[Federal Register Volume 59, Number 80 (Tuesday, April 26, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-9891]
[[Page Unknown]]
[Federal Register: April 26, 1994]
_______________________________________________________________________
Part III
Securities and Exchange Commission
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17 CFR Parts 210, 229, and 249
Selection of Reporting Currency for Financial Statements of Foreign
Private Issuers and Reconciliation to U.S. GAAP for Foreign Private
Issuers With Operations in a Hyperinflationary Economy et al.; Proposed
Rules
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 210 and 249
[Release Nos. 33-7054; 34-33919; International Series Release No. 654;
File No. S7-11-94]
RIN 3235-AD70
Selection of Reporting Currency for Financial Statements of
Foreign Private Issuers and Reconciliation to U.S. GAAP for Foreign
Private Issuers With Operations in a Hyperinflationary Economy
AGENCY: Securities and Exchange Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Commission is proposing to amend Regulation S-X and Form
20-F to facilitate the registration and reporting by foreign private
issuers. The changes proposed today allow foreign issuers flexibility
in the selection of the reporting currency used in filings with the
Commission and streamline financial statement reconciliation
requirements for foreign private issuers with operations in countries
with hyperinflationary economies.
DATES: Comments should be received on or before July 25, 1994.
ADDRESSES: Comment letters should refer to File Number S7-11-94 and
should be submitted in triplicate to Jonathan G. Katz, Secretary, U.S.
Securities and Exchange Commission, 450 Fifth Street NW., Washington,
DC 20549. The Commission will make all comments available for public
inspection and copying in its Public Reference Room at the same
address.
FOR FURTHER INFORMATION CONTACT: Wayne E. Carnall, Office of the Chief
Accountant, Division of Corporation Finance at (202) 272-2553 U.S.
Securities and Exchange Commission, Washington, DC 20549.
SUPPLEMENTARY INFORMATION: As described in detail below, the Commission
is proposing to revise Rule 3-201 of Regulation S-X2 and to
amend Form 20-F3 under the Securities Exchange Act of 1934.4
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\1\17 CFR 210.3.20
\2\17 CFR 210.
\3\17 CFR 249.220f.
\4\15 U.S.C. 78a et seq.
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I. Introduction
The Commission is proposing today to facilitate registration and
reporting by foreign private issuers, by allowing flexibility in the
selection of the reporting currency used in filings with the Commission
and by streamlining financial statement reconciliation requirements for
foreign private issuers with operations in countries with
hyperinflationary economies. As proposed, a foreign private issuer
could state amounts in its financial statements in any currency which
it deemed appropriate so long as it reports to a majority of its
nonaffiliated securityholders using that currency. In addition, a
foreign private issuer that accounts for its operations in
hyperinflationary environments in accordance with International
Accounting Standard No. 21, ``The Effects of Changes in Foreign
Exchange Rates,'' as amended in 1993 (``IAS 21''), would not need to
reconcile the differences that would have resulted from application of
the U.S. standard, Statement of Financial Accounting Standards No. 52,
``Foreign Currency Translation'' (``SFAS 52'').
II. Reporting Currency of Foreign Private Issuers
A. Selection of a Reporting Currency
Currently, the Commission's rules require a foreign issuer to
present its financial statements in the currency of either its country
of incorporation or of its primary economic environment. This
requirement has been increasingly troublesome for foreign companies
entering the U.S. market, and the staff has received a number of
requests for accommodation. Some foreign issuers that have historically
reported in their domestic market using the U.S. dollar seek to report
on that basis in the U.S., but current rules would not permit them to
do so in filings with the Commission. In addition, the issue of
reporting currency is particularly troublesome for foreign private
issuers that operate in several countries or have securities traded in
a number of markets. For such companies, the country of incorporation
may be a matter of convenience or may account only for a limited part
of its business activity; no single economic environment may be
dominant to its operations or shareholder base. In these circumstances,
management may wish to select a reporting currency chiefly on the basis
of its familiarity to and acceptance by the international markets. Some
multinational companies state amounts in their financial statements in
different currencies in different trading markets, either by choice or
by mandate of the various jurisdictions.
To address these difficulties, the Commission is proposing to
revise Rule 3-20 of Regulation S-X to permit a foreign issuer to state
the amounts in its primary financial statements using any currency in
which it reports to a majority of its nonaffiliated
securityholders.5 The amendment would require specific disclosure
in a note to the financial statements if the currency in which the
issuer expects to declare any dividends is different from the reporting
currency, or there are material exchange restrictions affecting the
reporting currency or the currency in which dividends are paid. The
rule as proposed to be amended would not limit a foreign issuer's
choice of reporting currency. Management should be in the best position
to determine which reporting currency is most relevant to the issuer's
investors, taking into consideration the effects of that choice on the
measurement of operations in the hyperinflationary environments in
which the issuer does business.
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\5\An issuer could furnish to some or all of its securityholders
financial statements with amounts in currencies other than the one
selected as its reporting currency for purposes of filings with the
Commission so long as it also delivered to a majority of its
unaffiliated securityholders financial statements with amounts
stated in the reporting currency used in its Commission filings.
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The Commission recognizes that the choice of reporting currency can
affect trends in sales, net income, working capital, and similar items
depicted in the financial statements. Also, depending on the reporting
currency, measurement differences arise if the issuer has material
operations in a hyperinflationary environment.6 Such consequences
of the reporting currency selection arise for domestic and foreign
companies alike, particularly if they have substantive operations in
more than one country. To the extent that depicted trends and reported
results are affected by exchange rate fluctuations, explanatory
disclosure should be provided in filings with the Commission as part of
the explanation of the material changes from year to year required in
management's discussion and analysis.7
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\6\SFAS 52 requires that the underlying transactions of
operations in hyperinflationary environments be measured in the
reporting currency, which may differ from company to company, rather
than in the currency of the operation's primary economic
environment. Differences may also arise because some issuers, which
prepare their primary financial statements in accordance with
accounting principles of other jurisdictions, measure transactions
using the functional currency of that business, with the results
restated for changes in price-level and then translated to the
reporting currency. An accommodation to issuers that account for
operations in hyperinflationary environments using a method that
differs from that required by U.S. GAAP is discussed in a later
section of this release.
\7\17 CFR 229.303.
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The Commission has previously addressed accounting for transactions
in multiple currencies, noting the significant differences in economic
substance that may exist among subsidiaries, divisions, and similar
operations that operate in different economic environments.8 At
that time, the Commission noted the need for registrants to provide
more information about the material functional currencies of foreign
operations, and observed that disaggregated disclosure about particular
operations may be necessary in some circumstances. Also, in response to
the requirements of Item 303 of Regulation S-K (``Management's
Discussion and Analysis'') of Regulation S-K,9 as well as the
comparable sections presented in Item 9 of Form 20-F,10
registrants are expected to quantify and discuss material financial
statement effects attributable solely to variations in currency
exchange rates, as well as any material consequences of exchange rate
changes on operations and business strategies.
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\8\See Financial Reporting Policy 501.09, ``Disclosure
Considerations Related to Foreign Operations and Foreign Currency
Translation Effects.''
\9\17 CFR 229.303.
\1\017 CFR 249.220f.
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Comment is requested on the need for accommodation with respect to
reporting currency, and whether the proposed revisions adequately
address these needs. Comment is also requested as to whether the
financial statements, taken together with the disclosures described
above, will provide investors with adequate and meaningful information.
What additional quantitative or other disclosures may be necessary to
fully inform investors regarding operations and transactions conducted
in currencies other than the reporting currency? Comment is also
requested as to whether the rule should be amended to allow only the
additional latitude of use of the currency of the country in which a
majority of the issuer's shareholders reside, or simply to allow the
additional alternative of reporting in U.S. dollars even if it is not
the issuer's primary economic environment. Are there circumstances in
which the reporting currency should be limited to the currency of the
issuer's country of incorporation, or whether the selection of a
reporting currency should be affected by (a) the existence of
hyperinflation in a predominant or significant currency used by the
issuer, (b) a high proportion of operating cash flows denominated in a
single currency, (c) exchange restrictions on the reporting currency or
underlying currencies, or (d) other factors? Commenters recommending
restriction of an issuer's choice of reporting currency should indicate
the appropriate criteria or other measures that would identify
situations warranting restriction of the reporting currency. Comment is
also requested regarding whether the issuer should be required to
furnish financial statements in the selected reporting currency to all
unaffiliated shareholders, rather than to only a majority; whether the
issuer should not be permitted to select a reporting currency for
purposes of filings with the Commission which differs from that used in
reports distributed to investors in other major trading markets; and
whether a requirement limiting the issuer to a single currency in all
distributions of its primary financial statements would be desirable or
feasible.
Increased flexibility in the selection of a reporting currency may
raise significant issues with respect to how the foreign private
issuer's underlying transactions should be measured. The Commission
invites comment on two measurement approaches, which are described
below.
Under Approach A, the issuer would measure separately its own
transactions, and those of each of its material operations (for
example, branch, division, subsidiary, or joint venture) that is
included in the issuer's consolidated financial statements and located
in a non-hyperinflationary environment, using the particular currency
of the primary economic environment in which the issuer or the
operation conducts its business.\11\ Financial statement amounts so
determined would be translated to the reporting currency using the
methodology that is prescribed by SFAS 52 for translation of financial
statements from a functional currency to a reporting currency. Under
that method, (a) all balance sheet amounts are translated into the
reporting currency at the exchange rate at the balance sheet date, (b)
all revenues, expenses, gains, and losses are translated at the
exchange rate existing at the time of the transaction or, if
appropriate, a weighted average of the exchange rates during the period
or year, and (c) all the translation effects of exchange rate changes
are included as a separate component (``cumulative translation
adjustment'') of shareholders' equity.
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\11\An issuer with a material operation in a hyperinflationary
environment would measure the transactions of the operation in the
reporting currency pursuant to SFAS 52, except that no
reconciliation to that method would be required in some
circumstances if the proposal relating to issuers with operations in
hyperinflationary environments, discussed in Section III of this
release, is adopted.
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Under Approach B, all transactions of the issuer and its
subsidiaries would be measured (or remeasured if not so measured
initially) using the reporting currency, except that transactions of
each of its material foreign operations (for example, branch, division,
subsidiary, or joint venture) included in the consolidated financial
statements and located in a non-hyperinflationary environment would be
measured using the particular currency of the primary economic
environment in which the foreign operation conducts its business.
Financial statement amounts determined for the material foreign
operations of the issuer would be translated using the methodology
prescribed by SFAS 52 for translation of financial statements from a
functional currency to a reporting currency, as described above.
Under both approaches, the effects of exchange rate changes between
transaction date and settlement date of transactions denominated in a
currency other than the currency of measurement would be included in
income. Monetary assets and liabilities of the issuer and its
operations that are not denominated in the currency of measurement
would be translated at the exchange rate at the balance sheet date with
the effects of exchange rate changes included in income.\12\
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\12\Neither approach A nor B affects accounting for foreign
currency transactions as defined in SFAS 52. The Commission is not
proposing to revise, and is not considering revision of the
requirements with respect to, accounting for foreign currency
transactions under SFAS 52.
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Under Approach A, the reporting currency is treated as a currency
of display, with no currency exchange gains or losses recognized in
income solely as a result of the selection of a particular reporting
currency. A hypothetical issuer with operations in each of three (non-
hyperinflationary) countries would depict the same relationships (e.g.,
return on assets or equity, debt to equity ratio, gross profit margin,
turnover ratios) in its annual financial statements, regardless of
where its parent company is domiciled or which reporting currency that
it selects. Determinations of ``lower of cost or market'' and ``net
realizable value'' which are necessary under GAAP with respect to
assets of the issuer and its component operations will be made in the
currency of that operation's primary economic environment.
Under Approach B, the effects of changing exchange rates between
the reporting currency and any other currency in which monetary assets
and liabilities of the issuer's parent company and of its similarly
domiciled subsidiaries are denominated would be reflected as a
component of income (``transaction gain or loss''). Determinations of
``lower of cost or market'' and ``net realizable value'' which are
necessary under GAAP with respect to assets of the issuer's parent
company and similarly domiciled subsidiaries will be made in the
reporting currency, while these determinations with respect to foreign
operations will be made in the currency of that operation's primary
economic environment. A hypothetical issuer with operations in each of
three countries could depict different financial statement
relationships (e.g., return on assets or equity, debt to equity ratio,
gross profit margin, turnover ratios), depending on both factors--the
country in which its parent company is domiciled and the reporting
currency that it selects, unless the issuer has an immaterial amount of
nonmonetary assets.
Comment is requested as to which approach would better meet the
needs of issuers and investors. Commenters should indicate whether one
approach or the other should be mandated or prohibited under particular
circumstances; and whether particular disclosures, in addition to an
explanation of the accounting policy followed, should be required.
Commenters should consider whether an issuer that distributes financial
statements stated in more than one currency in different markets,
either by election or mandate of particular jurisdictions, should be
required to use one method or the other in those financial statements;
or whether additional disclosures should be required. Commenters should
consider whether additional guidance concerning translation to the
selected reporting currency is necessary.
B. Changes of Reporting Currency
The proposed revisions to Rule 3-20 also codify staff practice
regarding changes in reporting currency. The staff has addressed
situations in which an issuer proposes to change its reporting currency
because of a change of its place of incorporation or of its primary
economic environment, as well as when characteristics of its
shareholder base have changed. The proposed revisions specify that the
financial statements for all periods presented should be stated in the
same reporting currency. In the event that an issuer elects to change
its reporting currency, the proposed revisions require that the
financial statements of periods prior to the change be comprehensively
recast as if the new reporting currency had been used since at least
the earliest period presented in the filing.\13\ Under this method, the
income statement and statement of cash flows would be translated into
the new reporting currency using an appropriately weighted average
exchange rate for the applicable period, and the balance sheet would be
translated using the exchange rate at the end of the applicable period.
Comprehensive translation into a single reporting currency for all
periods presented appears necessary to depict trends consistently and
maintain other relationships within the financial statements.\14\
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\13\A change in the reporting currency may or may not be
coincident with a change in the currency of the primary economic
environment in which the operations exist. The U.S. accounting
guidance applicable to a change in an entity's functional currency
appears in paragraph 9 of SFAS 52. The effects of differences
between the method of accounting in the primary financial statements
for a change in functional currency and the method of accounting
prescribed by U.S. GAAP should be explained and quantified where
reconciliation is required pursuant to Item 17 or Item 18 of Form
20-F.
\14\At least one other jurisdiction permits issuers to
recalculate the prior years' data by means of a ``convenience
translation'' of the former reporting currency to the new currency
using the exchange rate prevailing when the change of reporting
currency is implemented. See Emerging Issues Committee of the
Canadian Institute of Chartered Accountants, Issue No. 11 (December
15, 1989), ``Changes in Reporting Currency''.
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Comment is requested as to whether the financial statements should
be recast for all periods, rather than only for all periods presented,
in order to allocate more exactly the effect of the change in reporting
currency between retained earnings and the cumulative translation
adjustment. Comment is also requested as to whether other methods of
adjusting prior periods should be acceptable alternatives when a change
in reporting currency is adopted. Commenters are asked to address
whether the selection of either Approach A or Approach B described
above with respect to measurement of the issuer's underlying
transactions should affect the presentation of periods prior to a
change in reporting currency. Comment is also requested if the proposed
rule should require disclosure of the reason why the issuer changed its
reporting currency.
III. Foreign Issuer Operations in a Hyperinflationary Economy
A foreign issuer that has material operations in a currency of a
country with a hyperinflationary economy must, for purposes of
reconciliation to U.S. GAAP, measure those operations in the issuer's
reporting currency.\15\ However, the accounting principles of most
other countries require or permit the foreign issuer to measure
operations in hyperinflationary environments in the local currency,
restated for the effects of changing prices, and then translated to the
reporting currency.
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\15\SFAS 52 governs the accounting for operations in
hyperinflationary environments. Paragraph 11 of that standard
defines a hyperinflationary environment as ``one that has cumulative
inflation of approximately 100 percent or more over a 3-year
period.''
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Because devaluation of a currency is usually not equivalent to the
effect of inflation on that currency's purchasing power, the
remeasurement process required by U.S. GAAP will not produce the same
results as the restate-translate method often followed by foreign
issuers. The staff has addressed a number of requests by foreign
issuers for accommodation with respect to the requirement to quantify
effects of differences between the methods of accounting for
hyperinflationary operations. Foreign issuers cite the cost and
complexity involved in such a reconciliation, as it effectively may
require duplicate recordkeeping in both the reporting currency and the
local currency of the operation. Foreign issuers have observed that
amounts which would be produced by application of SFAS 52 will,
nevertheless, not be comparable to an identically situated U.S. company
if the reporting currency of the foreign issuer is not U.S.
dollars.\16\
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\16\SFAS 52 would require measurement of the operation's
transactions in the foreign issuer's reporting currency, while the
U.S. company would measure the operation's transactions in U.S
dollars.
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To address these concerns, the Commission is proposing to eliminate
the requirement of Items 17 and 18 of Form 20-F that an issuer quantify
the effects on financial statements of its use of a translation
methodology for operations in a hyperinflationary environment which
differs from SFAS 52 so long as it conforms with IAS 21, provided that
the method used is consistently applied in all periods. IAS 21, as
amended in 1993, requires that amounts in the financial statements of
the hyperinflationary operation be restated for the effects of changing
prices in accordance with International Accounting Standard No. 29,
``Financial Reporting in Hyperinflationary Economies'' (``IAS 29''),
and then translated to the reporting currency.\17\
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\17\Issuers may elect either of two methods described by IAS 29:
(a) Restatement of historical cost amounts into units of currency
that have the same general purchasing power (historical cost/
constant currency method), or (b) measurement at current cost, with
amounts for prior periods restated for changes in the general level
of prices (current cost method).
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Comment is requested on the need for accommodation with respect to
the accounting for hyperinflationary operations, and whether the
proposed revisions adequately address those needs. Comment is also
requested as to whether financial statements and accompanying
reconciliation produced on the basis permitted by the proposal would
provide investors with adequate and meaningful information. Comment is
requested regarding whether IAS 29 provides sufficient guidance to
ensure appropriate application of both the current cost method and the
historical cost/constant currency method, or whether only one or the
other of the two methods should be permitted without reconciliation.
IV. Cost-Benefit Analysis
To evaluate fully the costs and benefits associated with the
proposed amendment to Rule 3-20 of Regulation S-X and Form 20-F under
the Exchange Act, the Commission requests commenters to provide views
and empirical data as to the costs and benefits associated with such
proposals.
V. Regulatory Flexibility Act Certification
Pursuant to the Regulatory Flexibility Act [5 U.S.C. 605(b)], the
Chairman of the Commission has certified that the proposed revisions to
rules and forms will not have a significant impact on a substantial
number of small entities. Members of the public who wish to obtain a
copy of the Regulatory Flexibility Certification should contact Wayne
E. Carnall, (202) 272-2553, Office of Chief Accountant, Division of
Corporation Finance, Securities and Exchange Commission, 450 Fifth
Street NW., Washington DC 20549.
VI. General Requests for Comments
Any interested person wishing to submit comments on any aspect of
the amendments to forms and rules that are subject to this release are
requested to do so. Comments should be submitted in triplicate to
Jonathan G. Katz, Secretary, U.S. Securities and Exchange Commission,
450 Fifth Street NW., Washington, DC 20549 and should refer to file
number S7-11-94.
VII. Statutory Bases
The amendments to the Commission's rules and forms are being
proposed pursuant to sections 3(b), 4A, 12, 13, 14, 15, 16 and 23 of
the Securities Exchange Act of 1934.
List of Subjects in 17 CFR Parts 210 and 249
Accounting, Reporting and recordkeeping requirements, Securities.
Text of Rule and Form Amendments
In accordance with the foregoing, title 17, chapter II of the Code
of Federal Regulations is proposed to be amended as follows:
PART 210--FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL
STATEMENTS, SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF
1934, PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, INVESTMENT
COMPANY ACT OF 1940, AND ENERGY POLICY AND CONSERVATION ACT OF 1975
1. The authority citation for part 210 is revised to read as
follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77aa(25),
77aa(26), 78l, 78m, 78n, 78o(d), 78w(a), 78ll(d), 79e(b), 79j(a),
79n, 79t(a), 80a-8, 80a-20, 80a-29, 80a-30, 80a-37a, unless
otherwise noted.
2. By revising Sec. 210.3-20 to read as follows:
Sec. 210.3-20 Currency for financial statements of foreign private
issuers.
(a) A foreign private issuer, as defined in Sec. 230.405 of this
chapter, shall state amounts in its primary financial statements in the
currency in which it reports in its financial statements that are
distributed to the majority of its nonaffiliated shareholders.
(b) The currency in which amounts in the financial statements are
stated shall be disclosed prominently on the face of the financial
statements. If dividends on publicly-held equity securities will be
declared in a currency other than the reporting currency, a note to the
financial statements shall identify that currency. If there are
material exchange restrictions or controls relating to the issuer's
reporting currency, the currency of the issuer's domicile, or the
currency in which the issuer will pay dividends, prominent disclosure
of this fact shall be made in the financial statements. If the
reporting currency is not the U.S. dollar, dollar-equivalent financial
statements or convenience translations shall not be presented, except a
translation may be presented of the most recent fiscal year and any
subsequent interim period presented using the exchange rate as of the
most recent balance sheet included in the filing, except that a rate as
of the most recent practicable date shall be used if materially
different.
(c) If the financial statements of a foreign private issuer are
stated in a currency of a country that has experienced cumulative
inflationary effects exceeding a total of 100 percent over the most
recent three year period, and have not been recast or otherwise
supplemented to include information on a historical cost/constant
currency or current cost basis prescribed or permitted by appropriate
authoritative standards, the issuer shall present supplementary
information to quantify the effects of changing prices upon its
financial position and results of operations.
(d) Either.
(1) Approach A Notwithstanding the currency selected for reporting
purposes, the issuer shall measure separately its own transactions, and
those of each of its material operations (e.g., branches, divisions,
subsidiaries, joint ventures, and similar entities) that is included in
the issuer's consolidated financial statements and not located in a
hyperinflationary environment, using the particular currency of the
primary economic environment in which the issuer or the operation
conducts its business. Balance sheet amounts so determined shall be
translated into the reporting currency at the exchange rate at the
balance sheet date; all revenues, expenses, gains, and losses shall be
translated at the exchange rate existing at the time of the transaction
or, if appropriate, a weighted average of the exchange rates during the
period; and all translation effects of exchange rate changes shall be
included as a separate component (``cumulative translation
adjustment'') of shareholders' equity. For purposes of this paragraph,
the currency of an operation's primary economic environment is normally
the currency in which cash is primarily generated and expended; a
hyperinflationary environment is one that has cumulative inflation of
approximately 100% or more over the most recent three year period.
Departures from the methodology presented in this paragraph shall be
quantified pursuant to Items 17 and 18(c)(2) of Form 20-F
(Sec. 249.220f of this chapter).
(2) Approach B All transactions of the issuer and its subsidiaries
shall be measured (or remeasured if not so measured initially) using
the reporting currency and the effects of exchange rate changes on
monetary assets and liabilities of the issuer and its subsidiaries
shall be included in income, except that transactions of its material
foreign operations (e.g., branch, division, subsidiary, joint venture,
or similar entity) included in the consolidated financial statements
and not located in a hyperinflationary environment shall be measured
using the particular currency of the primary economic environment in
which the foreign operation conducts its business. With respect to
financial statement amounts of foreign operations so determined:
Balance sheet amounts shall be translated into the reporting currency
at the exchange rate at the balance sheet date; all revenues, expenses,
gains, and losses shall be translated at the exchange rate existing at
the time of the transaction or, if appropriate, a weighted average of
the exchange rates during the period; and all effects of exchange rate
changes shall be included as a separate component (``cumulative
translation adjustment'') of shareholders' equity. For purposes of this
paragraph, the currency of an operation's primary economic environment
is normally the currency in which cash is primarily generated and
expended; a hyperinflationary environment is one that has cumulative
inflation of approximately 100% or more over the most recent three year
period. Departures from the methodology presented in this paragraph
shall be quantified pursuant to Items 17 and 18(c)(2) of Form 20-F
(Sec. 249.220f of this chapter).
(e) The issuer shall state its primary financial statements in the
same currency for all periods for which financial information is
presented. If the financial statements are stated in a currency that is
different from that used in financial statements previously filed with
the Commission, the issuer shall recast its financial statements as if
the newly adopted currency had been used since at least the earliest
period presented in the filing. The decision to change the reporting
currency shall be disclosed in a note to the financial statements in
the period in which the change occurs.
PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934
3. The authority citation for part 249 continues to read in part as
follows:
Authority: 15 U.S.C. 78a, et seq., unless otherwise noted;
* * * * *
4. By amending Form 20-F (referenced in Sec. 249.220f) by revising
paragraph (c)(2)(iv) of Item 17 and adding Instruction (5) to Item 17,
by revising paragraph (c)(2)(iv) of Item 18 and adding Instruction (4)
to Item 18 to read as follows:
Note: The Form 20-F Does Not and the Amendments Will Not Appear
in the Code of Federal Regulations.
Form 20-F
* * * * *
Item 17. Financial Statements
* * * * *
(c) * * *
(2) * * *
(iv)(A) Issuers that prepare their financial statements on a basis
of accounting other than U.S. generally accepted accounting principles
that comprehensively includes the effects of price level changes in its
primary financial statements either on a historical cost/constant
currency or current cost approach, may omit the disclosures specified
by paragraphs (c)(2)(i), (c)(2)(ii), and (c)(2)(iii) of this Item
relating to effects of price level changes. The financial statements
should describe the basis of presentation, and that such effects have
not been included in the reconciliation.
(B) Issuers that prepare their financial statements on a basis of
accounting other than U.S. generally accepted accounting principles
that translates amounts in financial statements stated in a currency of
a hyperinflationary economy into the issuer's reporting currency in
accordance with International Accounting Standards No. 21, ``The
Effects of Changes in Foreign Exchange Rates,'' as amended in 1993, may
omit the disclosures specified by paragraphs (c)(2)(i), (c)(2)(ii), and
(c)(2)(iii) of this Item relating to the effects of the different
method of accounting for an entity in a hyperinflationary environment.
Instructions
* * * * *
(5) For purposes of this Item, a hyperinflationary economy is one
that has cumulative inflation of approximately 100% or more over the
most recent three year period.
* * * * *
Item 18. Financial Statements
* * * * *
(c) * * *
(2) * * *
(iv)(A) Issuers that prepare their financial statements on a basis
of accounting other than U.S. generally accepted accounting principles
that comprehensively includes the effects of price level changes in its
primary financial statements either on a historical cost/constant
currency or current cost approach, may omit the disclosures specified
by paragraphs (c)(2)(i), (c)(2)(ii), and (c)(2)(iii) of this Item
relating to effects of price level changes. The financial statements
should describe the basis of presentation, and that such effects have
not been included in the reconciliation.
(B) Issuers that prepare their financial statements on a basis of
accounting other than U.S. generally accepted accounting principles
that translates amounts in financial statements stated in a currency of
a hyperinflationary economy into the issuer's reporting currency in
accordance with International Accounting Standards No. 21, ``The
Effects of Changes in Foreign Exchange Rates,'' as amended in 1993, may
omit the disclosures specified by paragraphs (c)(2)(i), (c)(2)(ii), and
(c)(2)(iii) of this Item relating to the effects of the different
method of accounting for an entity in a hyperinflationary environment.
Instructions
* * * * *
(4) For purposes of this Item, a hyperinflationary economy is one
that has cumulative inflation of approximately 100% or more over the
most recent three year period.
* * * * *
Dated: April 19, 1994.
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-9891 Filed 4-25-94; 8:45 am]
BILLING CODE 8010-01-P
