Chapter 1 — Presentation of Separate Financial Statements and Summarized Financial Information

1.8 Requests to the SEC to Waive Certain Requirements

There may be situations in which registrants wish to seek relief from complying with certain reporting requirements under Regulation S-X, including omitting or substituting financial statements of an equity method investee under Rule 3-09. Regulation S-X, Rule 3-13, gives the SEC staff the authority to permit the omission or substitution of certain financial statements otherwise required under Regulation S-X “where consistent with the protection of investors.” Further, the SEC staff has historically encouraged registrants to seek modifications to their financial reporting requirements, as permitted under Rule 3-13, particularly when the requirements are burdensome and may not be material to the total mix of information available to investors. The SEC staff has indicated that it is also available to discuss potential waiver fact patterns by phone before a registrant submits a waiver request.

When assessing a waiver request, the SEC staff may consider, for example, whether the income significance test under Rule 3-09 is anomalous in situations in which a registrant is in a break-even position and the revenue component does not apply. This could be the case if either the registrant or equity method investee did not have material revenue for the two most recently completed fiscal years. In such a situation, the staff may consider other metrics when assessing the overall significance of the investment. Because registrants must continue to assess the significance of an equity method investee in each reporting period and present up to three years of financial statements, it is permissible for them to request in their Rule 3-13 waiver letter that the SEC extend any relief granted to current and future filings for which the same year of Rule 3-09 financial statements would be required, provided that the facts have not changed and the investment continues to be insignificant in future periods.

For additional guidance on Rule 3-13 waivers and prefiling letter requests, see Section B.2 of Deloitte’s Roadmap SEC Comment Letter Considerations, Including Industry Insights.

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This SEC Reporting Interpretations manual provides comprehensive guidance; however, the manual does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.