial statements for a subsidiary of a
smaller reporting company that issues securities guaranteed
by the smaller reporting company or guarantees securities
issued by the smaller reporting company. Disclosures about
guarantors and issuers of guaranteed securities registered
or being registered must be presented as required by §
210.13-01.
(7) Disclosures about affiliates whose
securities collateralize an issuance. Disclosures
about a smaller reporting company’s affiliates whose
securities collateralize any class of securities registered
or being registered and the related collateral arrangement
must be presented as required by § 210.13-02.
Instruction 1 to § 210.8-03. Where §§
210.8-01 through 210.8-08 (Article 8 of this part) are
applicable to a Form 10-Q (§ 249.308a of this chapter) and
the interim period is more than one quarter, statements of
comprehensive income must also be provided for the most
recent interim quarter and the comparable quarter of the
preceding fiscal year.
SEC Regulation S-X, Rule 10-01(b)(1)
§210.10-01 — Interim
Financial Statements.
. . .
(b) Other instructions as to content.
The following additional instructions shall be applicable
for purposes of preparing interim financial statements:
(1) Summarized statement of comprehensive
income information shall be given separately as to each
subsidiary not consolidated or 50 percent or less owned
persons or as to each group of such subsidiaries or fifty
percent or less owned persons for which separate individual
or group statements would otherwise be required for annual
periods. Such summarized information, however, need not be
furnished for any such unconsolidated subsidiary or person
which would not be required pursuant to § 240.13a-13 or §
240.15d-13 of this chapter to file quarterly financial
information with the Commission if it were a registrant.