Chapter 8 — Reporting Considerations for SEC Registrants

8.3 Registration Statements and Other Nonpublic Offerings

The requirement to retrospectively revise the annual pre-event financial statements and other affected financial information may be accelerated when the pre-event financial statements are reissued, as discussed in ASC 855-10-25-4 (see Form S-3, Item 11(b)(ii)). Such reissuance may occur when a registrant (1) files a new or amended registration statement, (2) files a Form S-8, (3) issues a prospectus supplement to a currently effective registration statement (e.g., an existing Form S-3 that already is effective but upon which the registrant wishes to draw down or issue securities), or (4) issues securities in a nonpublic offering. The discussion below addresses these requirements in the context of a discontinued operation. A registrant may need to similarly consider other retrospective changes, such as stock splits, changes in segment presentation under ASC 280, and certain accounting changes resulting from the adoption of a newly issued standard.

For dispositions that do not qualify as discontinued operations, reporting considerations highlighted in Section 8.2 that apply to MD&A will also generally apply to registration statements.

8.3.1 New Registration Statements (Other Than Form S-8)

If a registrant files a new or amended registration statement2 before it files the Form 10-Q that first reports a discontinued operation, the registrant is not required (or permitted3) to file updated financial statements for prior periods to reflect the discontinued operation. However, the registrant should consult with its legal counsel and independent accountants regarding the appropriate disclosure to provide in the registration statement, including the pro forma considerations discussed in Section 8.5.

If a registrant files a new or amended registration statement after it files the Form 10-Q that first reports a discontinued operation, the registration statement instructions (e.g., Item 11(b)(ii) of Form S-3) generally require a registrant to file updated financial statements that reflect the discontinued operation for all periods presented. In addition, other affected financial information (e.g., MD&A and selected quarterly financial data) also generally should be updated to reflect the retrospective adjustments.

Connecting the Dots

As discussed above, a registrant that reports a material retrospective change must disclose selected quarterly financial data for the quarters within the two most recent fiscal years. Since this requirement only applies when there is a material retrospective change, a registrant’s previous Form 10-K may not include such disclosures. Nonetheless, when retrospectively revising the financial statements and other affected financial information before filing a new or amended registration statement, a registrant may be required to include summarized financial information for the quarters within the two most recent fiscal years to reflect a new discontinued operation reported in a recent Form 10-Q.

For example, when filing a new Form S-3, a registrant must retrospectively revise its financial statements for a material retrospective change before filing the Form S-3. However, the Form S-3 is not required to include Item 302(a) selected quarterly financial data for the new retrospective change (i.e., a discontinued operation reported in a recent Form 10-Q). Therefore, a registrant that did not previously provide such quarterly disclosures in its Form 10-K would not be required to do so as a result of the new Form S-3. On the other hand, when a registrant previously provided such quarterly disclosures in its Form 10-K (whether required or voluntary), it must consider whether such quarterly disclosures continue to be appropriate in light of the new retrospective change. A registrant would generally revise such quarterly information for the new retrospective change to the extent that the revision is material. If a registrant is not eligible to use Form S-3 and the requirements related to the new registration statement include those in Item 302(a) (e.g., Form S-1), the registrant would need to provide the appropriate quarterly disclosures under Item 302(a) in connection with that new registration statement.

For new or amended registration statements that normally incorporate the financial statements by reference (e.g., Form S-3), the registrant may file updated financial statements as well as other affected financial information that reflects the retrospective adjustments on Form 8-K; alternatively, the registrant can include the retrospectively adjusted financial statements and related information in the registration statement being filed. If the recasted information is filed on Form 8-K, the Form 8-K will be incorporated by reference into the registration statement and will update the affected sections of the registrant’s previously filed Exchange Act reports (e.g., Form 10-K or Form 10-Q). Because they were not incorrect when filed, prior Exchange Act reports should not be amended (i.e., the registrant should not file a Form 10-K/A or Form 10-Q/A). For more information, see Topic 13 of the FRM.

To prepare itself for a potential registration statement, a registrant is permitted to file updated financial statements and other affected financial information that reflect the retrospective adjustments in a Form 8-K once the discontinued operation has been reported in a Form 10-Q. However, the registrant is not required to do so until immediately before a registration statement is filed. If the registrant expects to file a new registration statement, it may file the Form 8-K simultaneously with or any time after the filing of the Form 10-Q that reports the discontinued operation but before or simultaneously with the filing of the new registration statement.

Example 8-2

Registration Statement After Presentation of a Component as a Discontinued Operation

Facts

Company A, an SEC registrant, files its Form 10-K for the year ended December 31, 20X5, on February 28, 20X6. On June 1, 20X6, A determines that it has met the requirements for presenting Component B as a discontinued operation. Company A files its Form 10-Q for the quarter ended June 30, 20X6, on July 28, 20X6, and presents B as a discontinued operation for the interim periods presented.

Example 1

Company A files a new registration statement on September 15, 20X6. Company A must either (1) include financial statements and other affected financial information that present B as a discontinued operation for all periods presented in A’s December 31, 20X5, Form 10-K or (2) incorporate by reference a previously filed Form 8-K that contains financial statements and other affected financial information that present B as a discontinued operation for all periods presented in A’s December 31, 20X5, Form 10-K.

Example 2

Company A files a new registration statement on July 10, 20X6, instead of September 15, 20X6, before it files the Form 10-Q reporting B as a discontinued operation. Company A is not required (or permitted4) to (1) include in its registration statement updated financial statements that present B as a discontinued operation or (2) incorporate by reference a Form 8-K containing updated financial statements and other affected financial information that present B as a discontinued operation. However, A should consult with its legal counsel and independent accountants regarding the appropriate disclosure to provide in the new registration statement, including the pro forma considerations discussed in Section 8.5.

8.3.2 Form S-8

The requirements for a Form S-8 are addressed in Question 126.40 of the SEC staff’s C&DIs on Securities Act Forms:

C&DIs — Securities Act Forms

Question: After its Form 10-K is filed, a registrant has a change in accounting principles (or changes in segment presentation or discontinued operations), which will cause the financial presentation in its subsequent Form 10-Qs to differ from that in its most recent Form 10-K. In this situation, Item 11(b)(ii) of Form S-3 would require the annual audited financial statements filed in the Form 10-K to be restated to reflect the change in accounting principles (or changes in segment presentation or discontinued operations). Would General Instruction G.2 of Form S-8, which requires that “material changes in the registrant’s affairs” be disclosed in the registration statement, also require such restatement?

Answer: Not necessarily. Form S-8 does not contain express language similar to Item 11(b)(ii) of Form S-3, requiring the restatement of financial statements to reflect specified events. The fact that financial statements eventually will be retroactively restated does not necessarily mean that there are “material changes in the registrant’s affairs,” thereby requiring the financial statements to be restated for inclusion, or incorporation by reference, in a Form S-8. In other words, financial statements for which Item 11(b)(ii) of Form S-3 would require restatement may not necessarily need to be restated for incorporation by reference in a Form S-8. The registrant is responsible for determining if there has been a material change and, if so, the related information that is required to be disclosed in a Form S-8. Correspondingly, it is the auditor’s responsibility to determine if it will issue a consent to use of its report in a Form S-8 if there has been a change in the financial statements in a subsequent Form 10-Q and the financial statements in the Form 10-K have not been retroactively restated.

Accordingly, with respect to a Form S-8, a registrant is generally not required to update its previously issued financial statements to reflect a discontinued operation unless it constitutes a “material change in the registrant’s affairs.”

8.3.3 Prospectus Supplements to Registration Statements That Currently Are Effective

For currently effective registration statements (e.g., an existing Form S-3) upon which a registrant wishes to draw down or issue securities, the registrant may use a prospectus supplement. Paragraph 13110.2 of the FRM indicates that “a prospectus supplement used to update a delayed or continuous offering registered on Form S-3 (e.g., a shelf takedown) is not subject to the Item 11(b)(ii) updating requirements.” Rather, the prospectus must be updated “in accordance with S-K 512(a) with respect to any fundamental change.”

The issuance of a prospectus supplement does not constitute a reissuance of the financial statements included in or incorporated into the effective registration statement. Management, in consultation with legal counsel, should determine whether the retrospective presentation of a discontinued operation constitutes a fundamental change. (For more information, see SEC Regulation S-K, Item 512(a).) If the registrant and its legal counsel determine that the retrospective adjustment to present a discontinued operation is a fundamental change, updated financial statements and other affected financial information should be filed on Form 8-K or included in the registration statement, as described above. If the registrant and its legal counsel determine that the retrospective adjustment for a discontinued operation is not a fundamental change, the financial statements do not need to be updated, but the registrant should consult with its legal counsel and independent accountants regarding the appropriate disclosure to provide in the prospectus supplement. In addition, all post-effective amendments are considered “new filings” and are subject to the guidance discussed in Section 8.3.1.

8.3.4 Nonpublic Offerings

Financial statements subject to retrospective changes may also be included in or incorporated into a nonpublic offering, such as a private placement pursuant to SEC Regulation D or Rule 144A of the Securities Act. We believe that the inclusion of the financial statements in the nonpublic offering constitutes a reissuance (as discussed in ASC 855-10-25-4) and that entities are therefore typically required under U.S. GAAP to update the financial statements for prior periods to reflect the discontinued operation. Accordingly, the considerations related to updating the financial statements for a discontinued operation would be similar to those discussed in Section 8.3.1. We believe that when the financial statements are incorporated by reference into a nonpublic offering, the considerations related to updating the financial statements for the retrospective change would be the same as those for prospectus supplements to registration statements that are currently effective, which are discussed in Section 8.3.3.

Footnotes

SEC registrants that file a proxy statement with the SEC should also refer to this guidance. For a Schedule TO (used to file tender offers), see paragraph 14310.3 of the FRM.

See the highlights of the June 23, 2009, CAQ SEC Regulations Committee joint meeting with the SEC staff.

See footnote 3.

Confidential and Proprietary — for Use Solely by Authorized Personnel

This publication provides comprehensive guidance; however, it 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.