18.3 SEC Regulation S-X, Rules 3-09 and 4-08(g) — Financial Statements and Summarized Financial Information for Equity Method Investments
Under SEC Regulation S-X, Rules 3-09 and 4-08(g), registrants are required to
evaluate the significance of an equity method investee in accordance with the tests
in SEC Regulation S-X, Rule 1-02(w) (i.e., the asset, investment, or income test),
to determine whether they must provide the investee’s financial statements, the
investee’s summarized financial information, or both. Under these rules, the
prescribed significance tests are performed annually in connection with the filing
of a Form 10-K (i.e., at the end of the registrant’s fiscal year). Accordingly,
significance is not remeasured when updated financial statements that reflect
retrospective adjustments are filed in a Form 8-K (or are included in or
incorporated by reference into a registration statement).
As indicated in Topic
11 and paragraph
2410.8 of the FRM, when a change in accounting is retrospectively
applied in financial statements included in a registrant’s Form 10-K, the registrant
is not required to recalculate the significance of an equity method investee under
Rules 3-09 and 4-08(g). Therefore, for periods before the date of initial adoption
of the leasing standard, registrants may continue to measure the significance of
their equity method investees by using the information from their preadoption
financial statements.9
Footnotes
9
For a discontinued operation, a registrant should be mindful
that significance under Rules 3-09 and 4-08(g) should be measured for each
annual period presented in the financial statements on the basis of amounts
that were retrospectively restated. Consequently, as a result of
retrospective adjustments for a discontinued operation, a previously
insignificant equity method investee may become significant. For additional
information, see Deloitte’s Roadmap Impairments and Disposals of Long-Lived Assets
and Discontinued Operations.