[Federal Register Volume 60, Number 131 (Monday, July 10, 1995)]
[Proposed Rules]
[Pages 35604-35633]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16389]
[[Page 35603]]
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Part II
Securities and Exchange Commission
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17 CFR Parts 228, 229, et al.
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Securities; Final Rule and Proposed Rules
Federal Register / Vol. 60, No. 131 / Monday, July 10, 1995 /
Proposed Rules
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[[Page 35604]]
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 228, 229, 230, 239, 240 and 249
[Release Nos. 33-7183; 34-35893; IC-21166; File No. S7-13-95]
RIN 3235-AG49
Use of Abbreviated Financial Statements in Documents Delivered to
Investors Pursuant to the Securities Act of 1933 and Securities
Exchange Act of 1934
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rule.
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SUMMARY: The Securities and Exchange Commission (``Commission'') today
is soliciting comment on proposed amendments to allow the use of
abbreviated financial statements in annual reports delivered to
shareholders pursuant to the proxy rules. Comment is also solicited on
additional approaches to streamlining annual reports to shareholders.
Rule changes also are proposed to allow the use of abbreviated
financial statements in other disclosure documents, including
prospectuses, that are required to be delivered to investors. In order
to encourage individual investor comments and suggestions, the
Commission is including in the Release an Appendix directed to
investors, which will be published separately and distributed to
investors. In addition, during the comment period, the Commission
intends to hold focus groups composed of investors to assess investors'
views as to the utility of sample abbreviated financial statements, as
compared with full financial statements.
DATES: Comments on the proposed amendments should be received on or
before October 10, 1995.
ADDRESSES: Comments should be submitted in triplicate to Jonathan G.
Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street
NW., Washington, DC 20549. Comment letters should refer to File No. S7-
13-95. All comments received will be available for public inspection
and copying in the Commission's Public Reference Room, 450 Fifth Street
NW., Washington, DC 20549.
FOR FURTHER INFORMATION CONTACT: Craig C. Olinger, Associate Chief
Accountant, at (202) 942-2960, Kenneth T. Marceron, Staff Accountant,
at (202) 942-1781, or Elizabeth M. Murphy or William B. Haseltine,
Special Counsels, at (202) 942-2910, Division of Corporation Finance,
Securities and Exchange Commission, 450 Fifth Street NW., Mail Stop 3-
12, Washington, DC 20549.
SUPPLEMENTARY INFORMATION: The Commission is proposing amendments to
Forms S-1, S-2, S-3, S-4, S-6, S-8, S-11, SB-1, SB-2, F-1, F-2, F-3, F-
4, F-7, F-8, F-9, F-10, F-80 and 1-A 1 and Regulation D 2
under the Securities Act of 1933 (``Securities Act''),3 as well as
Forms 10-K and 10-KSB 4, Rules 13e-3, 13e-4, 14a-3, 14c-3, 14d-1
and 14d-6 5 and Schedules 13E-4F, 14A, 14C, 14D-1F, and 14D-9F
6 under the Securities Exchange Act of 1934 (``Exchange
Act'').7 Additionally, a new Item 305 would be added to
Regulations S-B and S-K,8 and new Securities Act Rule 435 and new
Exchange Act Rules 14a-16 and 14c-8 would be created.
\1\ 17 CFR 239.11, 12, 13, 25, 16, 16b, 18, 9, 10, 31, 32, 33,
34, 37, 38, 39, 40, 41 and 90.
\2\ 17 CFR 230.501-508.
\3\ 15 U.S.C. 77a et seq.
\4\ 17 CFR 249.310 and 310b.
\5\ 17 CFR 240.13e-3, 13e-4, 14a-3, 14c-3, 14d-1 and 14d-6.
\6\ 17 CFR 240.13e-102, 14a-101, 14c-101, 14d-102, and 14d-103.
\7\ 15 U.S.C. 78a et seq.
\8\ 17 CFR Part 228 and 17 CFR Part 229.
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I. Executive Summary and Background
The Commission today is publishing for comment proposals to
streamline the financial information currently required to be delivered
to investors in connection with the annual election of directors
pursuant to the Commission's proxy regulations.9 This initiative
responds to concerns that the growing complexity and volume of
financial information, particularly that required in notes to financial
statements,10 render the annual report less readable and useful to
the general shareholder body.11 Proponents of annual report
simplification believe that streamlined annual reports will allow
registrants both to communicate more effectively with shareholders in
the annual report by being able to highlight key financial items and to
reduce the costs of preparing and delivering the annual report. These
commentators are of the view that a large segment of a company's
shareholder body does not review and analyze the detailed information
in the notes to the financial statements, particularly in determining
whether to vote for director nominees, and companies therefore should
not have to incur the cost of delivery of the full set of financial
statements in the annual report.
\9\ See Rules 14a-3 and 14c-3.
\10\ Financial statements prepared in conformity with generally
accepted accounting principles (``GAAP'') are required to include
adequate disclosure of material matters (Statement on Auditing
Standards (``SAS'') No. 32, Adequacy of Disclosure in Financial
Statements). Disclosures in notes to the financial statements are
intended to provide material information necessary to make the
financial statements, in light of the circumstances under which they
are made, not misleading (Rule 4-01(a) of Regulation S-X [17 CFR
210.4-01(a)]). In recent decades, numerous requirements have been
adopted that specify in detail the content of disclosures required
in the notes to the financial statements.
\11\ See, e.g., Groves, Ray J., ``Overload of Financial
Disclosure Rules is Defeating the Purpose of the Exercise,''
American Banker (Jan. 3, 1995); Beresford, Dennis R. and Hepp, John
A., Financial Accounting Series: Status Report, No. 149-B,
``Financial Statement Disclosures: Too Many or Too Few?'' (May 25,
1995); Deloitte & Touche LLP, Summary Annual Reporting, Improving
Shareholder Communications (1995), at 3-4; Cook, Michael and Sutton,
Michael H., ``Summary Annual Reporting: A Cure for Information
Overload,'' Fin. Executive (Jan/Feb 1995).
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Various approaches have been suggested to accomplish the
streamlining. One, which is contained in rule amendments proposed
today, would permit an eligible registrant to use financial statements
with significantly abbreviated notes (``abbreviated financial
statements'') in annual reports to shareholders. The annual report
would prominently identify the financial statements as abbreviated and
state that the registrant will provide upon request, and without
charge, a copy of the full financial statements. The full financial
statements would be required to be filed in the registrant's annual
report on Form 10-K, 10-KSB or 20-F; 12 registrants are already
required to advise shareholders in the proxy statement or annual report
that the Form 10-K or 10-KSB will be provided upon request and without
charge. This would continue under the proposed rules.
\12\ 17 CFR 249.220f.
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In summary, disclosure required in the notes to the abbreviated
financial statements would include:
the significant accounting policies of the registrant;
certain matters materially affecting the comparability of
amounts reported in the financial statements;
circumstances identified in explanatory language added to
the independent accountant's report, contingencies, loan defaults, and
subsequent events; and
related party transactions.
The abbreviated financial statements contemplated by the proposed
rule would omit a significant number of notes to financial statements
that are required under GAAP. Appendix A to this release summarizes the
common disclosures that would be omitted from the abbreviated financial
statements under the proposals. In general, the disclosures that would
be omitted from
[[Page 35605]]
the abbreviated financial statements contain quantitative detail and
related explanatory information regarding amounts included in the
financial statements. Detailed quantitative disclosures and related
explanatory material regarding many off-balance sheet items also would
be omitted. For example, disclosure enumerating the composition of
inventories and fixed assets, the terms and conditions of borrowings,
the components of income tax expense and related deferred taxes, the
status of pension fund assets and obligations, the assets and operating
results of business and geographic segments, the details of
restructuring charges and the characteristics of on-balance sheet and
off-balance sheet financial instruments (including derivative
instruments), among other things, would be omitted.
Other approaches for streamlining the annual report to shareholders
include the concept of a summary annual report, the subject of a 1983
research study prepared for the Financial Executives Research
Foundation (``FERF'').13 The summary annual report concept is
discussed in this release, and comments are solicited on the approach.
Comment is also being solicited as to whether the Commission should
allow registrants total flexibility, subject to the requirements of
state corporate law and trading market listing agreements, by
rescinding the proxy requirements regarding delivery of the annual
report to shareholders.
\13\ ``Summary Reporting of Financial Information--Moving Toward
More Readable Annual Reports,'' Deloitte, Haskins & Sells (1983)
(``FERF Report'').
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Similar concerns about the complexity and volume of financial
information, particularly in the notes to the financial statements, as
well as the use of the annual report to shareholders in the integrated
disclosure system, underlie additional rule proposals that would allow
the use of abbreviated financial statements in the full spectrum of
other disclosure documents required to be delivered to investors, such
as prospectuses and transactional proxy statements.14 Use of
abbreviated financial statements in these circumstances raises
additional issues, including the extent to which those making
investment decisions would be willing to rely on the abbreviated
financial statements and the practicality of requiring delivery of full
financial statements upon request in various transactional contexts. A
number of Commission registration forms, most notably Forms S-3 and F-
3, already use a model of incorporation by reference, and delivery of
incorporated documents upon request. The Commission invites comment as
to the appropriateness and utility of such approach for both investors
and issuers generally, and specifically with respect to each class of
disclosure document covered by the proposed rulemaking.
\14\ These documents include: (1) prospectuses required to be
delivered in connection with offerings of securities pursuant to the
Securities Act; (2) proxy or information statements required to be
furnished pursuant to Section 14 of the Exchange Act [15 U.S.C.
78n]; (3) documents furnished to investors in connection with tender
offers or going private transactions; (4) offering circulars
delivered in connection with Regulation A [17 CFR 230.251-263]
offerings; and (5) disclosure required to be furnished in connection
with Regulation D offerings. If the disclosure document is required
to include financial statements of another entity, such as an
acquired business, significant subsidiary, or guarantor, the
registrant also could choose to deliver abbreviated financial
statements of that entity to investors, provided that the
eligibility criteria are met.
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The Commission recognizes that the feasibility of this initiative
requires the confidence of registrants that they will not be subject to
liability for failure to deliver the full financial statements in the
annual report or other mandated disclosure documents. The rules
proposed today include a safe harbor from liability for non-delivery of
the note disclosures allowed to be excluded from the abbreviated
financial statements. The proposals would not change the disclosure
currently required outside the company's financial statements in
mandated disclosure documents.
This initiative is part of the Commission's overall efforts to
improve the effectiveness and efficiency of its disclosure
system.15 Both the Commission and the Financial Accounting
Standards Board (``FASB'') recognize that an important part of that
effort is to evaluate current financial disclosures to assess their
continued utility and cost effectiveness.16
\15\ See, e.g., Securities Act Release No. 7053 (April 19, 1994)
[59 FR 21644] and Securities Act Release Nos. 7117, 7118 and 7119
(December 1, 1994) [59 FR 65628, 65632, and 65637] adopting
amendments to Form 20-F and Regulation S-X [17 CFR 210] designed to
streamline the financial information and reconciliation requirements
for both foreign and domestic companies.
\16\ In response to the Financial Accounting Standards Advisory
Council's 1994 Annual FASB Agenda Survey, survey respondents
selected ``Comprehensive Review of Financial Statement Disclosures''
from a list of projects not currently on FASB's agenda and indicated
that it should be given high priority by FASB. While FASB has not
yet added a formal project to its agenda, the Chairman of FASB has
indicated that FASB will be devoting significant resources to this
issue. See Beresford, Dennis R. and Hepp, John A., Financial
Accounting Series: Status Report, No. 149-B, ``Financial Statement
Disclosures: Too Many or Too Few?'' at 7 (May 25, 1995).
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II. Proposed Amendments To Permit Use of Abbreviated Financial
Statements
A. Content of Abbreviated Financial Statements
The proposed rule amendments would permit eligible registrants to
use abbreviated financial statements in specified disclosure documents
delivered to shareholders and investors. The content of the abbreviated
financial statements is set forth in proposed new Item 305(b) of
Regulations S-K and S-B.17
\17\ Proposed Item 305 of Regulations S-B and S-K. References
throughout the release to provisions of proposed Item 305 of
Regulation S-K should be read to include the comparable provisions
in proposed Item 305 of Regulation S-B. The two items are identical
in all substantive respects, except that all but one of the
references to Regulation S-X in proposed Item 305 of Regulation S-K
are omitted from proposed Item 305 of Regulation S-B or changed to
refer to Item 310 of Regulation S-B [17 CFR 228.310] (there is a
reference to Article 2 of Regulation S-X [17 CFR 210.2] regarding
accountants' reports in both the proposed Regulation S-K and S-B
Items).
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The face of the abbreviated financial statements would have to
include a prominent statement identifying them as such.18
Abbreviated financial statements would include balance sheets,
statements of income and cash flows, and statements of changes in
stockholders' equity that conform with GAAP and Regulation S-X with
respect to classifications, measurements and periods presented.19
The notes to the abbreviated financial statements would be limited to
the items specified in proposed Item 305. 20
\18\ Proposed Item 305(b)(1) of Regulation S-K.
\19\ Proposed Items 305(b) (1) and (2) of Regulation S-K.
Updating requirements for the abbreviated financial statements in
prospectuses and proxy statements would be consistent with the
updating requirements for the full financial statements.
Accordingly, domestic issuers would follow the requirements of Rule
3-12 of Regulation S-X [17 CFR 210.3-12], while foreign issuers
would follow the requirements of Rule 3-19 of Regulation S-X [17 CFR
210.3-19]. See proposed Regulation S-K Items 305(c) and (f)(2).
Pursuant to proposed Regulation S-B Item 305(c), small business
issuers would update their abbreviated financial statements in
accordance with Item 310(d) of Regulation S-B [17 CFR 228.310(d)].
\20\ The abbreviated financial statement proposals do not affect
other disclosure requirements, such as the registrant's description
of business, legal proceedings discussions, supplementary financial
information, or Management's Discussion & Analysis (``MD&A'') (Items
101, 103, 302, and 303 of Regulations S-B and S-K [17 CFR 228.101,
103, 302 and 303 and 229.101, 103, 302 and 303]). Registrants that
currently cross-reference, but do not reiterate, data set forth in
the notes to the financial statements in the MD&A section of their
disclosure documents could not cross-reference notes omitted from
the abbreviated financial statements. It is the current practice of
many registrants to include supplementary financial information
pursuant to Item 302 of Regulations S-K and S-B in an unaudited note
to the financial statements. Registrants using abbreviated financial
statements would be required to disclose supplementary financial
information outside of the financial statements elsewhere in the
disclosure document.
[[Page 35606]]
As proposed, the disclosures required in the notes to the
abbreviated financial statements are intended to be an extraction of
all disclosures included in the registrant's full financial statements
that are responsive to the matters specified by Item 305.21
Disclosures responsive to a particular matter may be located in several
places in the notes to the full financial statements. Proposed Item 305
would require all disclosures included in the notes to the full
financial statements that are responsive to a matter specified in Item
305 to be included in the notes to the abbreviated financial
statements, regardless of the source of the underlying disclosure
requirement or the location of the disclosure in the full financial
statements. For example, requirements regarding the disclosure of
accounting policies are primarily contained in Accounting Principles
Board (``APB'') Opinion No. 22,22 but various other FASB and AICPA
pronouncements specifically require disclosure of accounting policies
with respect to certain matters.23 In practice, some registrants
include all accounting policy disclosures in a single note, while
others integrate certain accounting policy disclosures within the
detailed disclosure of the matters to which the policies relate. Under
the proposed requirements, registrants would have to identify and
describe in the notes to the abbreviated financial statements all
significant accounting policies used in the preparation of the
financial statements, regardless of the particular manner in which they
are presented in the notes to the full financial statements.
\21\ Proposed Item 305(b)(3) of Regulation S-K.
\22\ Disclosure of Accounting Policies.
\23\ Disclosures responsive to a particular matter may emanate
from requirements in various accounting pronouncements. SAS No. 69,
The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles in the Independent Auditor's Report, defines
the sources of accounting principles generally accepted in the
United States.
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The specific matters proposed to be required in the notes to the
abbreviated financial statements are as follows: 24
\24\ Proposed Item 305(b)(3)(i)-(xiii) of Regulation S-K.
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1. Basis of presentation. A note to the abbreviated financial
statements would explain that although such statements were prepared
using GAAP for measurement and classification, substantially all of the
notes necessary for a fair presentation in accordance with GAAP and
Regulation S-X have been omitted.25 The note also would state that
the disclosures in the notes to the abbreviated financial statements
are limited to those matters specified by Commission rules, and comply
with Commission rules for presentation of abbreviated financial
statements. The note would contain a reference to the complete note
disclosures in the full financial statements.
\25\ The note to the abbreviated financial statements containing
basis of presentation disclosures that is included by small business
issuers in their delivery documents would refer only to GAAP since
small business issuers are not required to comply with Regulation S-
X.
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2. Accounting policies. A description of all significant accounting
policies used in the preparation of the financial statements, including
a description of the accounting principles followed by the reporting
entity and the methods of applying those principles that materially
affect the determination of financial position, cash flows or results
of operations, as specified by APB Opinion No. 22 and related
pronouncements, would be provided.26
\26\ ``Related pronouncement'' as used throughout this section
refers to a pronouncement constituting GAAP as defined in SAS No. 69
that requires disclosure regarding a matter that would have to be
disclosed in the notes to the abbreviated financial statements under
proposed Item 305 of Regulation S-K.
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3. Changes in accounting principle. The nature of, and
justification for, a change in accounting principle, and the effects of
the change, as specified by APB Opinion No. 20 27 and related
pronouncements, would be furnished.
\27\ Accounting Changes.
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4. Restatements and reclassifications. The nature and effects of a
correction of an error in previously issued financial statements, as
specified by APB Opinion No. 20 and related pronouncements, would be
furnished. Also, the nature and reasons for a change in the reporting
entity, and effects of the change, as specified by APB Opinion No. 20
and related pronouncements, would be furnished. Further, the nature and
effects of reclassifications materially affecting amounts reported in
previously issued financial statements would be explained.
5. Changes in accounting estimate. The nature and effects of
changes in accounting estimate, as specified by APB Opinion No. 20 and
related pronouncements, would be furnished.
6. Business combinations. The nature of business combinations
during the most recent fiscal year and quantitative disclosures of the
effects of the business combinations, as specified by APB Opinion No.
16 28 and related pronouncements, would be furnished.
\28\ Business Combinations.
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7. Discontinued operations. The nature of business operations that
were discontinued during the most recent fiscal year, and quantitative
disclosures of the effects of the discontinuation, as specified by APB
Opinion No. 30 29 and related pronouncements, would be furnished.
\29\ Reporting the Results of Operations--the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions.
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8. Circumstances identified in explanatory language added to the
independent accountant's standard report. If the independent
accountant's report on the entity's full financial statements includes
explanatory language added to the standard report, a note would
describe the circumstances identified in SAS No. 58 30
necessitating the explanatory language and would include all disclosure
set forth in notes to the full financial statements that bears upon an
understanding of those circumstances. Disclosure would also be provided
for explanatory paragraphs that emphasize a matter regarding the
financial statements.
\30\ Reports on Audited Financial Statements.
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9. Loss contingencies. If the entity is exposed to loss
contingencies for which a loss exceeding the amount accrued in the
financial statements is reasonably possible, a note would describe the
nature of the loss and disclose either the amount or range of
reasonably possible additional loss, or management's view that such
amount or range of loss cannot be estimated, as specified by SFAS No. 5
31 and related pronouncements.
\31\ Accounting for Contingencies.
10. Events of default under credit agreements. As presently
required by Regulation S-X, 32 the facts and amounts concerning
any default in principal, interest, sinking fund, or redemption
provisions with respect to any material issue of securities or credit
agreements, or any breach of covenant of a related indenture or
agreement, which default or breach existed at the date of the most
recent balance sheet date being filed and has not been subsequently
cured, would be described. If a default or breach exists but
acceleration of the obligation has been waived for a stated period of
time beyond the date of the most recent balance sheet being filed, the
amount of the obligation and the period of the waiver would have to be
stated.
\32\ Rule 4-08(c) of Regulation S-X [17 CFR 210.4-08(c)].
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11. Related party transactions. The nature of related party
relationships, and a description of transactions, amounts and balances,
as specified by
[[Page 35607]]
SFAS No. 57 33 and related pronouncements, would be furnished.
\33\ Related Party Disclosures.
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12. Bankruptcies and quasi-reorganizations. Entities entering into,
operating under, or emerging from proceedings under the federal
bankruptcy code during the most recent fiscal year would have to
provide all the disclosures specified by AICPA Statement of Position
No. 90-7.34 As presently required by Regulation S-X and related
interpretations,35 entities effecting a quasi-reorganization
during the most recent fiscal year would disclose the nature and
effects of the quasi-reorganization.
\34\ Financial Reporting Entities and Reorganization Under the
Bankruptcy Code.
\35\ Rule 5-02.31(b) of Regulation S-X [17 CFR 210.5-02.31(b)].
See also Accounting Series Release 25 and Staff Accounting Bulletins
78 and 86, Quasi-Reorganizations.
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13. Subsequent events. All events occurring subsequent to the date
of the most recent balance sheet for which disclosure was required to
be made in the full financial statements would be disclosed.
If none of the matters identified in Items 3 through 13 above apply
to a registrant, the note disclosures included in abbreviated financial
statements of that registrant would be limited to a description of the
basis of presentation of the abbreviated financial statements and the
registrant's accounting policies.
The types of disclosures commonly provided in full financial
statements that would be omitted from the notes to the abbreviated
financial statements are summarized in Appendix A to the release.
Comment is requested as to whether any of the items specified for
inclusion should not be deemed necessary in a presentation of
abbreviated financial statements, or whether there are other specific
items included in full financial statements that should be required
disclosure in abbreviated financial statements in order to provide
essential information to investors. For example, should the disclosures
regarding the amounts, terms, risks, or fair values of financial
instruments (including derivatives) specified by SFAS Nos. 105, 107,
and 119,36 or the information about stock options valuation to be
required by the forthcoming FASB standard on stock compensation,37
be required?
\36\ Disclosure of Information about Financial Instruments with
Off-Balance Sheet Risk and Financial Instruments with Concentrations
of Credit Risk, Disclosures about Fair Value of Financial
Instruments, and Disclosure about Derivative Financial Instruments
and Fair Value of Financial Instruments, respectively.
\37\ A draft of a Final Statement on stock compensation has been
sent to the FASB's Stock Compensation Task Force and other
interested persons for review and comment. FASB hopes to issue a
Final Statement in July.
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Proposed Item 305 specifies every matter that would require
disclosure in the notes to the abbreviated financial statements; the
Item does not provide for the discretionary addition by registrants of
note disclosures regarding other matters. Comment is solicited as to
whether the Item should allow for additional discretionary note
disclosures. Commenters remarking on this issue are asked to address
whether, if proposed Item 305 expressly permitted the discretionary
note disclosures: (1) registrants would be more or less likely to use
the abbreviated financial statement format; (2) the disclosures
included in the notes to the abbreviated financial statements would be
more or less useful to investors; and (3) whether registrants would
feel compelled routinely to add note disclosures regarding
discretionary matters similar to those included at the discretion of
other registrants.
As an alternative to the disclosures specified in the proposed
rules, comment is requested as to whether note disclosures in
abbreviated financial statements should be limited to only those
matters regarding the manner in which the full financial statements
were prepared. For example, should disclosures be limited to a
description of the registrant's significant accounting policies,
changes in those policies, and material restatements and
reclassifications of previously reported amounts? Should disclosures be
further limited to only include changes in those matters, and to
exclude descriptions of accounting policies that have not changed
during the reporting period? Should the abbreviated financial
statements also include a list of the notes that have been omitted?
B. Use of Abbreviated Financial Statements--Specified Disclosure
Documents
As discussed in the introduction to this release, the primary
impetus to the abbreviated financial statement initiative has been
suggestions to streamline the financial information required to be
included in annual reports to shareholders, so as to make the reports
more readable and useful to the general shareholder body. Underlying
these suggestions is the premise that, at least in the case of voting
on the election of directors, many, if not most, shareholders do not
use the detailed information contained in the financial statement
footnotes to make their voting decision.
The proposed amendments also would extend the abbreviated financial
statement approach to other disclosure documents required to be
delivered to investors, including those prospectuses currently required
to include financial statements. While the transactional context of
these documents and the use of the information as a basis for an
investment decision present additional issues to those raised by the
annual report, the Commission is interested in commenters' views as to
whether the concept of allowing delivery of more summary information,
while assuring that more extensive information is available in
Commission filings and promptly upon request from the company, should
be extended throughout the Commission's disclosure scheme. This model
already currently exists in the distinction between the annual report
required to be delivered to shareholders and the Form 10-K annual
report required to be filed with the Commission. Registration on Form
S-2 similarly uses this model.
The Commission also solicits comment as to the extent to which the
availability of financial disclosure documents through electronic media
warrants a reassessment of the regulatory framework that is based on
delivery of disclosure documents in hard copy to investors.38 By
mid-1996, most registrants under the Securities Act, Exchange Act and
Investment Company Act will be required to file their disclosure
documents electronically through the Commission's Electronic Data
Gathering, Analysis and Retrieval (``EDGAR'') system.39 Public
access to these reports is currently available through a wide variety
of private vendors, as well as through the Commission.40 Today, it
is estimated
[[Page 35608]]
that more than 16% of the public has access through home computers to
this information.41 These developments have changed and will
continue to change how investors access information about public
companies, and provide a significant opportunity to enhance the
efficacy and efficiency of the disclosure process under the federal
securities laws.42
\38\ In recognition of developments in electronic media, the
staff issued an interpretive letter to facilitate the use of
electronic transmission to satisfy prospectus delivery requirements.
Brown & Wood (Feb. 17, 1995). The Division of Corporation Finance
staff, in addition to issuing the Brown & Wood letter, is
considering generally delivery under the Securities Act of
prospectuses through other non-paper media (e.g., audiotapes,
videotapes, facsimile, directed electronic mail, and CD ROMs). The
staff anticipates submitting to the Commission in the near future
recommendations intended both to facilitate compliance with the
Securities Act's prospectus delivery requirements and to encourage
continued technological developments of non-paper delivery media.
\39\ To date, 6,250 Exchange Act registrants are filing on
EDGAR, and 2,500 under the Investment Company Act. The remaining
domestic registrants will be required to file on EDGAR by May 1996.
Foreign issuers may file on EDGAR on a voluntary basis.
\40\ For example, EDGAR filings are available through Dow Jones
and Lexis/Nexis. One of the subscribers to the EDGAR data base has
made it available on the Internet.
\41\ Gates, Bill, ``In Praise of a Free Market Approach,'' The
Guardian (June 22, 1995) at 7.
\42\ See Langevoort, Donald C., ``Information Technology and the
Structure of Securities Regulation, Harvard Law Review (February
1985), and Arnold, Jerry L., Greene, Edward F., and Keller, Earl C.,
``The Impact of Electronic Technology at the S.E.C.: An Analysis of
Policies Governing the Content and Dissemination of Corporate
Disclosures'' (Financial Executives Institute and SEC and Financial
Reporting Institute, 1987).
The manner in which the abbreviated financial statements scheme
would apply to specified disclosure documents varies according to the
nature of the document, as described in this section. In all cases, the
rules would provide that the full financial statements would be deemed
a part of the related disclosure document, so that liability for this
information would remain unchanged.43 Comment is requested
generally on whether the proposed system of delivering abbreviated
financial statements to investors and filing the full financial
statements would benefit the investing public. Comment also is
solicited as to whether issuers should be permitted to include
abbreviated financial statements in each type of disclosure document
covered by the proposed amendments.
\43\ Proposed Rules 435(c); 13e-3(e)(4)(iv); 13e-4(d)(1)(i);
14a-16; 14c-8 and 14d-1(b)(3)(iii).
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1. Annual Reports to Shareholders
a. Abbreviated Financial Statements. Companies that are subject to
the proxy and information statement rules because they have a class of
securities registered under Section 12 of the Exchange Act 44 must
furnish shareholders an annual report containing specified information,
including financial statements.45 Under the proposal, registrants
could choose to use abbreviated financial statements in their annual
reports to shareholders. If the Form 10-K or 10-KSB containing the full
financial statements was on file with the Commission, the copy of the
annual report to shareholders would simply be submitted to the
Commission, as is currently the case. If the Form 10-K or 10-KSB was
not yet on file, the annual report to shareholders submitted to the
Commission would have to be accompanied by a copy of the full financial
statements. This is to assure the availability of the full financial
statements in the Commission's public files at the time the annual
report to shareholders with the abbreviated financial statements is
being used.
\44\ 15 U.S.C. 78l.
\45\ Exchange Act Rules 14a-3 and 14c-3.
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Under the proposed rules, registrants using abbreviated financial
statements in their annual report to shareholders would not be able to
incorporate the financial statements from such annual report, but would
have to file the full financial statements in their Form 10-K or 10-KSB
report filed with the Commission. This would assure that investors
would be able to easily access the complete financial statements in
Commission filings.46 Comment is requested as to whether
registrants should be permitted to incorporate the abbreviated
financial statements from the annual report to shareholders and include
the additional information (i.e., the omitted notes and the
accountant's report on the full financial statements) in the Form 10-K
or 10-KSB when filed.
\46\ As noted above, full, rather than abbreviated, financial
statements would be required in Forms 10-K, 10-KSB, and 20-F.
Technical revisions would be made to Forms 10-K and 10-KSB.
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b. Summary Annual Reports. Another alternative to simplifying the
annual report requirements is the summary annual reporting concept that
was the subject of the 1983 FERF Report. The summary annual report
discussed in the FERF Report contemplated use of condensed financial
statements without traditional financial statement notes. Certain
information customarily contained in the notes, e.g. material
accounting changes, significant acquisitions and dispositions, material
contingencies, specified information on significant equity investees,
would be included in the summary annual report under the Disclosure
Guidelines outlined in the FERF Report. The summary report would not
include the full MD&A, or the full stock price and dividend information
and business description currently mandated by Rules 14a-3 or 14c-
3.47 Under the summary annual report approach, registrants would
still be required to deliver financial information to shareholders
annually. The rules could provide significantly greater flexibility as
to the form and content of such reports and could expressly permit the
use of condensed financial statements. The disclosure guidelines
included in the FERF Report are set forth in Appendix B to this
release.
\47\ A number of companies have used a variation of the summary
annual report approach following staff interpretative letters issued
in 1987. See General Motors (avail. January 20, 1987) and McKesson
Corp. (avail. May 15, 1987). Under the interpretative guidance in
the letters, a registrant may provide summary financial information
in the annual report to shareholders, provided the full financial
statements are otherwise delivered to shareholders, for example, as
an attachment to the annual meeting proxy statement.
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c. Rescission of the Rules Governing the Annual Report to
Shareholders. Rescission of the rules governing the annual report to
shareholders would give registrants the most flexibility in determining
how to communicate directly with their shareholders, subject to
requirements of state corporate law and any trading market for the
registrant's securities.48
\48\ Applicable state law and self-regulatory organization rules
may require that certain specified financial information be
furnished to security holders on an annual basis.
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The Exchange Act's periodic reporting provisions require the filing
of annual and quarterly reports with the Commission. The requirement to
deliver specified information, including audited financial statements,
was implemented as part of the Commission's proxy rules. Registrants
not subject to the Commission's proxy rules, such as foreign private
issuers, registrants subject to Section 15(d) 49 reporting
requirements, or registrants with only Section 12 registered debt
securities, are not required to deliver annual reports to their
investors.
\49\ 15 U.S.C. 78o(d).
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In adopting the requirement to deliver audited financial statements
and other specified information to shareholders prior to their voting
in the annual election of directors, the Commission noted that existing
common practice was to deliver this information. However, in
formalizing the practice, it reaffirmed its belief that the information
was important to enable investors ``to appraise the financial position
and results of operations of the issuer.'' 50
\50\ Exchange Act Release No. 8000 (Dec. 5, 1966) [31 FR 15750].
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Comment is requested as to whether the Commission should continue
to require a registrant to deliver to its shareholders full financial
statements, MD&A and the other information specified by Rules 14a-3 and
14c-3 in advance of the annual election of directors. If not, should
the rules be amended to provide for a more streamlined disclosure using
the model of abbreviated financial statements proposed today, the
summary annual report concept outlined in the FERF report or some other
simplification approach? Should the current requirement simply be
rescinded and registrants permitted total discretion to determine the
form and content of their annual report to shareholders, subject to the
requirements of state corporate law
[[Page 35609]]
and stock exchange or NASDAQ listing requirements and antifraud
prohibitions? If the requirements were rescinded, do commenters expect
that registrants would discontinue delivery of annual reports if not
subject to other requirements to do so? If the annual report rules were
amended to allow use of abbreviated financial statements or summary
annual reports or rescinded altogether, should the rules require
registrants to provide a mechanism by which shareholders could make a
standing request for the company to deliver annually a copy of the Form
10-K or 10-KSB report? If the annual report rules were rescinded, do
commenters expect that those registrants delivering annual reports
would include full financial statements, or would they provide summary
financial data? Are there other alternatives to streamlining the annual
report to shareholders?
2. Securities Act Disclosure Documents
Under the proposed amendments, the Part I item in each Securities
Act registration form 51 requiring the registrant to include
financial statements in the prospectus delivered to investors would be
amended to provide eligible registrants with the option of including in
the prospectus either full or abbreviated financial statements.
Registrants choosing to include full financial statements in the
prospectus would deliver to investors and file with the Commission the
same information, in the same format, that they deliver and file under
current requirements.
\51\ Part I of Securities Act registration statements sets forth
the information required in the prospectus.
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For registration statements on forms not permitting incorporation
by reference of financial statements, registrants choosing to include
abbreviated financial statements in the prospectus would put the
information required by proposed Item 305 in Part I. The full financial
statements would be filed in Part II of the registration
statement,52 but not delivered to investors except upon specific
request. If requested, a copy of the full financial statements would
have to be provided. Comment is requested as to whether, in order to
avoid unnecessary duplication in filing, the proposal should permit a
registrant either to file the full financial statements in their
entirety in Part II, or to file only the remaining financial
information--that is, the independent accountant's report on the full
financial statements plus the notes omitted from the disclosure
document, which, taken together with the abbreviated financial
statements, would constitute the full financial statements meeting the
requirements of GAAP and Regulation S-X. This latter option would be
feasible only if the omitted notes were grouped so the presentation
would be clear when the abbreviated financial statements were
considered together with the omitted notes. If the option to file only
the remaining financial information in Part II were adopted, should
delivery of the remaining financial information suffice in the event of
a request from a potential investor? Comment is solicited on whether
the option to file only the remaining financial information would be
useful to registrants, whether the presentation would be clear to
members of the financial community obtaining and using this
information, and whether such a presentation would be permitted by
existing auditing standards.
\52\ Part II of Securities Act registration statements sets
forth the information not required in the prospectus. A new Part II
Item would be added to each of the forms to require filing of the
full financial statements with the Commission.
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In addition, comment is solicited on whether, rather than requiring
full financial statements to be physically filed, in whole or in part,
in Part II of the registration statement, incorporation by reference
should be permitted. If the registrant had previously filed full
financial statements for the same period as required in the related
disclosure document, for example in a report on Form 10-K, would it be
acceptable to provide this information by incorporation by reference,
which is currently not permitted for any of the ``long form''
registration statements?
Registrants eligible to use short form registration statements
providing for the incorporation by reference of previously filed
documents 53 also could elect to use abbreviated financial
statements.54 In general, full financial statements would not be
required to be filed in Part II of these forms, since these would be
incorporated by reference from the registrant's periodic Exchange Act
filings. Where restated financial statements of the registrant, or
financial statements of businesses acquired or to be acquired, are not
incorporated by reference from a previously filed report and therefore
required to be included in a prospectus, abbreviated financial
statements of those entities could be included in the prospectus and
delivered to investors.55 The full financial statements would be
required to be filed with the Commission in Part II of the registration
statement, and delivered to investors upon request.56
\53\ Forms S-2, S-3, F-2, and F-3.
\54\ Since Form S-3 and F-3 registrants generally incorporate
their financial statements into the prospectus by reference from
Exchange Act reports and are not required to deliver this
information, they ordinarily would not use abbreviated financial
statements, but the forms would be amended so this option would be
available.
\55\ Forms S-2, F-2, S-3, F-3, S-4 and F-4 require financial
statements of the registrant to be restated if: (1) there has been a
change in accounting principles or a correction of an error where
such change or correction requires a material retroactive
restatement of financial statements; (2) where one or more business
combinations accounted for by the pooling of interests method of
accounting have been consummated subsequent to the most recent
fiscal year and the acquired businesses, considered in the
aggregate, are significant pursuant to Rule 11-01(b) [17 CFR 210.11-
01(b)]; or (3) in certain situations involving a material
disposition of assets not in the ordinary course of business.
\56\ With respect to Form S-2, in addition to the options
currently available, a registrant not choosing to deliver its Form
10-K could elect to include abbreviated financial statements in the
prospectus, or instead choose to deliver with the prospectus its
latest annual report to security holders that included abbreviated
financial statements. With respect to Form S-8, documents required
to be delivered upon request, such as the annual report to security
holders, could contain abbreviated financial statements. No
financial statements are required in the prospectus or registration
statement other than those incorporated by reference. Accordingly,
this form would not be amended, except for a technical provision in
Part II to assure that the full financial statements are
incorporated by reference (proposed revision to Item 3(a) of Form S-
8).
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With respect to securities registered on Form S-4 or F-4,
registrants and companies being acquired 57 would have the same
options regarding delivery of abbreviated financial statements
described above, depending on whether they furnish the Form S-1, S-2,
or S-3 level of disclosure.58 Comment is solicited on whether the
use of abbreviated financial statements is appropriate in the context
of a business combination. It appears that streamlining the financial
information presented to investors would be particularly useful in this
context, where the information for the registrant and other entities
can grow quite voluminous. Comment also is solicited on whether the
current requirement in Forms F-4 and S-4 that, if incorporation by
reference is used, the prospectus must be sent to security holders no
later than 20 business days prior to the meeting or the date on which
action is to be taken should also
[[Page 35610]]
apply when abbreviated financial statements are being used.59
\57\ See Part II.C below for further discussion of Forms S-4 and
F-4.
\58\ Pursuant to Item 17(b) of Form S-4, if the company being
acquired is not subject to the reporting requirements of either
Section 13(a) [15 U.S.C. 78m(a)] or 15(d) of the Exchange Act, or,
because of Section 12(i) [15 U.S.C. 78l(i)] of the Exchange Act, has
not furnished an annual report to security holders pursuant to
Exchange Act Rule 14a-3 or 14c-3 for its latest fiscal year, the
registrant would furnish financial statements as would have been
required to be included in a Rule 14a-3 or 14c-3 annual report
except that the financial statements need not be audited in certain
circumstances.
\59\ General Instruction A.2 to both Forms F-4 and S-4.
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The proposals would apply to filings relating to roll-up
transactions, whether or not involving a Form F-4 or S-4.60
Comment is solicited on whether abbreviated financial statements should
be permissible in the roll-up context. Since roll-ups are subject to a
60 day solicitation period, investors desiring full financial
statements would have the opportunity to send for them and consider
them before making a voting or tendering decision.
\60\ Item 901(c) of Regulation S-K [17 CFR 229.901(c)].
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Under the proposed amendments, abbreviated financial statements
could be included by eligible issuers in offering statements on Form 1-
A under Regulation A and furnished to purchasers of securities offered
pursuant to Regulation D. Comment is solicited on whether it is
appropriate to provide issuers conducting exempt offerings pursuant to
Regulation A or D with the option to distribute abbreviated financial
statements to investors, and whether such issuers would find this to be
a useful option.
Since, under current requirements, Regulation D issuers are
required to furnish financial statement information to purchasers, but
are not required to file this information with the Commission, issuers
opting to furnish abbreviated financial statements to purchasers would
not be required to file the full financial statements with the
Commission. They would, however, have to deliver the full financial
statements to requesting purchasers. Comment is solicited as to whether
Regulation D issuers choosing to distribute abbreviated financial
statements to purchasers should have to file the full financial
statements with the Commission, and if so, the method by which they
should be filed. Specific consideration should be given to whether the
fact that Regulation D issuers would not have to file the full
financial statements with the Commission would impair the objectives of
the proposed amendments.
3. Proxy and Information Statements
Registrants could use abbreviated financial statements in proxy and
information statements requiring financial statements. The full
financial statements would be appended to the proxy or information
statement filed with the Commission and delivered to security holders
only upon request.61 It would not, however, be necessary to append
the information if the full financial statements for the same period
had previously been filed in the registrant's Form 10-K or 10-KSB and
any Forms 10-Q or 10-QSB 62 necessary to provide interim financial
disclosure. Proxy or information statements for mergers or other
business combinations,63 which permit incorporation by reference
in a manner comparable to that in Form S-4 registration statements,
could include abbreviated financial statements in the same manner as
Form S-4.
\61\ This appended information would be publicly available
unless the related proxy or information statement was the subject of
a confidential treatment request.
\62\ 17 CFR 249.308a, 249.308b.
\63\ Item 14 of Schedule 14A.
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4. Tender Offers and Going Private Transactions
Currently, the rules governing tender offers and going private
transactions permit the delivery to investors of summary financial
information, with full financial statements being filed with the
Commission in the associated Schedule.64 As proposed, abbreviated
financial statements could be used for these transactions as well,
whether financial statements are required in the disclosure document or
included voluntarily. Comment is solicited on whether the eligibility
requirements should vary depending on whether the financial statements
involved are those of the bidder, the affiliate engaging in the
transaction, or the subject company.
\64\ See Rules 13e-3, 13e-4, and 14d-6; Schedules 13E-3 [17 CFR
240.13e-100], 13E-4 [17 CFR 240.13e-101], and 14D-1 [17 CFR 240.14d-
100].
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C. Eligibility to Use Abbreviated Financial Statements
As proposed, both reporting and non-reporting registrants would be
permitted to include abbreviated financial statements in the specified
disclosure documents delivered to investors, in lieu of full financial
statements required by the applicable form, provided that two
conditions are met. First, the report of the independent accountant on
the full financial statements of the registrant must express an opinion
that is unqualified as to scope of the audit and as to accounting
principles used, and must not contain a disclaimer of opinion.65
Second, a reporting registrant would have to be current in filing all
of its Exchange Act reports at the time the abbreviated financial
statements are delivered.66 Comment is requested as to whether a
further condition should be that an issuer filing reports under the
Exchange Act must have timely filed all required reports during the
most recent 12 months, or since becoming subject to the Exchange Act,
whichever is shorter.
\65\ Proposed Item 305(a)(1) of Regulation S-K.
\66\ Proposed Item 305(a)(2) of Regulation S-K.
Comment also is requested as to whether use of the proposed rule
should be limited to companies that are subject to Section 13(a) or
15(d) of the Exchange Act, precluding the use of abbreviated financial
statements in initial public offerings. If so, should the rule contain
a reporting history requirement, e.g., 12 or 18 months? Comment also is
requested as to whether other eligibility criteria should be
established, such as size of the issuer or other condition. Comment is
further requested on whether eligibility should be limited based on
certain financial statement attributes.
In addition to financial statements of the registrant, disclosure
documents may be required to include financial statements of other
entities, such as a business acquired or to be acquired, 50 percent or
less owned entity accounted for by the equity method, or
guarantor.67 The proposed rules would base eligibility for the use
of abbreviated financial statements of such entities on a combination
of: (1) the registrant's eligibility, i.e., the registrant would have
to have filed with its full financial statements an acceptable
independent accountant's report and be current in its filing of
Exchange Act reports; 68 and (2) the acceptability of the
independent accountant's report on the other entity's full financial
statements.69 Whether the other entity had filed all required
Exchange Act reports would not affect the registrant's ability to
include abbreviated financial statements of that entity. The same
criteria would apply to the use of abbreviated financial statements of
the company being acquired in a registration statement on Form S-4 or
F-4 or a merger proxy or information statement.
\67\ Rules 3-05, 3-09 and 3-10 of Regulation S-X [17 CFR 210.3-
05, 3-09 and 3-10] and Item 310(c) of Regulation S-B [17 CFR
228.310(c)] require the financial statements of a business acquired
or to be acquired, 50 percent or less owned entity accounted for by
the equity method, or guarantor to be included in registrants'
disclosure documents in certain circumstances.
\68\ Proposed Item 305(a) of Regulation S-K.
\69\ Proposed Item 305(d) of Regulation S-K. Financial
statements of other entities may be included in Commission filings
in certain circumstances other than those specified by Rules 3-05,
3-09 and 3-10 of Regulation S-X. The proposed rules also would
permit the use of abbreviated financial statements of those
entities, provided that all conditions for their use are otherwise
met.
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Comment is requested as to whether this eligibility standard is
appropriate regarding financial statements of a company other than the
registrant. Comment also is requested concerning
[[Page 35611]]
whether the ability of a registrant to include abbreviated financial
statements of a third party should be based solely on the registrant's
eligibility, or whether different or additional eligibility criteria
should be established. For example, should a Form S-4 registrant be
permitted to include abbreviated financial statements of a target
company if the target company has an acceptable independent
accountant's report on its full financial statements but the registrant
does not satisfy the abbreviated financial statement eligibility
criteria?
Investment companies registered under the Investment Company Act of
1940,70 and business development companies, a type of investment
company with securities registered under Section 12 of the Exchange
Act, would not be eligible to use abbreviated financial statements. The
Commission does not believe that it is necessary to extend the proposed
amendments to these types of companies because they generally have
fewer note disclosures. As proposed, the amendments would allow
insurance companies that are the issuers of variable life insurance
contracts and register on Form S-6 under the Securities Act to provide
abbreviated financial statements in the prospectus for these types of
securities. Insurance companies that issue variable annuity contracts
and register on Forms N-3 71 or N-4 72 would continue to be
required to provide their full financial statements, which currently
are made available to investors only upon request in a Statement of
Additional Information. The Commission requests comment on whether
insurance companies should be permitted to use abbreviated financial
statements in connection with the sale of variable annuity contracts.
\70\ 15 U.S.C. 80a-1, et seq.
\71\ 17 CFR 274.11b.
\72\ 17 CFR 274.11c.
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D. Foreign Issuers
Pursuant to the proposed amendments, foreign issuers that meet the
eligibility requirements would be able to elect to include abbreviated
financial statements in delivered disclosure documents. This would
include Canadian issuers using the multijurisdictional disclosure
system (``MJDS'').73 As is currently the case with full financial
statements of foreign issuers, the informational content of the
abbreviated financial statements of foreign issuers would have to be
substantially similar to the abbreviated financial statements of
domestic issuers 74 and would be provided for the periods
specified by Rule 3-19 of Regulation S-X.75
\73\ In order to provide Canadian issuers using the MJDS with
the same flexibility to deliver disclosure documents with
abbreviated financial statements as all other issuers, the
Commission proposes to amend the MJDS registration forms to permit
eligible Canadian issuers to include abbreviated financial
statements in MJDS disclosure documents delivered to U.S. investors,
notwithstanding the Canadian requirements that would otherwise
apply.
\74\ See Items 17 and 18 of Form 20-F.
\75\ 17 CFR 210.3-19. Proposed Item 305(f)(2) of Regulation S-K.
As with full financial statements of foreign issuers, the
abbreviated financial statements could be prepared either on the basis
of U.S. GAAP or on a comprehensive body of accounting principles other
than U.S. GAAP.76 If the abbreviated financial statements were
prepared on a basis other than U.S. GAAP, the required note disclosures
would include the same matters as those required in the abbreviated
financial statements of domestic issuers, and an additional note
containing the quantitative reconciling information required by Item
17(c) or Item 18(c), as applicable, of Form 20-F also would be
provided. However, a foreign issuer that follows Item 17 of Form 20-F
in preparing its full financial statements would omit from the notes to
the abbreviated financial statements any disclosures that are not
required by Item 17, even if those disclosures otherwise would be
required by proposed Item 305. Comment is solicited as to whether a
more abbreviated or otherwise different reconciliation should be
required.
\76\ Proposed Item 305(f)(1) of Regulation S-K.
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E. Use of Abbreviated Financial Statements to be at Registrant's Option
Under the proposed amendments, a registrant would have the option
whether or not to include abbreviated financial statements each time it
prepared one of the specified disclosure documents for delivery to
investors, provided that the registrant met the eligibility criteria
for using abbreviated statements described above. For example, a
registrant could elect to include abbreviated financial statements in
its annual report to shareholders delivered to investors, but decide to
include full financial statements in a Securities Act prospectus
delivered a few months later, or vice versa. The registrant also might
choose to include abbreviated financial statements relating to its
existing business in a proxy statement and full financial statements
relating to an acquired business in the same proxy statement, or vice
versa.
However, with respect to a particular disclosure document, for
purposes of comparability and consistency, the proposed rules would
require the interim financial statements of a particular entity to be
presented in the same manner as the annual financial statements of that
entity. For example, if a prospectus included abbreviated annual
financial statements of the registrant, the interim financial
statements of the registrant included in the same prospectus also would
have to be abbreviated.77
\77\ Proposed Item 305(b)(5)(i) of Regulation S-K. While interim
financial statements prepared under existing rules (Article 10 of
Regulation S-X) omit substantially all footnote disclosures required
under GAAP, disclosures required to be included under Article 10
differ in certain respects from those proposed for annual
abbreviated financial statements. For example, Article 10 calls for
disclosure of material changes in the status of long-term contracts,
while Item 305(b)(3) does not. If issuers were not required to
conform the basis of presentation of annual and interim financial
statements, certain matters required to be disclosed in interim
financial statements would be included in a disclosure document that
would not have been disclosed in the abbreviated annual financial
statements, had the matter occurred during the most recently
completed fiscal year.
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Comment is solicited as to whether registrants should be able to
include abbreviated financial statements in some of the specified
delivery documents and not others, or whether they should be required
to make an election and consistently include abbreviated or full
financial statements in their delivery documents. Comment also is
solicited as to whether interim financial statements of a particular
entity should be presented in the same manner as the entity's annual
financial statements. Additional comment is requested on whether it
would be appropriate for a registrant to select one option with respect
to its own financial statements and a different one regarding the
financial statements of another entity whose financial statements are
required in the disclosure document.
F. Report of the Independent Accountant on the Abbreviated Financial
Statements
Proposed Item 305 would require the abbreviated financial
statements delivered to investors to be accompanied by a report of the
independent accountant. The rule would specify that the report must
contain: (1) a statement that the abbreviated financial statements were
examined in connection with an audit of the registrant or other
entity's full financial statements; (2) a complete description of the
opinion rendered by the independent accountant on the full financial
statements, including any explanatory language included in the report
on the full financial statements;
[[Page 35612]]
and (3) a statement of the independent accountant's opinion that the
content of the abbreviated financial statements complies with Item
305.78 It is contemplated that an independent accountant's report
satisfying the requirements of proposed Item 305 would fall within the
auditing guidance contained in SAS No. 62,79 which governs
reporting on financial statements prepared on a basis of accounting
prescribed in a regulatory provision that results in an incomplete
presentation but one that is otherwise in conformity with GAAP. Comment
is solicited as to whether a report in the form prescribed by proposed
Item 305 is appropriate and sufficient, or whether additional or
different statements or explanations would be desirable. Also, comment
is requested as to whether auditing guidance other than SAS No. 62
would be applicable to a report on abbreviated financial statements, or
whether the reporting objectives under the proposed rule would require
the accounting profession to develop new guidance governing the form of
such report and procedures necessary to its issuance.
\78\ Proposed Item 305(b)(4) of Regulation S-K.
\79\ Special Reports.
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G. Abbreviated Interim Financial Statements
Proposed Item 305 also would state that, like full financial
statements, abbreviated financial statements required with respect to
an interim period should be prepared in conformity with GAAP and
Regulation S-X,80 except that note disclosures to the abbreviated
interim financial statements would be limited only to any of the
thirteen items set forth above not previously disclosed in the
abbreviated annual financial statements. As currently required in
interim financial statements, loss contingencies would have to be
disclosed even though a significant change since year end may not have
occurred.81
\80\ Article 10 of Regulation S-X specifies the content of
interim financial statements.
\81\ Proposed Item 305(b)(5)(ii) of Regulation S-K.
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H. Delivery of Full Financial Statements to Requesting Investors
Registrants choosing to include abbreviated financial statements in
disclosure documents delivered to investors would have to furnish the
full audited financial statements and the independent accountant's
report thereon to any person making a written or oral request, at no
cost to the person making the request.82 Comment is solicited on
whether registrants should be permitted to send only the remaining
financial information rather than the complete full financial
statements. Which format would be more useful to investors? Comment
also is solicited on whether a means should be provided that would
enable security holders who receive abbreviated financial statements in
an annual report and request delivery of the full financial information
also to indicate that they would like to receive automatically full
financial information or the entire Form 10-K or 10-KSB in future
years.
\82\ Proposed Item 305(e) of Regulation S-K.
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As proposed, if Form 10-K (and/or Form 10-Q) financial statements
were delivered to investors in compliance with the delivery
requirement, registrants could deliver only the portion of those
reports that contain the financial statements.83 The delivered
information would have to be for the same periods covered by the
abbreviated financial statements.84
\83\ Id.
\84\ Id.
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A statement setting forth the registrant's obligation to furnish
the full financial statements and the name, address and telephone
number of the person designated by the registrant to receive requests
would have to be included in the disclosure document.85
\85\ With respect to delivery of annual reports or proxy or
information statements that include abbreviated financial
statements, in addition to setting forth this statement, registrants
would continue to be required to provide the Rule 14a-3(b)(10) [17
CFR 240.14a-3(b)(10)] undertaking to provide persons from whom proxy
authority is solicited with a Form 10-K or 10-KSB upon written
request.
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The registrant would be required to deliver the requested
information by a means reasonably calculated to result in the
information reaching the requesting investor within five business days
from the date the request is received. Comment is solicited as to
whether a delivery period should be specified in the rule, and if so,
whether the proposed time period is appropriate, both from an
investor's and registrant's perspective, or should it be shorter or
longer. Should the rule simply require prompt delivery, with promptness
being determined according to the context? Comment also is solicited as
to whether the delivery period should be shorter than five business
days when the abbreviated financial statements are delivered to
investors in connection with certain types of transactions, e.g.,
mergers and exchange offers, where the investor does not initiate the
transaction, has no control over the timing of the transaction, and
will be affected financially by the transaction even if the investor
does not act. Commenters also should address whether the delivery
period should be longer when the requested delivery is not in
connection with any specific transaction.
Further comment is solicited on whether the rule should specify the
appropriate means of delivery, and, if so, the means that should be
specified. Finally, comment is requested as to whether availability of
the full financial statements by public filing at the Commission, and
from the registrant upon investor request, is sufficiently practical,
timely and effective for meeting investor requirements.
I. Safe Harbor Provisions
The Commission recognizes that the utility of the abbreviated
financial statement proposal will depend on companies' perception of
their vulnerability to liability for the omission of certain financial
statement notes pursuant to the provisions of proposed Item 305.86
The proposed rules, therefore, include a safe harbor provision stating
that disclosure contained in disclosure documents will not be
materially misleading or omit to state a material fact on the basis of
the exclusion from the abbreviated financial statements of the
information permitted to be excluded from the financial statement notes
pursuant to proposed Item 305. The safe harbor would cover cases where,
for example, an investor claimed that the information included in the
abbreviated financial statements in the delivered document failed to
include information that was in the full financial statements included
in the filed document. Comment is requested as to both the efficacy of
the proposed safe harbor provisions and their appropriateness.
\86\ Safe harbors with respect to the omission of notes from
abbreviated financial statements would be provided in proposed
Securities Act Rule 435 and Exchange Act Rules 13e-3, 13e-4, 14a-16,
14c-8 and 14d-1. These rules also would provide that the omitted
information is deemed part of the disclosure document.
As discussed above in Part II.A, proposed Item 305 would not
provide for inclusion of note disclosures regarding matters other than
those specified by the Item,87 although comment is solicited on
whether registrants should be permitted to add discretionary note
disclosures. As proposed, the safe harbor would not be available to
issuers that included additional notes. Commenters are asked to address
whether the protection of the safe harbor provisions should be
available to registrants who add
[[Page 35613]]
discretionary note disclosures, and if so, should the protection extend
only to the note disclosures specified by Item 305, or to the
voluntarily included notes as well?
\87\ This would not preclude the registrant from discussing such
information in the delivered disclosure document, but only cause
that discussion to be set forth outside of the abbreviated financial
statements.
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III. Request for Comment
Any interested person wishing to submit written comments on the
proposed amendments that would permit abbreviated financial statements
to be included in disclosure documents, as well as other matters that
might have an impact on the proposed amendments, is requested to do so.
Comment is solicited from the point of view of investors, registrants,
accountants and financial analysts. Comment is specifically requested
on the extent to which the information currently contained in notes to
the financial statements is used by investors to conduct a thorough
analysis of a registrant's financial condition and future prospects.
The Commission also requests comment on whether the proposed rules, if
adopted, would have an adverse impact on competition that is neither
necessary nor appropriate in furthering the purposes of the Exchange
Act. Comments responsive to this inquiry will be considered by the
Commission in complying with its responsibilities under Section 23(a)
of the Exchange Act.88
\88\ 15 U.S.C. 78w(a).
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IV. Cost-Benefit Analysis
To evaluate fully the costs and benefits associated with the
proposals, the Commission requests commenters to provide views and
empirical data as to the costs and benefits associated therewith. The
proposals are expected to benefit registrants by allowing more
flexibility in accounting and lowering costs associated with printing
and mandated across the board delivery of information that may be used
directly only by a portion of investors. Full financial statements of
these entities will continue to be required in Commission filings.
Furthermore, the proposals are expected to make financial statement
note disclosures more useful and meaningful to the individual investor.
V. Summary of Initial Regulatory Flexibility Analysis
An Initial Regulatory Flexibility Analysis has been prepared in
accordance with 5 U.S.C. 603 concerning the proposed amendments. The
analysis notes that the proposed amendments are intended to respond to
concerns regarding the increasing volume and complexity of financial
information that is included in prospectuses and other documents
delivered to investors. The proposed amendments are intended to make
the financial information presented to investors more readable and
understandable by streamlining the note disclosure and focusing on
matters of particular significance to investors.
As discussed more fully in the analysis, some of the registrants
that the proposed amendments would affect are small entities, as
defined by the Commission's rules. The proposed amendments would
decrease the cost for all issuers choosing to rely on them, including
small businesses.
The analysis discusses several possible alternatives to the
proposed amendments including, among others, establishing different
compliance or reporting requirements for small entities or exempting
them from all or part of the proposed requirements. Given the fact that
small business issuers would receive a favorable impact from the
proposed rules and that use of the proposed rules would be at the
issuer's option, the Commission does not believe that any of the
alternatives are preferable at this time.
Comments are encouraged on any aspect of this analysis. A copy of
the analysis may be obtained by contacting William B. Haseltine, Office
of Disclosure Policy, Division of Corporation Finance, Securities and
Exchange Commission, 450 Fifth Street NW., Washington, DC 20549.
VI. Statutory Basis
The amendments to Forms 1-A, S-1, S-2, S-3, S-4, S-6, S-8, S-11,
SB-1, SB-2, F-1, F-2, F-3, F-4, F-7, F-8, F-9, F-10 and F-80 and new
Rule 435 are being proposed pursuant to Sections 6, 7, 10 and 19(a) of
the Securities Act. The amendments to Rules 13e-3, 13e-4, 14a-3, 14c-3,
14d-1 and 14d-6, Schedules 13E-4F, 14A, 14C, 14D-1F and 14D-9F and
Forms 10-K and 10-KSB and new Rules 14a-16 and 14c-8 are being proposed
pursuant to Sections 12, 13, 14 and 23(a) of the Exchange Act.
List of Subjects in 17 CFR 228, 229, 230, 239, 240 and 249
Accountants, Accounting, Reporting and recordkeeping requirements,
and Securities.
Text of the Proposals
In accordance with the foregoing, Title 17, Chapter II of the Code
of Federal Regulations is proposed to be amended as follows:
PART 228--INTEGRATED DISCLOSURE SYSTEM FOR SMALL BUSINESS ISSUERS
1. The authority citation for part 228 continues to read as
follows:
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s,
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77jjj, 77nnn, 77sss,
78l, 78m, 78n, 78o, 78w, 78ll, 80a-8, 80a-29, 80a-30, 80a-37, 80b-
11, unless otherwise noted.
2. By amending Part 228 by adding Sec. 228.305 to read as follows:
Sec. 228.305 (Item 305) Abbreviated financial statements.
Note: The term full financial statements as used throughout this
Item refers to financial statements filed with the Commission
meeting the requirements of Item 310 of Regulation S-B
(Sec. 228.310).
(a) Eligibility. A small business issuer, other than an investment
company registered under the Investment Company Act of 1940 [15 U.S.C.
80a-1 et seq.] or a business development company under that Act, that
meets the following conditions may furnish abbreviated financial
statements in a document to be furnished to investors or security
holders, as permitted by the Form or Schedule governing the
requirements of that document:
(1) The small business issuer has filed with its full financial
statements an independent accountant's report that complies with the
requirements of Article 2 of Regulation S-X (17 CFR 210.2) and does not
contain a qualification as to scope of audit, or as to accounting
principles used, or a disclaimer of opinion. However, if the full
financial statements of the small business issuer filed with the
Commission are not required to be audited, neither this condition nor
the requirement to provide an independent accountant's report pursuant
to paragraph (b)(4) of this Item shall apply; and
(2) If the small business issuer is a reporting company, all
reports due must have been filed.
(b) Information to be included in abbreviated financial statements.
Abbreviated financial statements shall include the following
information:
(1) A balance sheet as of the end of the most recent fiscal year
and statements of income and cash flows for each of the two most recent
fiscal years prepared in conformity with accounting principles
generally accepted in the United States (``U.S. GAAP''), except that
note disclosures specified by U.S. GAAP shall not be included unless
specified in paragraph (b)(3) of this Item. The face of the financial
statements shall include a prominent
[[Page 35614]]
statement identifying them as ``abbreviated financial statements.''
(2) A statement of changes in stockholders' equity prepared in
conformity with Item 310(a) of Regulation S-B (Sec. 228.310(a)) for
each of the two most recent fiscal years.
(3) Notes to the financial statements. The disclosures required in
the notes to the abbreviated financial statements shall be an
extraction of all note disclosures included in the small business
issuer's full financial statements that are responsive to the matters
specified in paragraphs (b)(3)(ii) through (b)(3)(xiii) of this Item.
To facilitate the extraction of all disclosures responsive to the
specified matters, the primary authoritative pronouncements concerning
the specified matters are identified in paragraphs (b)(3)(ii) through
(b)(3)(xiii) of this Item. The term ``related pronouncements'' as used
in paragraphs (b)(3)(ii) through (b)(3)(xiii) of this Item refers to
pronouncements constituting U.S. GAAP as defined in Statement of
Auditing Standards (``SAS'') No. 69 that requires disclosure regarding
the matter specified for disclosure in the abbreviated financial
statements. The notes shall disclose the following:
(i) Basis of presentation. The small business issuer shall state
that the abbreviated financial statements have been prepared using U.S.
GAAP for measurement and classification. The registrant also shall
state that substantially all note disclosures necessary for a fair
presentation under U.S. GAAP have been omitted, and that the note
disclosures are limited to those matters specified by Commission rules
for inclusion in abbreviated financial statements. Additionally, the
small business issuer shall state that the note disclosures comply with
Commission rules for presentation of abbreviated financial statements.
A reference to the complete disclosures in the full financial
statements shall be provided.
(ii) Accounting policies. The small business issuer shall provide a
description of all significant accounting policies used in the
preparation of the financial statements. Disclosure of accounting
policies shall identify and describe the accounting principles followed
by the reporting entity and the methods of applying those principles
that materially affect the determination of financial position, cash
flows or results of operations, as specified by Accounting Principles
Board (``APB'') Opinion No. 22 and related pronouncements.
(iii) Changes in accounting principle. The small business issuer
shall disclose the nature of, and justification for, a change in
accounting principle, and the effects of the change, as specified by
APB Opinion No. 20 and related pronouncements.
(iv) Restatements and reclassifications. The small business issuer
shall disclose the following matters:
(A) The nature and effects of a correction of an error in
previously issued financial statements, as specified by APB Opinion No.
20 and related pronouncements.
(B) The nature and reasons for a change in the reporting entity,
and effects of the change, as specified by APB Opinion No. 20 and
related pronouncements. Combinations of entities under common control
and similar reorganizations described in APB Opinion No. 16 and related
pronouncements shall be considered changes in the reporting entity for
purposes of this item.
(C) The nature and effects of reclassifications materially
affecting amounts reported in previously issued financial statements.
(v) Changes in accounting estimate. The small business issuer shall
disclose the nature and effects of a change in accounting estimate, as
specified by APB Opinion No. 20 and related pronouncements.
(vi) Business combinations. The small business issuer shall
disclose the following with respect to business combinations:
(A) The nature of business combinations accounted for as a pooling
of interests and the disclosures of the effects of the business
combinations, as specified by APB Opinion No. 16 and related
pronouncements.
(B) The nature of business combinations accounted for as a purchase
and the disclosures specified by APB Opinion No. 16 and related
pronouncements.
(vii) Discontinued operations. The small business issuer shall
disclose the nature of discontinued operations and provide the
quantitative disclosures of the effects of the discontinued operations,
as specified by APB Opinion No. 30 and related pronouncements.
(viii) Circumstances identified in explanatory language added to
the independent accountant's standard report. The small business issuer
shall disclose the nature and effects of circumstances for which the
independent accountant's report on the full financial statements
includes explanatory language. These circumstances are identified in
paragraph 11 of SAS No. 58. The notes shall include all disclosures
regarding the matter considered necessary by the independent accountant
in rendering an opinion on the full financial statements unqualified as
to adequacy of disclosure. However, disclosure need not be provided
where the explanatory language merely reports that the independent
accountant's opinion is based in part on the work of another
independent accountant. Disclosure shall be provided for explanatory
paragraphs that emphasize a matter regarding the financial statements.
(ix) Loss contingencies. The small business issuer shall disclose
the nature of loss contingencies and estimated amount or range of
reasonably possible loss in excess of amounts accrued in the financial
statements, as specified by Statement of Financial Accounting Standards
(``SFAS'') No. 5 and related pronouncements. A statement that the
amount or range of probable or reasonably possible loss cannot be
reasonably estimated shall be included if applicable.
(x) Events of default under credit agreements. The small business
issuer shall disclose the facts and amounts concerning any default in
principal, interest, sinking fund, or redemption provisions with
respect to any material issue of securities or credit agreements, or
any breach of covenant of a related indenture or agreement, which
default or breach existed at the date of the most recent balance sheet
being filed and which has not been subsequently cured. If a default or
breach exists but acceleration of the obligation has been waived for a
stated period of time beyond the date of the most recent balance sheet
being filed, the small business issuer shall state the amount of the
obligation and the period of the waiver.
(xi) Related party transactions. The small business issuer shall
disclose the nature of related party relationships, and a description
of transactions, amounts and balances as specified by SFAS No. 57 and
related pronouncements.
(xii) Bankruptcies and quasi-reorganizations. (A) Bankruptcies.
Small business issuers entering into, operating under, or emerging from
proceedings under the federal bankruptcy code during the most recent
fiscal year shall provide all of the disclosures required by AICPA
Statement of Position No. 90-7.
(B) Quasi-reorganizations. Small business issuers effecting a
quasi-reorganization during the most recent fiscal year shall disclose
the nature and effects of the quasi-reorganization.
(xiii) Subsequent events. The small business issuer shall disclose
all events occurring subsequent to the date of the
[[Page 35615]]
most recent balance sheet for which disclosure was required in the full
financial statements.
(4) An independent accountant's report. The report shall state that
the abbreviated annual financial statements have been examined in
connection with the audit of the full financial statements. The report
shall state clearly the opinion of the independent accountant that the
abbreviated financial statements comply with the requirements in
paragraph (b) of this Item for presentation of abbreviated financial
statements. The report shall describe the opinion rendered by the
independent accountant on the full financial statements, including any
explanatory language.
(5) Abbreviated interim financial statements. (i) Where interim
financial statements of the registrant are required in a document that
includes abbreviated annual financial statements of the registrant,
those interim financial statements shall be abbreviated. Where interim
financial statements of the registrant are required in a document that
includes full annual financial statements of the registrant, those
interim financial statements shall not be abbreviated.
(ii) Abbreviated interim financial statements shall be furnished
for the same periods as prescribed by Item 310(b) of Regulation S-B
(Sec. 228.310(b)). The abbreviated interim financial statements shall
be prepared in conformity with generally accepted accounting
principles, except that note disclosures required by generally accepted
accounting principles shall not be included unless specified in
paragraph (b)(3) of this Item. However, disclosures that would
substantially duplicate the disclosure contained in the most recent
annual abbreviated financial statements may be omitted, except that
contingencies shall be disclosed pursuant to paragraph (b)(3)(ix) of
this Item even though a significant change since year end may not have
occurred. The abbreviated interim financial statements shall comply
with all requirements of Item 310(b) of Regulation S-B governing
classification of items on the face of the balance sheet, statement of
income, and statement of cash flows.
(c) Age of abbreviated financial statements at effective date of
registration statement or mailing date of proxy statement. Small
business issuers shall update the abbreviated financial statements to
cover the same periods as required pursuant to Item 310(g) of
Regulation S-B (Sec. 228.310(g)).
(d) Abbreviated financial statements of entities other than the
registrant. In those instances where full financial statements of
businesses acquired or to be acquired are required by Item 310(c) of
Regulation S-B (Sec. 228.310(c)), or full financial statements of other
entities are required to be included in a small business issuer's
filing with the Commission on a form that permits the abbreviation of
financial statements, abbreviated financial statements may be furnished
for those entities provided that the small business issuer meets the
conditions in paragraph (a) of this Item and those entities meet the
condition in paragraph (a)(1) of this Item. Abbreviated financial
statements of businesses acquired or to be acquired shall be prepared
in accordance with this Item for the respective periods specified by
Item 310(c) of Regulation S-B. Where abbreviated financial statements
of entities other than the small business issuer are furnished, full
financial statements shall also be filed with the Commission as
provided in the respective form requirements.
(e) Delivery of full financial statements to requesting investors.
Small business issuers including abbreviated financial statements in
disclosure documents shall deliver without charge to each person to
whom the document is furnished, upon the written or oral request of
such person and by a means reasonably calculated to result in the
information reaching the requesting person within five business days
from the date of the request, a copy of the small business issuer's
full financial statements and the independent accountant's report
thereon filed with the Commission for the same periods covered by the
abbreviated financial statements. The small business issuer shall
include a statement in bold face or otherwise reasonably prominent type
in the disclosure document that the small business issuer will provide
a copy of its full financial statements and the independent
accountant's report thereon without charge to each person to whom the
document is furnished, upon the written or oral request by such person,
and shall state the name, address, and telephone number of the person
(including title and department) to whom the request for full financial
statements should be directed. If Form 10-KSB (17 CFR 249.310b) and/or
Form 10-QSB (17 CFR 249.308b) financial statements are permitted to be
furnished to requesting persons in satisfaction of the delivery
requirement, only the portion of those reports containing the financial
statements, and the independent accountant's report thereon, need be
delivered.
(f) Special provisions as to abbreviated financial statements for
foreign private issuers. (1) The abbreviated financial statements may
be prepared according to U.S. GAAP, except that note disclosures shall
be limited to those specified in paragraph (b)(3) of this item.
Alternatively, such abbreviated financial statements may be prepared
according to a comprehensive body of accounting principles other than
U.S. GAAP. Where the abbreviated financial statements are prepared
according to a comprehensive body of accounting principles other than
U.S. GAAP, the disclosures specified by Item 18(c) of Form 20-F (17 CFR
249.220f) shall be furnished, except that note disclosures shall be
limited to those specified in paragraph (b)(3) of this item. However,
foreign private issuers that comply with Item 17 of Form 20-F rather
than Item 18 may furnish the disclosure specified by Item 17(c) in the
notes to the abbreviated financial statements. Where Item 17(c) permits
the omission of a disclosure from the notes to the full financial
statements, that disclosure shall not be included in the notes to the
abbreviated financial statements even if specified for disclosure by
paragraph (b)(3) of this Item.
(2) Abbreviated financial statements shall be provided for the
periods specified by Rule 3-19 of Regulation S-X.
PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND
CONSERVATION ACT OF 1975--REGULATION S-K
3. The authority citation for part 229 continues to read in part as
follows:
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s,
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn,
77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79e, 79n,
79t, 80a-8, 80a-29, 80a-30, 80a-37, 80b-11, unless otherwise noted.
* * * * *
4. By amending Part 229 by adding Sec. 229.305 to read as follows:
Sec. 229.305 (Item 305) Abbreviated financial statements.
Note: The term full financial statements as used throughout this
Item refers to financial statements filed with the Commission
meeting the requirements of Regulation S-X (17 CFR part 210).
(a) Eligibility. A registrant, other than an investment company
registered under the Investment Company Act of 1940 [15 U.S.C. 80a-1 et
seq.], or a business development company under
[[Page 35616]]
that Act, that meets the following conditions may furnish abbreviated
financial statements in a document to be furnished to investors or
security holders, as permitted by the Form or Schedule governing the
requirements of that document:
(1) The registrant has filed with its full financial statements an
independent accountant's report that complies with the requirements of
Article 2 of Regulation S-X (17 CFR 210.2) and does not contain a
qualification as to scope of audit or as to accounting principles used,
or a disclaimer of opinion.
However, if the full financial statements of the registrant filed
with the Commission are not required to be audited, neither this
condition nor the requirement to provide an independent accountant's
report pursuant to paragraph (b)(4) of this Item shall apply; and
(2) If the registrant is subject to the requirement to file reports
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 (15 U.S.C. 78m(a) or 78o(d)), it has filed all reports and other
materials required to be filed by such requirements.
(b) Information to be included in abbreviated financial statements.
Abbreviated financial statements shall include the following
information:
(1) Balance sheets as of the end of each of the two most recent
fiscal years and statements of income and cash flows for each of the
three most recent fiscal years prepared in conformity with accounting
principles generally accepted in the United States (``U.S. GAAP'') and
Regulation S-X (17 CFR 210), except that note disclosures specified by
U.S. GAAP and Articles 4, 5, 7, and 9 of Regulation S-X (17 CFR 210.4,
210.5, 210.7 and 210.9) shall not be included unless specified in
paragraph (b)(3) of this Item. The abbreviated annual financial
statements shall comply with all requirements of Regulation S-X
governing classification of items on the face of the balance sheet,
statement of income, and statement of cash flows, and shall include all
disclosures required by Regulation S-X to be included on the face of
the balance sheet, statement of income, and statement of cash flows.
The face of the financial statements shall include a prominent
statement identifying them as ``abbreviated financial statements.''
(2) A statement of changes in stockholders' equity prepared in
conformity with Rule 3-04 of Regulation S-X (17 CFR 210.3-04) for each
of the registrant's three most recent fiscal years.
(3) Notes to the financial statements. The disclosures required in
the notes to the abbreviated financial statements shall be an
extraction of all note disclosures included in the registrant's full
financial statements that are responsive to the matters specified in
paragraphs (b)(3)(ii) through (b)(3)(xiii) of this Item. To facilitate
the extraction of all disclosures responsive to the specified matters,
the primary authoritative pronouncements concerning the specified
matters are identified in paragraphs (b)(3)(ii) through (b)(3)(xiii) of
this Item. The term ``related pronouncements'' as used in paragraphs
(b)(3)(ii) through (b)(3)(xiii) of this Item refers to pronouncements
constituting U.S. GAAP as defined in Statement of Auditing Standards
(``SAS'') No. 69 that require disclosure regarding the matter specified
for disclosure in the abbreviated financial statements. The notes shall
disclose the following:
(i) Basis of presentation. The registrant shall state that the
abbreviated financial statements have been prepared using U.S. GAAP for
measurement and classification. The registrant also shall state that
substantially all note disclosures necessary for a fair presentation
under U.S. GAAP and Regulation S-X (17 CFR 210) have been omitted, and
that the note disclosures are limited to those specified by Commission
rules for inclusion in abbreviated financial statements. Additionally,
the registrant shall state that the note disclosures comply with
Commission rules for presentation of abbreviated financial statements.
A reference to the complete disclosures in the full financial
statements shall be provided.
(ii) Accounting policies. The registrant shall provide a
description of all significant accounting policies used in the
preparation of the financial statements. Disclosure of accounting
policies shall identify and describe the accounting principles followed
by the reporting entity and the methods of applying those principles
that materially affect the determination of financial position, cash
flows or results of operations, as specified by Accounting Principles
Board (``APB'') Opinion No. 22 and related pronouncements.
(iii) Changes in accounting principle. The registrant shall
disclose the nature of, and justification for, a change in accounting
principle, and the effects of the change, as specified by APB Opinion
No. 20 and related pronouncements.
(iv) Restatements and reclassifications. The registrant shall
disclose the following matters:
(A) The nature and effects of a correction of an error in
previously issued financial statements, as specified by APB Opinion No.
20 and related pronouncements.
(B) The nature and reasons for a change in the reporting entity,
and effects of the change, as specified by APB Opinion No. 20 and
related pronouncements. Combinations of entities under common control
and similar reorganizations described in APB Opinion No. 16 and related
pronouncements shall be considered changes in the reporting entity for
purposes of this Item.
(C) The nature and effects of reclassifications materially
affecting amounts reported in previously issued financial statements.
(v) Changes in accounting estimate. The registrant shall disclose
the nature and effects of a change in accounting estimate, as specified
by APB Opinion No. 20 and related pronouncements.
(vi) Business combinations. The registrant shall disclose the
following with respect to business combinations:
(A) The nature of business combinations accounted for as a pooling
of interests and the disclosures of the effects of the business
combinations, as specified by APB Opinion No. 16 and related
pronouncements.
(B) The nature of business combinations accounted for as a purchase
and the disclosures specified by APB Opinion No. 16 and related
pronouncements.
(vii) Discontinued operations. The registrant shall disclose the
nature of discontinued operations and provide the quantitative
disclosures of the effects of the discontinued operations, as specified
by APB Opinion No. 30 and related pronouncements.
(viii) Circumstances identified in explanatory language added to
the independent accountant's standard report. The registrant shall
disclose the nature and effects of circumstances for which the
independent accountant's report on the full financial statements
includes explanatory language. These circumstances are identified in
paragraph 11 of SAS No. 58. The notes shall include all disclosures
regarding the matter considered necessary by the independent accountant
in rendering an opinion on the full financial statements unqualified as
to adequacy of disclosure. However, disclosure need not be provided
where the explanatory language merely reports that the independent
accountant's opinion is based in part on the work of another
independent accountant. Disclosure shall be provided for explanatory
[[Page 35617]]
paragraphs that emphasize a matter regarding the financial statements.
(ix) Loss contingencies. The registrant shall disclose the nature
of loss contingencies and estimated amount or range of reasonably
possible loss in excess of amounts accrued in the financial statements,
as specified by Statement of Financial Accounting Standards (``SFAS'')
No. 5 and related pronouncements. A statement that the amount or range
of probable or reasonably possible loss cannot be reasonably estimated
should be included if applicable.
(x) Events of default under credit agreements. The registrant shall
disclose the facts and amounts concerning any default in principal,
interest, sinking fund, or redemption provisions with respect to any
material issue of securities or credit agreements, or any breach of
covenant of a related indenture or agreement, which default or breach
existed at the date of the most recent balance sheet being filed and
which has not been subsequently cured. If a default or breach exists
but acceleration of the obligation has been waived for a stated period
of time beyond the date of the most recent balance sheet being filed,
the registrant shall state the amount of the obligation and the period
of the waiver.
(xi) Related party transactions. The registrant shall disclose the
nature of related party relationships, and a description of
transactions, amounts and balances as specified by SFAS No. 57 and
related pronouncements.
(xii) Bankruptcies and quasi-reorganizations. (A) Bankruptcies.
Registrants entering into, operating under, or emerging from
proceedings under the federal bankruptcy code during the most recent
fiscal year shall provide all of the disclosures required by AICPA
Statement of Position No. 90-7.
(B) Quasi-reorganizations. Registrants effecting a quasi-
reorganization during the most recent fiscal year shall disclose the
nature and effects of the quasi-reorganization.
(xiii) Subsequent events. The registrant shall disclose all events
occurring subsequent to the date of the most recent balance sheet for
which disclosure was required in the full financial statements.
(4) An independent accountant's report. The report shall state that
the abbreviated annual financial statements have been examined in
connection with the audit of the full financial statements. The report
shall state clearly the opinion of the independent accountant that the
abbreviated financial statements comply with the requirements in
paragraph (b) of this Item for presentation of abbreviated financial
statements. The report shall describe the opinion rendered by the
independent accountant on the full financial statements, including any
explanatory language.
(5) Abbreviated interim financial statements. (i) Where interim
financial statements of the registrant are required in a document that
includes abbreviated annual financial statements of the registrant,
those interim financial statements shall be abbreviated. Where interim
financial statements of the registrant are required in a document that
includes full annual financial statements of the registrant, those
interim financial statements shall not be abbreviated.
(ii) Abbreviated interim financial statements shall be furnished
for the same periods as prescribed by Rules 3-01 and 3-02 of Regulation
S-X (17 CFR 210.3-01 and 210.3-02). The abbreviated interim financial
statements shall be prepared in conformity with generally accepted
accounting principles and Article 10 of Regulation S-X (17 CFR 210.10),
except that note disclosures specified by generally accepted accounting
principles and Regulation S-X shall not be included unless specified in
paragraph (b)(3) of this Item. However, disclosures that would
substantially duplicate the disclosure contained in the most recent
annual abbreviated financial statements may be omitted, except that
contingencies shall be disclosed pursuant to (b)(3)(ix) of this Item
even though a significant change since year end may not have occurred.
The abbreviated interim financial statements shall comply with all
requirements of Article 10 of Regulation S-X governing classification
of items on the face of the balance sheet, statement of income, and
statement of cash flows.
(c) Age of abbreviated financial statements at effective date of
registration statement or at mailing date of proxy statement.
Registrants shall update the abbreviated financial statements to cover
the same periods as required pursuant to Rule 3-12 of Regulation S-X
(17 CFR 210.3-12).
(d) Abbreviated financial statements of entities other than the
registrant. In those instances where full financial statements of
entities other than the registrant are required by Rule 3-05, 3-09 or
3-10 of Regulation S-X (17 CFR 210.3-05, 210.3-09, or 210.3-10), or are
otherwise required to be included in a registrant's filing with the
Commission on a form that permits the abbreviation of financial
statements, abbreviated financial statements may be furnished for those
other entities provided that the registrant meets the conditions in
paragraph (a) of this Item and those other entities meet the condition
in paragraph (a)(1) of this Item. Abbreviated financial statements of
entities other than the registrant shall be prepared in accordance with
this Item for the respective periods specified by Rule 3-05, 3-09 or 3-
10 of Regulation S-X. Where abbreviated financial statements of
entities other than the registrant are furnished, full financial
statements shall also be filed with the Commission as provided in the
respective form requirements.
(e) Delivery of full financial statements to requesting investors.
Registrants including abbreviated financial statements in a disclosure
document shall deliver without charge to each person to whom the
document is furnished, upon the written or oral request of such person
and by a means reasonably calculated to result in the information
reaching the requesting person within five business days from the date
of the request, a copy of the full financial statements and the
independent accountant's report thereon filed with the Commission for
the same periods covered by the abbreviated financial statements. The
registrant shall include a statement in bold face or otherwise
reasonably prominent type in the disclosure document that the
registrant will provide a copy of its full financial statements and the
independent accountant's report thereon without charge to each person
to whom the document is furnished, upon the written or oral request of
such person, and shall state the name, address, and telephone number of
the person (including title and department) to whom the request for
full financial statements should be directed. If Form 10-K (17 CFR
249.310) and/or Form 10-Q (17 CFR 249.308a) financial statements are
permitted to be furnished to requesting persons in satisfaction of the
delivery requirement, only the portion of those reports containing the
financial statements, and the independent accountant's report thereon,
need be delivered.
(f) Special provisions as to abbreviated financial statements for
foreign private issuers. (1) The abbreviated financial statements may
be prepared according to U.S. GAAP, except that note disclosures shall
be limited to those specified in paragraph (b)(3) of this Item.
Alternatively, such abbreviated financial statements may be prepared
according to a comprehensive body of accounting principles other than
U.S. GAAP. Where the abbreviated financial statements are prepared
[[Page 35618]]
according to a comprehensive body of accounting principles other than
U.S. GAAP, the disclosures specified by Item 18(c) of Form 20-F (17 CFR
249.220f) shall be furnished, except that note disclosures shall be
limited to those specified in paragraph (b)(3) of this Item. However,
foreign private issuers that comply with Item 17 of Form 20-F rather
than Item 18 may furnish the disclosure specified by Item 17(c) in the
notes to the abbreviated financial statements. Where Item 17(c) permits
the omission of a disclosure from the notes to the full financial
statements, that disclosure shall not be included in the notes to the
abbreviated financial statements even if specified for disclosure by
paragraph (b)(3) of this Item.
(2) Abbreviated financial statements shall be provided for the
periods specified by Rule 3-19 of Regulation S-X (17 CFR 210.3-19).
PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933
5. The authority citation for Part 230 continues to read in part as
follows:
Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77s, 77sss, 78c,
78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-29, 80a-30, and
80a-37, unless otherwise noted.
* * * * *
6. By amending Part 230 by adding Sec. 230.435 to read as follows:
Sec. 230.435 Abbreviated financial statements.
(a) For purposes of this section:
(1) The term full financial statements shall mean financial
statements filed with the Commission meeting the requirements of
Regulation S-X (17 CFR 210), or, for small business issuers, Item 310
of Regulation S-B (Sec. 228.310 of this chapter).
(2) The term abbreviated financial statements shall mean financial
statements that include the information specified in Item 305(b) of
Regulation S-B (Sec. 228.305(b) of this chapter) or Item 305(b) of
Regulation S-K (Sec. 229.305(b) of this chapter).
(b) A prospectus containing abbreviated financial statements shall
not be deemed materially misleading or omitting material facts from the
prospectus within the meaning of the federal securities laws based on
the omission from the prospectus of those financial statement footnotes
permitted by Item 305 of Regulation S-B (Sec. 228.305 of this chapter)
or Item 305 of Regulation S-K (Sec. 229.305 of this chapter) deemed a
part of the prospectus, provided the registrant has complied with Item
305 of Regulation S-B or Item 305 of Regulation S-K.
(c) The full financial statements that are omitted from a
prospectus shall be deemed to be part of the prospectus.
7. By amending Sec. 230.502 of Regulation D by adding a sentence at
the end of paragraph (b)(2)(i)(B)(1) to read as follows:
Sec. 230.502 General conditions to be met.
* * * * *
(b) Information requirements. * * *
(2) Type of information to be furnished. * * *
(i) * * *
(B) Financial statement information. * * *
(1) Offerings up to $2,000,000. * * * If the issuer satisfies the
eligibility criteria in Item 305(a) of Regulation S-B (Sec. 228.305(a)
of this chapter), the issuer may provide the abbreviated financial
statements required by Item 305 of Regulation S-B (Sec. 228.305 of this
chapter) rather than the information required in Item 310 of Regulation
S-B (Sec. 228.310 of this chapter).
* * * * *
PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933
8. The authority citation for part 239 continues to read, in part,
as follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77sss, 78c, 78l,
78m, 78n, 78o(d), 78w(a), 78ll(d), 79e, 79f, 79g, 79j, 79l, 79m,
791, 79t, 80a-8, 80a-29, 80a-30 and 80a-37, unless otherwise noted.
* * * * *
9. By amending Form SB-1 (referenced in Sec. 239.9) by revising
Part F/S and adding Item 7 to Part II to read as follows:
Note--The text of Form SB-1 does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form SB-1
Registration Statement Under the Securities Act of 1933
* * * * *
Part F/S--Financial Information Required in Prospectus
Furnish either: (1) the full financial statements required by
Item 310 of Regulation S-B (Sec. 228.310 of this chapter); or (2)
the abbreviated financial statements required by Item 305 of
Regulation S-B (Sec. 228.305 of this chapter). The option to furnish
abbreviated financial statements is available only to registrants
satisfying the eligibility criteria in Item 305(a) of Regulation S-
B.
Instruction to Part F/S
Abbreviated financial statements meeting the requirements of
Item 305 of Regulation S-B may be furnished with respect to
businesses acquired or to be acquired, except that the information
need only be provided for the periods specified by Item 310(c) of
Regulation S-B. This option is available only if the business
acquired or to be acquired satisfies the eligibility criteria in
Item 305(a)(1) of Regulation S-B.
* * * * *
Part II--Information Not Required in Prospectus
* * * * *
Item 7. Financial Statements
If abbreviated financial statements are furnished in the
prospectus pursuant to Part F/S of this Form SB-1, furnish the full
financial statements required by Item 310 of Regulation S-B and the
independent accountant's report thereon.
* * * * *
10. By amending Form SB-2 (referenced in Sec. 239.10) by revising
Item 22 to Part I and adding Item 29 to Part II to read as follows:
Note--The text of Form SB-2 does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form SB-2
Registration Statement Under the Securities Act of 1933
* * * * *
Item 22. Financial Statements
Furnish either: (a) the full financial statements required by
Item 310 of Regulation S-B (Sec. 228.310 of this chapter); or (b)
the abbreviated financial statements required by Item 305 of
Regulation S-B (Sec. 228.305 of this chapter). The option to furnish
abbreviated financial statements is available only to registrants
satisfying the eligibility criteria in Item 305(a) of Regulation S-
B.
Instruction to Item 22
Abbreviated financial statements meeting the requirements of
Item 305 of Regulation S-B may be furnished with respect to
businesses acquired or to be acquired, except that the information
need only be provided for the periods specified by Item 310(c) of
Regulation S-B. This option is available only if the business
acquired or to be acquired satisfies the eligibility criteria in
Item 305(a)(1) of Regulation S-B.
* * * * *
Part II--Information Not Required in Prospectus
* * * * *
Item 29. Financial Statements
If abbreviated financial statements are furnished pursuant to
Item 22(b), furnish the full financial statements required by Item
310 of Regulation S-B and the independent accountant's report
thereon.
* * * * *
11. By amending Form S-1 (referenced in Sec. 239.11) by revising
Item 11(e), adding an Instruction to Item 11(e), removing the words
``and Financial Statement Schedules'' from the caption to Item 16,
removing
[[Page 35619]]
paragraph (b) of Item 16, and adding Item 18 to read as follows:
Note--The text of Form S-1 does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form S-1
Registration Statement Under the Securities Act of 1933
* * * * *
Item 11. Information with Respect to the Registrant
* * * * *
(e) Full financial statements meeting the requirements of
Regulation S-X (17 CFR Part 210) (Schedules required under
Regulation S-X shall be filed pursuant to Item 18 ``Financial
Statements and Schedules,'' of this Form) as well as any financial
information required by Rule 3-05 and Article 11 of Regulation S-X;
or abbreviated financial statements meeting the requirements of Item
305 of Regulation S-K shall be filed, as well as any financial
information required by Rule 3-05 and Article 11 of Regulation S-X.
The option to furnish abbreviated financial statements is available
only to registrants satisfying the eligibility criteria in Item
305(a) of Regulation S-K (Sec. 229.305(a) of this chapter).
Instruction to Item 11(e)
Abbreviated financial statements meeting the requirements of
Item 305 of Regulation S-K may be furnished with respect to
businesses acquired or to be acquired, except that the information
need only be provided for the periods specified by Rule 3-05 of
Regulation S-X (Sec. 210.3-05 of this chapter). This option is
available only if the business acquired or to be acquired satisfies
the eligibility criteria in Item 305(a)(1) of Regulation S-K.
* * * * *
Part II--Information Not Required in Prospectus
* * * * *
Item 18. Financial Statements and Schedules
(a) If abbreviated financial statements are furnished pursuant
to Item 11(e) of this Form, furnish the full financial statements
required by Regulation S-X and the independent accountant's report
thereon.
(b) Regardless of whether full or abbreviated financial
statements are furnished pursuant to Item 11(e) of this Form,
furnish the financial statement schedules required by Regulation S-
X. These schedules shall be lettered or numbered in the manner
described for exhibits in Item 601 of Regulation S-K (Sec. 229.601
of this chapter).
* * * * *
12. By amending Form S-2 (referenced in Sec. 239.12) by revising
the last sentence in General Instruction II.C, adding paragraph (iv) to
Item 11(a)(2), adding a sentence at the end of Item 11(a)(3), adding
paragraphs (A), (B), and (C) to Item 11(b)(2), adding instructions to
Item 11(a)(2), (a)(3), and Item 11(b)(2), and adding Item 18 to read as
follows:
Note--The text of Form S-2 does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form S-2
Registration Statement under the Securities Act of 1933
* * * * *
General Instructions
* * * * *
II. Application of General Rules and Regulations
* * * * *
C. * * * If, however, the small business issuer satisfies the
eligibility criteria in Item 305(a) of Regulation S-B
(Sec. 228.305(a) of this chapter), the small business issuer may
provide the abbreviated financial statements required by Item 305 of
Regulation S-B rather than the financial information in Item 310 of
Regulation S-B (Sec. 228.310 of this chapter).
* * * * *
Item 11. Information with Respect to the Registrant
(a) * * *
(2) * * *
(iv) If the registrant satisfies the eligibility criteria in
Item 305(a) of Regulation S-K, abbreviated interim financial
statements of the registrant meeting the requirements of Item
305(b)(5) of Regulation S-K may be furnished pursuant to paragraphs
(a)(2)(i) or (a)(2)(iii) of this Item.
(3) * * * Abbreviated financial statements meeting the
requirements of Item 305 of Regulation S-K may be furnished with
respect to businesses acquired or to be acquired, except that the
information need only be provided for the periods specified by Rule
3-05 of Regulation S-X (Sec. 210.3-05 of this chapter). This option
is available only if the business acquired or to be acquired
satisfies the eligibility criteria in Item 305(a)(1) of Regulation
S-K.
* * * * *
(b) * * *
(2) Include either: financial * * *
(A) If the registrant satisfies the eligibility criteria in Item
305(a) of Regulation S-K, abbreviated interim financial statements
meeting the requirements of Item 305(b)(5) of Regulation S-K may be
furnished pursuant to paragraph (b)(2)(i) of this Item.
(B) Abbreviated financial statements meeting the requirements of
Item 305 of Regulation S-K may be furnished with respect to
businesses acquired or to be acquired, except that the information
need only be provided for the periods specified by Rule 3-05 of
Regulation S-X. This option is available only if the business
acquired or to be acquired satisfies the eligibility criteria in
Item 305(a)(1) of Regulation S-K.
(C) If the registrant satisfies the eligibility criteria in Item
305(a) of Regulation S-K, abbreviated financial statements meeting
the requirements of Item 305 of Regulation S-K may be furnished
pursuant to paragraph (b)(2) of this Item with respect to restated
financial statements of the registrant required by this Item.
* * * * *
Instruction to Item 11(a)(2), (a)(3) and (b)(2)
Abbreviated financial statements meeting the requirements of
Item 305 of Regulation S-K may be furnished with respect to
businesses acquired or to be acquired, except that the information
need only be provided for the periods specified by Rule 3-05 of
Regulation S-X. This option is available only if the business
acquired or to be acquired satisfies the eligibility criteria in
Item 305(a)(1) of Regulation S-K.
* * * * *
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
* * * * *
Item 18. Financial Statements and Schedules
If abbreviated financial statements are furnished pursuant to
Item 11(a)(3) or (b)(2)(B) with respect to businesses acquired or to
be acquired, furnish the full financial statements required by
Regulation S-X and the independent accountant's report thereon. If
abbreviated financial statements are furnished pursuant to Item
11(b)(2)(C) with respect to restated financial statements of the
registrant, furnish the full financial statements required by
Regulation S-X and the independent accountant's report thereon.
* * * * *
13. By amending Form S-3 (referenced in Sec. 239.13) by revising
the last sentence of General Instruction II.C, adding Item 11(c) and
Item 18 to read as follows:
Note--The text of Form S-3 does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form S-3
Registration Statement Under the Securities Act of 1933
* * * * *
General Instructions
* * * * *
II. Application of General Rules and Regulations
* * * * *
C. * * * If, however, the small business issuer satisfies the
eligibility criteria in Item 305(a) of Regulation S-B
(Sec. 228.305(a) of this chapter), the small business issuer may
provide the abbreviated financial statements required by Item 305 of
Regulation S-B rather than the financial information in Item 310 of
Regulation S-B (Sec. 228.310 of this chapter).
* * * * *
Item 11. Material Changes
* * * * *
(c) If the registrant satisfies the eligibility criteria in Item
305(a) of Regulation S-K:
(1) Abbreviated financial statements meeting the requirements of
Item 305 of Regulation S-K may be furnished pursuant to Item
11(b)(i) with respect to businesses acquired or to be acquired,
except that the information need only be provided for the periods
specified by Rule 3-05 of Regulation S-X. This option is available
only if the business acquired or to be acquired satisfies
[[Page 35620]]
the eligibility criteria in Item 305(a)(1) of Regulation S-K.
(2) Abbreviated financial statements meeting the requirements of
Item 305 of Regulation S-K may be furnished pursuant to Items
11(b)(ii), 11(b)(iii) and 11(b)(iv) with respect to restated
financial statements of the registrant.
* * * * *
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
* * * * *
Item 18. Financial Statements and Schedules
If abbreviated financial statements are furnished pursuant to
Item 11(c)(1) with respect to businesses acquired or to be acquired,
furnish the full financial statements required by Regulation S-X and
the independent accountant's report thereon. If abbreviated
financial statements are furnished pursuant to Item 11(c)(2) with
respect to restated financial statements of the registrant, furnish
the full financial statements required by Regulation S-X and the
independent accountant's report thereon.
* * * * *
14. By amending Form S-6 (referenced in Sec. 239.16) by designating
the undesignated paragraph following paragraph (c)(2) of Instruction 1
of Instructions as to the Prospectus as paragraph (c)(3) and adding
paragraph (c)(4) and by adding paragraph 6 to the Instructions as to
Exhibits to read as follows:
Note--The text of Form S-6 does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form S-6
For Registration Under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2
* * * * *
Instructions as to the Prospectus
Instruction 1. Information to be Contained in Prospectus
* * * * *
(c) * * *
(4) Abbreviated financial statements meeting the requirements of
Item 305 of Regulation S-K (Sec. 229.305 of this chapter) may be
included in the prospectus in lieu of the financial statements
required by paragraphs (c)(1) and (2) above. The option to include
abbreviated financial statements is available only to registrants
satisfying the eligibility criteria in Item 305(a) of Regulation S-
K.
* * * * *
Instructions as to Exhibits
* * * * *
6. If abbreviated financial statements are furnished pursuant to
Instruction 1(c)(4) of the Instructions as to the Prospectus,
furnish the full financial statements required by Instructions
1(c)(1) and (2) of the Instructions as to the Prospectus and the
independent accountant's report thereon.
15. By amending Form S-8 (referenced in Sec. 239.16b) by adding an
Instruction to Item 3(a) to read as follows:
Note--The text of Form S-8 does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form S-8
Registration Statement Under the Securities Act of 1933
* * * * *
PART II--INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
* * * * *
(a) * * *
Instruction to Item 3(a). If the registrant's latest prospectus
filed pursuant to Rule 424(b) under the Act contains abbreviated
financial statements, the registrant shall not incorporate such
prospectus by reference into the Form S-8. In lieu thereof, the
registrant shall incorporate its latest effective registration
statement filed under the Act that contains audited full financial
statements for the registrant's latest fiscal year for which such
statements have been filed.
* * * * *
16. By amending Form S-11 (referenced in Sec. 239.18) by revising
Item 27 and adding paragraph (c) to Item 35 to read as follows:
Note--The text of Form S-11 does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form S-11
For Registration Under the Securities Act of 1933 of Securities of
Certain Real Estate Companies
* * * * *
Item 27. Financial Statements and Information
Include in the prospectus either full financial statements
meeting the requirements of Regulation S-X (17 CFR 210) or
abbreviated financial statements meeting the requirements of Item
305 of Regulation S-K (Sec. 229.305 of this chapter). The option to
furnish abbreviated financial statements is available only to
registrants satisfying the eligibility criteria in Item 305(a) of
Regulation S-K. In addition, include the supplementary financial
information required by Item 302 of Regulation S-K (Sec. 229.302 of
this chapter) and the information concerning changes in and
disagreements with accountants on accounting and financial
disclosure required by Item 304 of Regulation S-K (Sec. 229.304 of
this chapter). Although all schedules required by Regulation S-X are
to be included in the registration statement, all such schedules
other than those prepared in accordance with Rules 12-12, 12-28 and
12-29 of the Regulation may be omitted from the prospectus.
* * * * *
INFORMATION NOT REQUIRED IN PROSPECTUS
* * * * *
Item 35. Financial statements and Exhibits
* * * * *
(c) If abbreviated financial statements are furnished pursuant
to Item 27 of this Form, file the full financial statements meeting
the requirements of Regulation S-X and the independent accountant's
report thereon.
* * * * *
17. By amending Form S-4 (referenced in Sec. 239.25) by revising
the last sentence of General Instruction D.3; adding Item 10(b)(5),
paragraph (iv) to Item 12(a)(2), a sentence at the end of Item
12(a)(3); revising Item 14(e), adding a sentence at the end of Items
15, 16(a), 17(a) and 17(b)(8); removing the words ``and Financial
Statement Schedules'' from the caption to Item 21; removing Item 21(b),
and redesignating Item 21(c) as Item 21(b); and adding Item 23 to read
as follows:
Note--The text of Form S-4 does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form S-4
Registration Statement Under the Securities Act of 1933
* * * * *
General Instructions
* * * * *
D. Application of General Rules and Regulations
* * * * *
3. * * * Small business issuers shall provide or incorporate by
reference the information called for by Item 310 of Regulation S-B
(Sec. 228.310 of this chapter), or, if the small business issuer
satisfies the eligibility criteria in Item 305(a) of Regulation S-B
(Sec. 228.305(a) of this chapter), the abbreviated information in
Item 305 of Regulation S-B.
* * * * *
Item 10. Information with Respect to S-3 Registrants
* * * * *
(b) * * *
(5) If the registrant satisfies the eligibility criteria in Item
305(a) of Regulation S-K:
(i) Abbreviated financial statements meeting the requirements of
Item 305 of Regulation S-K may be furnished pursuant to paragraph
(b)(1) of this Item with respect to businesses acquired or to be
acquired, except that the information need only be provided for the
periods specified by Rule 3-05 of Regulation S-X (Sec. 210.3-05 of
this chapter). This option is available only if the business
acquired or to be acquired satisfies the eligibility criteria in
Item 305(a)(1) of Regulation S-K.
(ii) Abbreviated financial statements meeting the requirements
of Item 305 of Regulation S-K may be furnished pursuant to
paragraphs (b)(2), (b)(3) and (b)(4) of this Item
[[Page 35621]]
with respect to restated financial statements of the registrant.
* * * * *
Item 12. Information With Respect to S-2 or S-3 Registrants
* * * * *
(a) * * *
(2) * * *
(iv) If the registrant satisfies the eligibility criteria in
Item 305(a) of Regulation S-K, abbreviated interim financial
statements of the registrant meeting the requirements of Item
305(b)(5) of Regulation S-K may be furnished pursuant to paragraphs
(a)(2)(i) or (a)(2)(iii) of this Item.
(3) * * * Abbreviated financial statements meeting the
requirements of Item 305 of Regulation S-K may be furnished with
respect to the businesses acquired or to be acquired, except that
the information need only be provided for the periods specified by
Rule 3-05 of Regulation S-X. This option is available only if the
business acquired or to be acquired satisfies the eligibility
criteria in Item 305(a)(1) of Regulation S-K.
* * * * *
(b) * * *
(2) * * *
(vi) If the registrant satisfies the eligibility criteria in
Item 305(a) of Regulation S-K, abbreviated interim financial
statements of the registrant meeting the requirements of Item
305(b)(5) of Regulation S-K may be furnished pursuant to paragraph
(b)(2)(i) of this Item.
(vii) Abbreviated financial statements meeting the requirements
of Item 305 of Regulation S-K may be furnished pursuant to paragraph
(b)(2)(ii) of this Item with respect to businesses acquired or to be
acquired, except that the information need only be provided for the
periods specified by Rule 3-05 of Regulation S-X. This option is
available only if the business acquired or to be acquired satisfies
the eligibility criteria in Item 305(a)(1) of Regulation S-K.
(viii) If the registrant satisfies the eligibility criteria in
Item 305(a) of Regulation S-K, abbreviated financial statements
meeting the requirements of Item 305 of Regulation S-K may be
furnished pursuant to paragraphs (b)(2)(iii), (iv) and (v) of this
Item with respect to restated financial statements of the registrant
required by this Item.
* * * * *
Item 14. Information with Respect to Registrants Other than S-2 or S-3
Registrants
* * * * *
(e) Financial statements required by either paragraph (e)(1) or
(e)(2) of this Item:
(1) Financial statements of the registrant meeting the
requirements of Regulation S-X (17 CFR Part 210) (Schedules required
under Regulation S-X shall be filed pursuant to Item 23 ``Financial
Statements and Schedules,'' of this Form) as well as any financial
information required by Rule 3-05 and Article 11 of Regulation S-X;
or
(2) If the registrant satisfies the eligibility criteria in Item
305(a) of Regulation S-K, abbreviated financial statements of the
registrant meeting the requirements of Item 305 of Regulation S-K,
as well as any financial information required by Rule 3-05 and
Article 11 of Regulation S-X.
(3) Abbreviated financial statements meeting the requirements of
Item 305 of Regulation S-K may be furnished pursuant to paragraphs
(1) and (2) of this Item with respect to businesses acquired or to
be acquired, except that the information need only be provided for
the periods specified by Rule 3-05 of Regulation S-X. This option is
available only if the business acquired or to be acquired satisfies
the eligibility criteria in Item 305(a)(1) of Regulation S-K.
* * * * *
Item 15. Information with Respect to S-3 Companies
* * * Abbreviated financial statements meeting the requirements
of Item 305 of Regulation S-K may be furnished for the company being
acquired pursuant to Items 10 and 11 of this Form if the company
being acquired satisfies the eligibility criteria in Item 305(a)(1)
of Regulation S-K and the registrant satisfies the eligibility
criteria in Item 305(a) of Regulation S-K.
Item 16. Information with Respect to S-2 or S-3 Companies
(a) * * * Abbreviated financial statements meeting the
requirements of Item 305 of Regulation S-K may be furnished for the
company being acquired pursuant to Items 12 and 13 of this Form if
the company being acquired satisfies the eligibility criteria in
Item 305(a)(1) of Regulation S-K and the registrant satisfies the
eligibility criteria in Item 305(a) of Regulation S-K.
* * * * *
Item 17. Information With Respect to Companies Other Than S-2 or S-3
Companies
* * * * *
(a) * * * Abbreviated financial statements meeting the
requirements of Item 305 of Regulation S-K may be furnished for the
company being acquired pursuant to Item 14 of this Form if the
company being acquired satisfies the eligibility criteria in Item
305(a)(1) of Regulation S-K and the registrant satisfies the
eligibility criteria in Item 305(a) of Regulation S-K.
(b) * * *
(8) * * * If the registrant satisfies the eligibility criteria
in Item 305(a) of Regulation S-K, abbreviated interim financial
statements of the company being acquired meeting the requirements of
Item 305(b)(5) of Regulation S-K may be furnished pursuant to this
paragraph.
* * * * *
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
* * * * *
Item 23. Financial Statements
(a) S-3 Registrants. If abbreviated financial statements are
furnished pursuant to Item 10(b)(5)(i) with respect to the
businesses acquired or to be acquired, furnish the full financial
statements required by Regulation S-X and the independent
accountant's report thereon. If abbreviated financial statements are
furnished pursuant to Item 10(b)(5)(ii) with respect to the restated
financial statements of the registrant, furnish the full financial
statements required by Regulation S-X and the independent
accountant's report thereon.
(b) S-2 or S-3 Registrants. If abbreviated financial statements
are furnished pursuant to Item 12(a)(3) or 12(b)(2)(vii) with
respect to the businesses acquired or to be acquired, furnish the
full financial statements required by Regulation S-X and the
independent accountant's report thereon. If abbreviated financial
statements are furnished pursuant to Item 12(b)(2)(viii) with
respect to the restated financial statements of the registrant,
furnish the full financial statements required by Regulation S-X and
the independent accountant's report thereon.
(c) Registrants Other Than S-2 or S-3 Registrants. If
abbreviated financial statements are furnished pursuant to Item
14(e)(2) with respect to the financial statements of the registrant,
furnish the full financial statements required by Regulation S-X and
the independent accountant's report thereon. If abbreviated
financial statements are furnished pursuant to Item 14(e)(3) with
respect to the businesses acquired or to be acquired, furnish the
full financial statements required by Regulation S-X and the
independent accountant's report thereon.
(d) S-3 Companies. If abbreviated financial statements of the
company being acquired are furnished pursuant to Item 15, furnish
the full financial statements required by Regulation S-X and the
independent accountant's report thereon.
(e) S-2 or S-3 Companies. If abbreviated financial statements of
the company being acquired are furnished pursuant to Item 16,
furnish the full financial statements required by Regulation S-X and
the independent accountant's report thereon.
(f) Companies Other Than S-2 or S-3 Companies. If abbreviated
financial statements of the company being acquired are furnished
pursuant to Item 17(a), furnish the full financial statements
required by Regulation S-X and the independent accountant's report
thereon. If abbreviated financial statements are furnished pursuant
to Item 17(a) with respect to the other businesses acquired or to be
acquired, furnish the full financial statements required by
Regulation S-X and the independent accountant's report thereon. If
abbreviated financial statements are furnished pursuant to Item
17(b)(7) with respect to the company being acquired, furnish the
full financial statements required by Regulation S-X and the
independent accountant's report thereon.
(g) Furnish the financial statement schedules required by
Regulation S-X (17 CFR Part 210) and Item 14(e), Item 17(a), or Item
17(b)(9) of this Form. These schedules should be lettered or
numbered in the manner described for exhibits in paragraph (a) of
Item 21.
* * * * *
18. By amending Form F-1 (referenced in Sec. 239.31) by revising
Items 11(b) and (c), removing the words ``and Financial Statement
Schedules'' from the caption to Item 16, removing paragraph (b) of Item
16, and adding Item 18 to read as follows:
[[Page 35622]]
Note--The text of Form F-1 does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form F-1
Registration Statement Under the Securities Act of 1933
* * * * *
Item 11. Information with respect to the Registrant
Furnish the following information with respect to the
Registrant:
* * * * *
(b) Information required by either paragraph (b)(1) or (b)(2) of
this Item:
(1) Information required by Item 18 of Form 20-F (Schedules
required under Regulation S-X shall be filed pursuant to Item 18
``Financial Statements and Schedules,'' of this Form) as well as any
information required by Rule 3-05 and Article 11 of Regulation S-X
(Sec. 210 of this chapter), except as provided by paragraph (c) of
this Item; or
(2) If the registrant satisfies the eligibility criteria in Item
305(a) of Regulation S-K (Sec. 229.305(a) of this chapter),
abbreviated financial statements of the registrant meeting the
requirements of Item 305 of Regulation S-K, as well as any
information required by Rule 3-05 and Article 11 of Regulation S-X.
(3) Abbreviated financial statements meeting the requirements of
Item 305 of Regulation S-K may be furnished with respect to
businesses acquired or to be acquired, except that the information
need only be provided for the periods specified by Rule 3-05 of
Regulation S-X. This option is available only if the business
acquired or to be acquired satisfies the eligibility criteria in
Item 305(a)(1) of Regulation S-K.
(c) Information required by either paragraph (1) or (2) of this
Item:
(1) Information required by Item 17 of Form 20-F may be
furnished in lieu of the information specified by Item 18 thereof if
the only securities to be issued pursuant to this registration
statement are non-convertible securities that are ``investment grade
securities,'' as defined below, or the only securities to be issued
hereunder are to be offered: (1) upon the exercise of outstanding
rights granted by the issuer of the securities to be offered, if
such rights are granted on a pro rata basis to all existing security
holders of the class of securities to which the rights attach and
there is no standby underwriting in the United States or similar
arrangement; or (2) pursuant to a dividend or interest reinvestment
plan; or (3) upon the conversion of outstanding transferable
warrants issued by the issuer of the securities to be offered, or by
an affiliate of such issuer; or
(2) If the registrant satisfies the eligibility criteria in Item
305(a) of Regulation S-K, abbreviated financial statements of the
registrant meeting the requirements of Item 305 of Regulation S-K,
as well as any information required by Rule 3-05 and Article 11 of
Regulation S-X.
(3) Abbreviated financial statements meeting the requirements of
Item 305 of Regulation S-K may be furnished with respect to
businesses acquired or to be acquired, except that the information
need only be provided for the periods specified by Rule 3-05 of
Regulation S-X. This option is available only if the business
acquired or to be acquired satisfies the eligibility criteria in
Item 305(a)(1) of Regulation S-K.
* * * * *
Item 18. Financial Statements and Schedules
(a) If abbreviated financial statements are furnished pursuant
to Items 11 (b)(2) or (3) of this Form, furnish the full financial
statements required by Item 18 of Form 20-F and the independent
accountant's report thereon.
(b) If abbreviated financial statements are furnished pursuant
to Items 11 (c)(2) or (3) of this Form, furnish the full financial
statements required by Item 17 of Form 20-F and the independent
accountant's report thereon.
* * * * *
19. By amending Form F-2 (referenced in Sec. 239.32) by amending
General Instructions I.D and I.G by adding a sentence at the end of
each Instruction, adding paragraphs (b)(1)(A)-(C) to Item 11, adding a
sentence at the end of paragraph (b)(2) of Item 11, revising Item 12,
revising Instruction 4 to Item 12, and adding Item 18 to read as
follows:
Note--The text of Form F-2 does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form F-2
Registration Statement Under the Securities Act of 1933
* * * * *
General Instructions
I. Eligibility Requirements for Use of Form F-2
* * * * *
D. * * * This instruction does not apply to any abbreviated
financial statements included in the prospectus pursuant to Item
11(b) or 12(b) of this Form.
* * * * *
G. * * * If the subsidiary satisfies the eligibility criteria in
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter),
abbreviated financial statements meeting the requirements of Item
305 of Regulation S-K may be furnished as specified in Form S-2.
* * * * *
Item 11. Material Changes
(b) * * *
(1) * * *
(A) Abbreviated financial statements meeting the requirements of
Item 305 of Regulation S-K may be furnished with respect to the
businesses acquired or to be acquired, except that the information
need only be provided for the periods specified by Rule 3-05 of
Regulation S-X. This option is available only if the business
acquired or to be acquired satisfies the eligibility criteria in
Item 305(a)(1) of Regulation S-K.
(B) If the registrant satisfies the eligibility criteria in Item
305(a) of Regulation S-K, abbreviated financial statements meeting
the requirements of Item 305 of Regulation S-K may be furnished
pursuant to paragraphs (b)(1)(ii), (iii) or (iv) above with respect
to restated financial statements of the registrant required by these
paragraphs.
(2) * * *
If the registrant satisfies the eligibility criteria in Item
305(a) of Regulation S-K, abbreviated interim financial statements
meeting the requirements of Item 305 of Regulation S-K may be
furnished pursuant to paragraph (b)(2)(i) above.
Item 12. Information with Respect to the Registrant
The registrant shall incorporate by reference the latest Form
20-F, Form 40-F or Form 10-K filed pursuant to the Exchange Act that
contains certified financial statements for the registrant's latest
fiscal year for which a Form 20-F, Form 40-F or Form 10-K was
required to have been filed and any report on Form 10-Q or Form 8-K
filed since the end of the fiscal year covered by such annual
report. The registrant may incorporate by reference any other Form
10-Q or Form 8-K, and any Form 6-K containing information meeting
the requirements of this Form. The registrant shall deliver with the
prospectus the information required by paragraph (a) or (b) of this
Item, except that only registrants satisfying the eligibility
criteria in Item 305(a) of Regulation S-K may choose to deliver the
information in paragraph (b).
(a) The latest Form 20-F, Form 40-F or Form 10-K and any report
on Form 10-Q or Form 8-K required to be incorporated by reference
into this Form, along with any other Form 10-Q, Form 8-K or Form 6-K
incorporated by reference into this Form at the registrant's option.
(b) The information required by Part I of Form 20-F and
abbreviated financial statements of the registrant meeting the
requirements of Item 305 of Regulation S-K, as well as any
information required by Rule 3-05 and Article 11 of Regulation S-X.
Abbreviated financial statements meeting the requirements of Item
305 of Regulation S-K may be furnished with respect to businesses
acquired or to be acquired, except that the information need only be
provided for the periods specified by Rule 3-05 of Regulation S-X.
This option is available only if the business acquired or to be
acquired satisfies the eligibility criteria in Item 305(a)(1) of
Regulation S-K. The registrant also shall deliver any Form 10-Q,
Form 8-K or Form 6-K incorporated by reference into this Form at the
registrant's option.
Instructions
* * * * *
4. If the registrant elects to comply with paragraph (a) of this
Item, the Form 20-F, Form 40-F or Form 10-K shall be delivered with
the preliminary prospectus but need not be redelivered with the
final prospectus to a recipient that had previously received the
Form 20-F, Form 40-F or Form 10-K with the preliminary prospectus.
* * * * *
Item 18. Financial Statements and Schedules
If abbreviated financial statements are furnished pursuant to
Item 11(b)(1)(A) or
[[Page 35623]]
Item 12(b) with respect to businesses acquired or to be acquired,
furnish the full financial statements required by Regulation S-X and
the independent accountant's report thereon. If abbreviated
financial statements are furnished pursuant to Item 11(b)(1)(B) with
respect to restated financial statements of the registrant, furnish
the full financial statements required by Regulation S-X and the
independent accountant's report thereon.
20. By amending Form F-3 (referenced in Sec. 239.33) by adding a
sentence to the end of the note to General Instruction I.A.5, by adding
a sentence to the end of General Instruction I.B.1, I.B.2, I.B.3 and
I.B.4, adding Item 11(c), and Item 18 to read as follows:
Note--The text of Form F-3 does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form F-3
Registration Statement Under the Securities Act of 1933
* * * * *
General Instructions
I. Eligibility Requirements for Use of Form F-3
* * * * *
A. Registrant Requirements * * *
5. Majority-owned subsidiaries * * *
Note: * * * If such subsidiary satisfies the eligibility
criteria in Item 305(a) of Regulation S-K (Sec. 229.305(a) of this
chapter), abbreviated financial statements meeting the requirements
of Item 305 of Regulation S-K may be furnished as specified in Form
S-3.
B. Transaction Requirements
1. * * * If the registrant satisfies the eligibility criteria in
Item 305(a) of Regulation S-K, abbreviated financial statements
meeting the requirements of Item 305 of Regulation S-K may be
furnished pursuant to this Instruction.
* * * * *
2. * * * If the registrant satisfies the eligibility criteria in
Item 305(a) of Regulation S-K, abbreviated financial statements
meeting the requirements of Item 305 of Regulation S-K may be
furnished pursuant to this Instruction.
3. * * * If the registrant satisfies the eligibility criteria in
Item 305(a) of Regulation S-K, abbreviated financial statements
meeting the requirements of Item 305 of Regulation S-K may be
furnished pursuant to this Instruction.
4. * * * If the registrant satisfies the eligibility criteria in
Item 305(a) of Regulation S-K, abbreviated financial statements
meeting the requirements of Item 305 of Regulation S-K may be
furnished pursuant to this Instruction.
* * * * *
Item 11. Material Changes
(b)(1) * * *
(A) Abbreviated financial statements meeting the requirements of
Item 305 of Regulation S-K may be furnished with respect to the
businesses acquired or to be acquired, except that the information
need only be provided for the periods specified by Rule 3-05 of
Regulation S-X. This option is available only if the business
acquired or to be acquired satisfies the eligibility criteria in
Item 305(a)(1) of Regulation S-K.
(B) If the registrant satisfies the eligibility criteria in Item
305(a) of Regulation S-K, abbreviated financial statements meeting
the requirements of Item 305 of Regulation S-K may be furnished
pursuant to paragraphs (b)(ii), (iii) or (iv) above with respect to
restated financial statements of the registrant required by these
paragraphs.
(2) * * * If the registrant satisfies the eligibility criteria
in Item 305(a) of Regulation S-K, abbreviated interim financial
statements meeting the requirements of Item 305 of Regulation S-K
may be furnished pursuant to paragraph (i) above.
* * * * *
Item 18. Financial Statements and Schedules
If abbreviated financial statements are furnished pursuant to
paragraph (i) of Item 11(b) with respect to businesses acquired or
to be acquired, furnish the full financial statements required by
Regulation S-X and the independent accountant's report thereon. If
abbreviated financial statements are furnished pursuant to paragraph
(ii), (iii) or (iv) of Item 11(b) with respect to restated financial
statements of the registrant, furnish the full financial statements
required by Regulation S-X and the independent accountant's report
thereon.
* * * * *
21. By amending Form F-4 (referenced in Sec. 239.34) by adding Item
10(c)(5), paragraph (iv) to Item 12(a)(2), a sentence at the end of
Item 12(a)(3), a sentence at the end of Item 12(a)(5), redesignating
paragraph (h) of Item 14 as paragraph (h)(1) of Item 14, adding
paragraph (h)(2) to Item 14, redesignating current Item 15 as paragraph
(a) to Item 15, adding paragraph (b) to Item 15, redesignating current
Item 16 as paragraph (a) to Item 16, adding paragraph (b) to Item 16,
adding paragraph (c) to Item 17, removing the words ``and Financial
Statement Schedules'' from the caption to Item 21, removing paragraph
(b) from Item 21, redesignating paragraph (c) of Item 21 as paragraph
(b) of Item 21, and adding Item 23 to read as follows:
Note--The text of Form F-4 does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form F-4
Registration Statement Under the Securities Act of 1933
* * * * *
Item 10. Information With Respect to F-3 Companies * * *
(c) * * *
(5) If the registrant satisfies the eligibility criteria in Item
305(a) of Regulation S-K:
(i) Abbreviated financial statements meeting the requirements of
Item 305 of Regulation S-K may be furnished pursuant to paragraph
(c)(1) of this Item with respect to businesses acquired or to be
acquired, except that the information need only be provided for the
periods specified by Rule 3-05 of Regulation S-X. This option is
available only if the business acquired or to be acquired satisfies
the eligibility criteria in Item 305(a)(1) of Regulation S-K.
(ii) Abbreviated financial statements meeting the requirements
of Item 305 of Regulation S-K may be furnished pursuant to
paragraphs (c)(2), (3) and (4) of this Item with respect to restated
financial statements of the registrant.
* * * * *
Item 12. Information With Respect to F-2 or F-3 Registrants
* * * * *
(a) * * *
(2) * * *
(iv) If the registrant satisfies the eligibility criteria in
Item 305(a) of Regulation S-K, abbreviated interim financial
statements of the registrant meeting the requirements of Item
305(b)(5) of Regulation S-K may be furnished pursuant to paragraph
(a)(2)(i) of this Item.
(3) * * * Abbreviated financial statements meeting the
requirements of Item 305 of Regulation S-K may be furnished with
respect to the businesses acquired or to be acquired, except that
the information need only be provided for the periods specified by
Rule 3-05 of Regulation S-X. This option is available only if the
business acquired or to be acquired satisfies the eligibility
criteria in Item 305(a)(1) of Regulation S-K.
* * * * *
(b) * * *
(2) * * *
(vi) If the registrant satisfies the eligibility criteria in
Item 305(a) of Regulation S-K, abbreviated interim financial
statements of the registrant meeting the requirements of Item 305 of
Regulation S-K may be furnished pursuant to paragraph (i) above.
(vii) If the registrant satisfies the eligibility criteria in
Item 305(a) of Regulation S-K, abbreviated financial statements
meeting the requirements of Item 305 of Regulation S-K may be
furnished pursuant to paragraph (b)(2)(ii) of this Item with respect
to businesses acquired or to be acquired, except that the
information need only be provided for the periods specified by Rule
3-05 of Regulation S-X. This option is available only if the
business acquired or to be acquired satisfies the eligibility
criteria in Item 305(a)(1) of Regulation S-K.
(viii) If the registrant satisfies the eligibility criteria in
Item 305(a) of Regulation S-K, abbreviated financial statements
meeting the requirements of Item 305 of Regulation S-K may be
furnished pursuant to paragraphs (b)(2)(iii), (iv) and (v) of this
Item with respect to restated financial statements of the registrant
required by this Item.
(3) * * *
(ix) If the registrant satisfies the eligibility criteria in
Item 305(a) of Regulation S-K, abbreviated financial statements of
the registrant meeting the requirements of Item 305 of Regulation S-
K may be furnished pursuant to paragraph (3)(vii) of this Item. If
[[Page 35624]]
the registrant satisfies the eligibility criteria in Item 305(a) of
Regulation S-K, abbreviated financial statements meeting the
requirements of Item 305 of Regulation S-K may be furnished pursuant
to paragraph (3)(vii) of this Item with respect to businesses
acquired or to be acquired, except that the information need only be
provided for the periods specified by Rule 3-05 of Regulation S-X.
This option is available only if the business acquired or to be
acquired satisfies the eligibility criteria in Item 305(a)(1) of
Regulation S-K.
* * * * *
Item 14. Information With Respect to Foreign Registrants Other Than F-2
or F-3 Registrants
(h) Financial statements required by either paragraph (1) or (2)
of this Item:
(1) * * *
(2) If the registrant satisfies the eligibility criteria in Item
305(a) of Regulation S-K, abbreviated financial statements of the
registrant meeting the requirements of Item 305 of Regulation S-K
may be furnished with respect to paragraph (h)(1) of this Item.
Abbreviated financial statements meeting the requirements of Item
305 of Regulation S-K also may be furnished with respect to
businesses acquired or to be acquired if such businesses satisfy the
eligibility criteria in Item 305(a)(1) of Regulation S-K and the
registrant satisfies the eligibility criteria in Item 305(a) of
Regulation S-K, except that the information need only be provided
for the periods specified by Rule 3-05 of Regulation S-X.
* * * * *
Item 15. Information With Respect to F-3 Companies
(a) * * *
(b) Abbreviated financial statements meeting the requirements of
Item 305 of Regulation S-K of the company being acquired may be
furnished pursuant to Items 10 and 11 of this Form if the company
being acquired satisfies the eligibility criteria in Item 305(a)(1)
of Regulation S-K and the registrant satisfies the eligibility
criteria in Item 305(a) of Regulation S-K.
* * * * *
Item 16. Information With Respect to F-2 or F-3 Companies
(a) * * *
(b) Abbreviated financial statements meeting the requirements of
Item 305 of Regulation S-K may be furnished for the company being
acquired pursuant to Items 12 and 13 of this Form if the company
being acquired satisfies the eligibility criteria in Item 305(a)(1)
of Regulation S-K and the registrant satisfies the eligibility
criteria in Item 305(a) of Regulation S-K.
* * * * *
Item 17. Information With Respect to Foreign Companies Other Than F-2
or F-3 Companies
* * * * *
(c) Abbreviated financial statements meeting the requirements of
Item 305 of Regulation S-K may be furnished for the company being
acquired pursuant to paragraph (a) of this Item if the company being
acquired satisfies the eligibility criteria in Item 305(a)(1) of
Regulation S-K and the registrant satisfies the eligibility criteria
in Item 305(a) of Regulation S-K.
* * * * *
Item 23. Financial Statements and Schedules
If abbreviated financial statements are furnished pursuant to
paragraph (b)(3)(ix) of Item 12, paragraph (h)(2) of Item 14,
paragraph (b) of Item 15, paragraph (b) of Item 16, or paragraph (c)
of Item 17 of this Item, furnish full financial statements meeting
the requirements of Item 17 or 18 of Form 20-F, whichever is
applicable. If abbreviated financial statements are furnished
pursuant to paragraph (c)(5)(i) of Item 10, paragraph (a)(3) of Item
12, or paragraph (b)(2)(vii) of Item 12 of this Item, furnish full
financial statements meeting the requirements of Regulation S-X with
respect to businesses acquired or to be acquired. If abbreviated
financial statements are furnished pursuant to paragraph (c)(5)(ii)
of Item 10 or paragraph (b)(2)(viii) of Item 12 above, furnish
restated full financial statements of the registrant meeting the
requirements of Regulation S-X. If abbreviated financial statements
are furnished pursuant to paragraph (a)(2)(iv) or paragraph
(b)(2)(vi) of Item 12 above, furnish interim financial statements
meeting the requirements of Regulation S-X.
22. By amending Form F-7 (referenced in Sec. 239.37) by adding a
paragraph to the end of Item 1 to read as follows:
Note--The text of Form F-7 does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form F-7
Registration Statement Under the Securities Act of 1933
* * * * *
Item 1. Home Jurisdiction Documents
* * * * *
Notwithstanding the foregoing, the prospectus may contain, in
lieu of any financial statements required in any Canadian
jurisdiction, if the bidder satisfies the eligibility criteria in
Item 305(a) of Regulation S-B (Sec. 228.305(a) of this chapter) or
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter),
abbreviated financial statements meeting the requirements of Item
305 of such regulation.
* * * * *
23. By amending Form F-8 (referenced in Sec. 239.38) by adding a
paragraph to the end of Item 1 to read as follows:
Note--The text of Form F-8 does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form F-8
Registration Statement Under the Securities Act of 1933
* * * * *
Item 1. Home Jurisdiction Documents
* * * * *
Notwithstanding the foregoing, the prospectus may contain, in
lieu of any financial statements required in any Canadian
jurisdiction, if the bidder satisfies the eligibility criteria in
Item 305(a) of Regulation S-B (Sec. 228.305(a) of this chapter) or
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter),
abbreviated financial statements meeting the requirements of Item
305 of such regulation.
* * * * *
24. By amending Form F-9 (referenced in Sec. 239.39) by adding a
paragraph to the end of Item 1 to read as follows:
Note--The text of Form F-9 does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form F-9
Registration Statement Under the Securities Act of 1933
* * * * *
Item 1. Home Jurisdiction Documents
* * * * *
Notwithstanding the foregoing, the prospectus may contain, in
lieu of any financial statements required in any Canadian
jurisdiction, if the bidder satisfies the eligibility criteria in
Item 305(a) of Regulation S-B (Sec. 228.305(a) of this chapter) or
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter),
abbreviated financial statements meeting the requirements of Item
305 of such regulation.
* * * * *
25. By amending Form F-10 (referenced in Sec. 239.40) by adding a
paragraph to the end of Item 1 to read as follows:
Note--The text of Form F-10 does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form F-10
Registration Statement Under the Securities Act of 1933
* * * * *
Item 1. Home Jurisdiction Documents
* * * * *
Notwithstanding the foregoing, the prospectus may contain, in
lieu of any financial statements required in any Canadian
jurisdiction, if the bidder satisfies the eligibility criteria in
Item 305(a) of Regulation S-B (Sec. 228.305(a) of this chapter) or
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter),
abbreviated financial statements meeting the requirements of Item
305 of such regulation.
* * * * *
26. By amending Form F-80 (referenced in Sec. 239.41) by adding a
paragraph to the end of Item 1 to read as follows:
Note--The text of Form F-80 does not, and this amendment will
not, appear in the Code of Federal Regulations.
[[Page 35625]]
Form F-80
Registration Statement Under the Securities Act of 1933
* * * * *
Item 1. Home Jurisdiction Documents
* * * * *
Notwithstanding the foregoing, the prospectus may contain, in
lieu of any financial statements required in any Canadian
jurisdiction, if the bidder satisfies the eligibility criteria in
Item 305(a) of Regulation S-B (Sec. 228.305(a) of this chapter) or
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter),
abbreviated financial statements meeting the requirements of Item
305 of such regulation.
* * * * *
27. By amending Form 1-A (referenced in Sec. 239.90) by revising
Part F/S, by adding a sentence to the end of section (2), paragraph (f)
to section (3) and paragraph (11) to Item 2 of Part III to read as
follows:
Note--The text of Form 1-A does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form 1-A
Regulation A Offering Statement Under the Securities Act of 1933
* * * * *
PART F/S
* * * * *
(2) Statements of income, cash flows, and other stockholders
equity--* * * If the issuer satisfies the eligibility criteria in
Item 305(a) of Regulation S-B, the issuer may furnish abbreviated
financial statements in accordance with Item 305 of Regulation S-B,
except that the information shall be furnished for the periods
specified in paragraphs (1) and (2) above, in lieu of full financial
statements.
* * * * *
(3) Financial Statements of Businesses Acquired or to be
Acquired.
* * * * *
(f) If the issuer satisfies the eligibility criteria in Item
305(a) of Regulation S-B, the issuer may furnish abbreviated
financial statements of the business acquired or to be acquired in
accordance with Item 305 of Regulation S-B, except that the
information shall be furnished for the periods specified under
paragraph (c) above, in lieu of full financial statements. This
option is available only if the business acquired or to be acquired
satisfies the eligibility criteria in Item 305(a)(1) of Regulation
S-B.
* * * * *
PART III--EXHIBITS
* * * * *
Item 2. Description of Exhibits
* * * * *
(11) Financial statements--If abbreviated financial statements are
furnished pursuant to Part F/S of this Form, furnish the full financial
statements. If the full financial statements furnished pursuant to this
paragraph are audited, furnish the independent accountant's report on
the full financial statements.
* * * * *
PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
28. The authority citation for Part 240 continues to read in part
as follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77eee, 77ggg,
77nnn, 77sss, 77ttt, 78c, 78d, 78i, 78j, 78l, 78m, 78n, 78o, 78p,
78q, 78s, 78w, 78x, 78ll(d), 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-
37, 80b-3, 80b-4, and 80b-11, unless otherwise noted.
* * * * *
29. By amending Sec. 240.13e-3 by adding paragraph (e)(4) to read
as follows:
Sec. 240.13e-3 Going private transactions by certain issuers or their
affiliates.
* * * * *
(e) Disclosure of certain information.
* * * * *
(4) In lieu of the information required by paragraph (e)(1) of this
section regarding information contained in Item 14 of Schedule 13E-3
(Sec. 240.13e-3), or a fair and adequate summary thereof, the
information set forth in this paragraph (e)(4) may be disclosed.
(i) If the issuer or affiliate satisfies the eligibility criteria
in Item 305(a) of Regulation S-B (Sec. 228.305(a) of this chapter) or
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter),
abbreviated financial statements meeting the requirements of Item 305
of such regulation may be furnished.
(ii) Abbreviated Financial Statements. For purposes of this
section:
(A) The term full financial statements shall mean financial
statements filed with the Commission pursuant to Item 14 of Schedule
13E-3.
(B) The term abbreviated financial statements shall mean financial
statements that meet the requirements of Item 305 of Regulation S-B or
Item 305 of Regulation S-K.
(iii) A disclosure document containing abbreviated financial
statements shall not be deemed materially misleading or omitting
material facts from the disclosure document within the meaning of the
federal securities laws based on the omission from the disclosure
document of those financial statement footnotes permitted by Item 305
of Regulation S-B (Sec. 228.305 of this chapter) or Item 305 of
Regulation S-K (Sec. 229.305 of this chapter) deemed a part of the
disclosure document, provided the issuer or affiliate has complied with
Item 305 of Regulation S-B or Item 305 of Regulation S-K.
(iv) The full financial statements that are omitted from a
disclosure document pursuant to this paragraph (e)(4) shall be deemed
to be part of the disclosure document.
30. By amending Sec. 240.13e-4 by adding paragraphs (d)(1)(v) and
(i) to read as follows:
Sec. 240.13e-4 Tender offers by issuers.
* * * * *
(d) Disclosure of certain information.
(1) * * *
(v) In lieu of the information required by paragraph (d)(1)(iv) of
this section regarding information contained in Item 7 of Schedule 13E-
4 (Sec. 240.13e-4), or a fair and adequate summary thereof, if the
issuer or affiliate satisfies the eligibility criteria in Item 305(a)
of Regulation S-B (Sec. 228.305(a) of this chapter) or Item 305(a) of
Regulation S-K (Sec. 229.305(a) of this chapter), abbreviated financial
statements meeting the requirements of Item 305 of such regulation may
be furnished.
* * * * *
(i) Abbreviated Financial Statements. (1) For purposes of this
section 13e-4:
(i) The term full financial statements shall mean financial
statements filed with the Commission pursuant to Item 7 of Schedule
13E-4 or Item 1(a) of Schedule 13E-4F.
(ii) The term abbreviated financial statements shall mean financial
statements that meet the requirements of Item 305 of Regulation S-B or
Item 305 of Regulation S-K.
(2) A disclosure document containing abbreviated financial
statements shall not be deemed materially misleading or omitting
material facts from the disclosure document within the meaning of the
federal securities laws based on the omission from the disclosure
document of those financial statement footnotes permitted by Item 305
of Regulation S-B (Sec. 228.305 of this chapter) or Item 305 of
Regulation S-K (Sec. 229.305 of this chapter) deemed a part of the
disclosure document, provided the issuer or affiliate has complied with
Item 305 of Regulation S-B or Item 305 of Regulation S-K.
(3) The full financial statements that are omitted from a
disclosure document pursuant to paragraph (d)(1)(v) of this section or
Item 1 of Schedule 13E-4F shall be deemed to be part of the disclosure
document.
31. By amending Sec. 240.13e-102 by redesignating paragraph (a) of
Item 1 as paragraph (a)(1), adding a sentence at the beginning of
paragraph (a)(1) and adding paragraph (a)(2) to read as follows:
[[Page 35626]]
Sec. 240.13e-102 Schedule 13E-4F. Tender offer statement pursuant to
section 13(e)(1) of the Securities Exchange Act of 1934 and
Sec. 240.13e-4 thereunder.
* * * * *
Item 1. Home Jurisdiction Documents
(a) (1) Furnish the information required by paragraph (a)(1) of
this item to the Commission. Either the information required by
paragraph (a)(1) or that required by paragraph (a)(2) of this Item
shall be furnished to shareholders. If information is delivered to
shareholders pursuant to paragraph (a)(2) of this Item, such
information shall be furnished to the Commission. * * *
(2) Furnish the information required by paragraph (a)(1) of this
Item, provided that in lieu of financial statements included in such
information, if the issuer satisfies the eligibility criteria in
Item 305(a) of Regulation S-B (Sec. 228.305(a) of this chapter) or
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter),
abbreviated financial statements meeting the requirements of Item
305 of such regulation may be furnished.
* * * * *
32. By amending Sec. 240.14a-3 by revising the third sentence in
the ``Note to Small Business Issuers''; by revising paragraph (b)(1);
following the paragraph (b)(1), redesignating Notes 1 and 2 as Notes 2
and 3, and adding Note 1 to read as follows:
Sec. 240.14a-3 Information to be furnished to security holders.
* * * * *
(b) * * *
Note to Small Business Issuers. * * * A small business issuer
shall provide the information in Item 310(a) of Regulation S-B, or,
provided that the small business issuer satisfies the eligibility
criteria in Item 305(a) of Regulation S-B, the abbreviated financial
statements required by Item 305 of Regulation S-B, in lieu of the
financial information required by Sec. 240.14a-3(b)(1)). * * *
(1) The report shall include, for the registrant and its
subsidiaries consolidated, either:
(i) Audited balance sheets as of the end of the two most recent
fiscal years and audited statements of income and cash flows for each
of the three most recent fiscal years prepared in accordance with
Regulation S-X (Part 210 of this chapter), except that the provisions
of Article 3 (other than Sec. 210.3-03(e), 210.3-04 and 210.3-20) and
Article 11 shall not apply; or
(ii) If the registrant satisfies the eligibility criteria in Item
305(a) of Regulation S-K, abbreviated financial statements for the
registrant and its subsidiaries consolidated prepared in accordance
with Item 305 of Regulation S-K for the same periods specified in
Sec. 240.14a-3(b)(1)(i). If abbreviated financial statements are
included in the annual report to security holders, the registrant shall
append the full financial statements required by Regulation S-X and the
independent accountant's report thereon to the copies of the report
mailed to the Commission pursuant to paragraph (c) of this section. If,
however, the registrant has filed with the Commission an annual report
on Form 10-K for the same fiscal year on or before the date that the
annual report required by this section is delivered to security
holders, the registrant does not have to append full financial
statements to the copies of the report mailed to the Commission, and
the registrant may furnish the Form 10-K financial statements to
requesting persons in satisfaction of the delivery requirement set
forth in Item 305(e) of Regulation S-K.
Note 1. Any financial statement schedules or exhibits or
separate financial statements that may otherwise be required in
filings with the Commission may be omitted. If the financial
statements of the registrant and its subsidiaries consolidated in
the annual report filed or to be filed with the Commission are not
required to be audited, the financial statements required by this
paragraph (b) may be unaudited.
* * * * *
33. By adding Sec. 240.14a-16 to read as follows:
Sec. 240.14a-16 Abbreviated financial statements.
(a) For purposes of this section:
(1) The term full financial statements shall mean financial
statements filed with the Commission meeting the requirements of
Regulation S-X (Part 210 of this chapter), or, for small business
issuers, Item 310 of Regulation S-B (Sec. 228.310 of this chapter).
(2) The term abbreviated financial statements shall mean financial
statements that include the information specified in Item 305(b) of
Regulation S-B (Sec. 228.305(b) of this chapter) or Item 305(b) of
Regulation S-K (Sec. 229.305(b) of this chapter).
(b) A report furnished pursuant to Sec. 240.14a-3(b) containing
abbreviated financial statements shall not be deemed materially
misleading or omitting material facts from the report within the
meaning of the federal securities laws based on the omission from the
report of those financial statement footnotes permitted by Item 305 of
Regulation S-B (Sec. 228.305 of this chapter) or Item 305 of Regulation
S-K (Sec. 229.305 of this chapter) deemed a part of the report,
provided the issuer has complied with Item 305 of Regulation S-B or
Item 305 of Regulation S-K.
(c) A proxy statement containing abbreviated financial statements
pursuant to Item 13 or 14 of Schedule 14A (Sec. 240.14a-101 of this
chapter) shall not be deemed materially misleading or omitting material
facts from the proxy statement within the meaning of the federal
securities laws based on the omission from the proxy statement of those
financial statement footnotes permitted by Item 305 of Regulation S-B
(Sec. 228.305 of this chapter) or Item 305 of Regulation S-K
(Sec. 229.305 of this chapter) deemed a part of the proxy statement,
provided the issuer has complied with Item 305 of Regulation S-B or
Item 305 of Regulation S-K.
(d) The full financial statements that are omitted from a report or
proxy statement shall be deemed to be part of the report or proxy
statement.
34. By amending Schedule 14A (Sec. 240.14a-101) by revising the
last sentence in Note F, by revising paragraph (2) of Note G, by
revising paragraph (3)(f) of Note G, by adding paragraph (a)(6) and
Instruction 6 to Item 13 and by adding paragraphs (b)(1)(ii)(E),
(b)(2)(i)(A)(5), (b)(2)(i)(B)(2)(vi), (b)(3)(i)(J) and (b)(3)(ii)(F)
and Instruction 8 to Item 14 to read as follows:
Sec. 240.14a-101 Schedule 14A. Information required in proxy
statement.
* * * * *
Notes.
* * * * *
F. Note to Small Business Issuers--* * * Small business issuers
shall provide the financial information in Item 310 of Regulation S-
B or, if the small business issuer satisfies the eligibility
criteria in Item 305(a) of Regulation S-B, the abbreviated financial
statements required by Item 305 of Regulation S-B, in lieu of the
financial statements required in Schedule 14A.
G. Special Note for Small Business Issuers.
* * * * *
(2) Registrants and acquirees which relied upon Alternative 1 in
their most recent Form 10-KSB may provide the following information
(Question numbers are in reference to Model A of Form 1-A): (a)
Questions 37 and 38 instead of Item 6(d); (b) Question 43 instead of
Item 7(a); (c) Questions 29-36 and 39 instead of Item 7(b); (d)
Questions 40-42 instead of Item 8; (e) Questions 40-42 instead of
Item 10; (f) the information required in Part F/S of Form 10-SB, or,
if the small business issuer satisfies the eligibility criteria in
Item 305(a) of Regulation S-B, the abbreviated financial statements
required by Item 305 of Regulation S-B, instead of the financial
statement requirements of Items 13 or 14 (abbreviated financial
statements may be furnished for a business acquired or to be
acquired if the small business issuer satisfies the eligibility
criteria in Item 305(a) of Regulation S-B and the business acquired
or to be acquired satisfies the eligibility criteria in Item
305(a)(1) of Regulation S-B); (g)
[[Page 35627]]
Questions 4, 11 and 47-50 instead of Item 13(a)(1)(3); (h) Question 3
instead of Item 14(b)(3)(i)(A) and (B); and (i) Questions 4, 11 and
47-50 instead of Item 14(b)(3)(i)(H).
* * * * *
(3) * * *
(f) the information required in Part F/S of Form 10-SB, or, if
the small business issuer satisfies the eligibility criteria in Item
305(a) of Regulation S-B, the abbreviated financial statements
required by Item 305 of Regulation S-B, instead of the financial
statement requirements of Items 13 or 14 of Schedule 14A
(abbreviated financial statements may be furnished for a business
acquired or to be acquired if the small business issuer satisfies
the eligibility criteria in Item 305(a) of Regulation S-B and the
business acquired or to be acquired satisfies the eligibility
criteria in Item 305(a)(1) of Regulation S-B);
Item 13. Financial and Other Information. * * *
(a) Information required. * * *
* * * * *
(6) If the registrant satisfies the eligibility criteria in Item
305(a) of Regulation S-K, abbreviated financial statements of the
registrant meeting the requirements of Item 305 of Regulation S-K
may be furnished pursuant to paragraph (a)(1) of this Item. If the
registrant satisfies the eligibility criteria in Item 305(a) of
Regulation S-K, abbreviated financial statements meeting the
requirements of Item 305 of Regulation S-K may be furnished pursuant
to paragraph (a)(1) above with respect to businesses acquired or to
be acquired, except that the information need only be provided for
the periods specified by Rule 3-05 of Regulation S-X. This option is
available only if the business acquired or to be acquired satisfies
the eligibility criteria in Item 305(a)(1) of Regulation S-K.
* * * * *
Instructions to Item 13. * * *
6. If abbreviated financial statements are included pursuant to
paragraph (a)(6) of this Item, the registrant shall append the full
financial statements required by Regulation S-X and the independent
accountant's report thereon to the copies of the proxy statement
filed with the Commission pursuant to Rule 14a-6 (17 CFR 240.14a-6).
If, however, the registrant previously has filed with the Commission
full financial statements and the independent accountant's report
thereon for the same period in an annual report on Form 10-K and any
quarterly reports on Form 10-Q necessary to provide interim
financial disclosure, the registrant does not have to append full
financial statements to the copies of the proxy statement filed with
the Commission, and the registrant may furnish the Form 10-K and 10-
Q financial statements and the independent accountant's report
thereon to requesting persons in satisfaction of the delivery
requirement set forth in Item 305(e) of Regulation S-K.
Item 14. Mergers, consolidations, acquisitions and similar
matters
* * * * *
(b) * * *
(1) * * *
(ii) * * *
(E) If the registrant satisfies the eligibility criteria in Item
305(a) of Regulation S-K, abbreviated financial statements meeting
the requirements of Item 305 of Regulation S-K may be furnished
pursuant to paragraph (b)(1)(ii)(A) of this Item with respect to
businesses acquired or to be acquired, except that the information
need only be provided for the periods specified by Rule 3-05 of
Regulation S-X. This option is available only if the business
acquired or to be acquired satisfies the eligibility criteria in
Item 305(a)(1) of Regulation S-K. If the registrant satisfies the
eligibility criteria in Item 305(a) of Regulation S-K, abbreviated
financial statements of the registrant meeting the requirements of
Item 305 of Regulation S-K may be furnished pursuant to paragraphs
(b)(1)(ii)(B), (C) or (D) of this Item.
* * * * *
(2) Information with respect to S-2 or S-3 registrants.
* * * * *
(i) * * *
(A) * * *
(5) If the registrant satisfies the eligibility criteria in Item
305(a) of Regulation S-K, abbreviated financial statements meeting
the requirements of Item 305 of Regulation S-K may be furnished
pursuant to paragraph (b)(2)(i)(A)(3) of this Item with respect to
businesses acquired or to be acquired, except that the information
need only be provided for the periods specified by Rule 3-05 of
Regulation S-X. This option is available only if the business
acquired or to be acquired satisfies the eligibility criteria in
Item 305(a)(1) of Regulation S-K.
(B) * * *
(2) * * *
(vi) If the registrant satisfies the eligibility criteria in
Item 305(a) of Regulation S-K, abbreviated financial statements
meeting the requirements of Item 305 of Regulation S-K may be
furnished pursuant to paragraph (b)(2)(i)(B)(2)(i) of this Item with
respect to interim financial information of the registrant,
paragraph (b)(2)(i)(B)(2)(ii) of this Item with respect to
businesses acquired or to be acquired, except that the information
need only be provided for the periods specified by Rule 3-05 of
Regulation S-X, paragraphs (b)(2)(i)(B)(2) (iii) and (iv) of this
Item with respect to restated financial statements of the
registrant, and paragraph (b)(2)(i)(B)(2)(v) of this Item with
respect to financial information required because of a material
disposition of assets outside of the normal course of business. The
option to furnish abbreviated financial statements with respect to
businesses acquired or to be acquired is available only if the
business acquired or to be acquired satisfies the eligibility
criteria in Item 305(a)(1) of Regulation S-K.
* * * * *
(3) Information with respect to registrants other than S-2 or S-
3 registrants. * * *
(i) * * *
(J) If the registrant satisfies the eligibility criteria in Item
305(a) of Regulation S-K, abbreviated financial statements of the
registrant meeting the requirements of Item 305 of Regulation S-K
may be furnished pursuant to paragraph (b)(3)(i)(E) of this Item. If
the registrant satisfies the eligibility criteria in Item 305(a) of
Regulation S-K, abbreviated financial statements meeting the
requirements of Item 305 of Regulation S-K may be furnished pursuant
to paragraph (E) above with respect to businesses acquired or to be
acquired, except that the information need only be provided for the
periods specified by Rule 3-05 of Regulation S-X. This option is
available only if the business acquired or to be acquired satisfies
the eligibility criteria in Item 305(a)(1) of Regulation S-K.
(ii) * * *
(F) If the registrant satisfies the eligibility criteria in Item
305(a) of Regulation S-K, abbreviated financial statements of the
registrant meeting the requirements of Item 305 of Regulation S-K
may be furnished pursuant to paragraphs (b)(3)(ii) (A) and (B) of
this Item.
* * * * *
Instructions to Item 14. * * *
8. If abbreviated financial statements are included pursuant to
paragraphs (b)(1)(ii)(E), (b)(2)(i)(A)(5), (b)(2)(i)(B)(2)(vi),
(B)(3)(i)(J), or (b)(3)(ii)(F) of this Item, the registrant shall
append the full financial statements required by Regulation S-X and
the independent accountant's report thereon to the copies of the
proxy statement filed with the Commission pursuant to Rule 14a-6 [17
CFR 240.14a-6]. If, however, the registrant previously has filed
with the Commission full financial statements and the independent
accountant's report thereon for the same period in an annual report
on Form 10-K and any quarterly reports on Form 10-Q necessary to
provide interim financial disclosure, the registrant does not have
to append full financial statements to the copies of the proxy
statement filed with the Commission, and the registrant may furnish
the Form 10-K and 10-Q financial statements and the independent
accountant's report thereon to requesting persons in satisfaction of
the delivery requirement set forth in Item 305(e) of Regulation S-K.
* * * * *
35. By amending Sec. 240.14c-3 by adding two sentences at the end
of paragraph (a)(1) and revising the third sentence in the ``Note to
Small Business Issuers'' to read as follows:
Sec. 240.14c-3 Annual report to be furnished security holders.
(a) * * *
(1) * * * If abbreviated financial statements are included in the
annual report to security holders, the registrant shall append the full
financial statements required by Regulation S-X and the independent
accountant's report thereon to the copies of the report mailed to the
Commission pursuant to paragraph (c) of this rule. If, however, the
registrant has filed with the Commission an annual report on Form 10-K
on or before the date that the annual report required by this rule is
delivered to security holders, the registrant does not have to append
full
[[Page 35628]]
financial statements to the copies of the report mailed to the
Commission, and the registrant may furnish the Form 10-K financial
statements to requesting persons in satisfaction of the delivery
requirement set forth in Item 305(e) of Regulation S-K.
(2) * * *
Note to Small Business Issuers. * * * A small business issuer
shall provide the information in Item 310(a) of Regulation S-B, or,
if the small business issuer satisfies the eligibility criteria in
Item 305(a) of Regulation S-B, the abbreviated financial statements
required by Item 305 of Regulation S-B, in lieu of the financial
information required by Rule 14a-3(b)(1) (Sec. 240.14a-3(b)(1)).
* * * * *
36. By adding Sec. 240.14c-8 to read as follows:
Sec. 240.14c-8 Abbreviated financial statements.
(a) For purposes of this rule:
(1) The term ``full financial statements'' shall mean financial
statements filed with the Commission meeting the requirements of
Regulation S-X (Sec. 210 of this chapter), or, for small business
issuers, Item 310 of Regulation S-B (Sec. 228.310 of this chapter).
(2) The term ``abbreviated financial statements'' shall mean
financial statements that include the information specified in Item
305(b) of Regulation S-B (Sec. 228.305(b) of this chapter) or Item
305(b) of Regulation S-K (Sec. 229.305(b) of this chapter).
(b) A report furnished pursuant to Sec. 240.14c-3 containing
abbreviated financial statements shall not be deemed materially
misleading or omitting material facts from the report within the
meaning of the federal securities laws based on the omission from the
report of those financial statement footnotes permitted by Item 305 of
Regulation S-B (Sec. 228.305 of this chapter) or Item 305 of Regulation
S-K (Sec. 229.305 of this chapter) deemed a part of the report,
provided the issuer has complied with Item 305 of Regulation S-B or
Item 305 of Regulation S-K.
(c) An information statement containing abbreviated financial
statements pursuant to Item 1 of Schedule 14C (Sec. 240.14c-101 of this
chapter) shall not be deemed materially misleading or omitting material
facts from the information statement within the meaning of the federal
securities laws based on the omission from the information statement of
those financial statement footnotes permitted by Item 305 of Regulation
S-B (Sec. 228.305 of this chapter) or Item 305 of Regulation S-K
(Sec. 229.305 of this chapter) deemed a part of the information
statement, provided the issuer has complied with Item 305 of Regulation
S-B or Item 305 of Regulation S-K.
(d) The full financial statements that are omitted from a report or
information statement shall be deemed to be part of the report or
information statement.
37. By amending Schedule 14C (Sec. 240.14c-101) by revising the
last sentence in the Note to read as follows:
* * * * *
Note: * * * Small business issuers shall provide the financial
information in Item 310 of Regulation S-B or, if the small business
issuer satisfies the eligibility criteria in Item 305(a) of
Regulation S-B, the abbreviated financial statements required by
Item 305 of Regulation S-B, in lieu of any financial statements
required by Item 1 of Sec. 240.14c-101.
* * * * *
38. By amending Sec. 240.14d-1 by adding paragraph (b)(3) to read
as follows:
Sec. 240.14d-1 Scope of and definitions applicable to Regulations 14D
and 14E.
* * * * *
(b) * * *
(3) Abbreviated Financial Statements (i) For purposes of this rule:
(A) The term ``full financial statements'' shall mean financial
statements filed with the Commission pursuant to Item 9 of Schedule
14D-1, Item 1(a) of Schedule 14D-1F or Item 1(a) of Schedule 14D-9F.
(B) The term ``abbreviated financial statements'' shall mean
financial statements that meet the requirements of Item 305 of
Regulation S-B or Item 305 of Regulation S-K.
(ii) A disclosure document containing abbreviated financial
statements shall not be deemed materially misleading or omitting
material facts from the disclosure document within the meaning of the
federal securities laws based on the omission from the disclosure
document of those financial statement footnotes permitted by Item 305
of Regulation S-B (Sec. 228.305 of this chapter) or Item 305 of
Regulation S-K (Sec. 229.305 of this chapter) deemed a part of the
disclosure document, provided the bidder or other filer has complied
with Item 305 of Regulation S-B or Item 305 of Regulation S-K.
(iii) The full financial statements that are omitted from a
disclosure document pursuant to paragraph (e)(1)(x) of Rule 14d-6, Item
1(a) of Schedule 14D-1F or Item 1(a) of Schedule 14D-9F shall be deemed
to be part of the disclosure document.
39. By amending Sec. 240.14d-6 by adding paragraph (e)(1)(x) to
read as follows:
Sec. 240.14d-6 Disclosure requirements with respect to tender offers.
* * * * *
(e) Information to be included
(1) * * *
(x) In lieu of the information required by paragraph (e)(1)(viii)
above regarding information contained in Item 9 of Schedule 14D-1, or a
fair and adequate summary thereof, if the bidder satisfies the
eligibility criteria in Item 305(a) of Regulation S-B (Sec. 228.305(a)
of this chapter) or Item 305(a) of Regulation S-K (Sec. 229.305(a) of
this chapter), abbreviated financial statements meeting the
requirements of Item 305 of such regulation may be furnished.
40. By amending Sec. 240.14d-102 by redesignating paragraph (a) of
Item 1 as paragraph (a)(1), adding a new paragraph (a) introductory
text and adding paragraph (a)(2) to read as follows:
Sec. 240.14d-102 Schedule 14D-1F. Tender offer statement pursuant to
rule 14d-1(b) under the Securities Exchange Act of 1934.
* * * * *
Item 1. Home Jurisdiction Documents
(a) Furnish the information required by paragraph (a)(1) of this
item to the Commission. Either the information required by paragraph
(a)(1) or that required by paragraph (a)(2) of this item shall be
furnished to shareholders. If information is delivered to
shareholders pursuant to paragraph (a)(2) of this item, such
information shall be furnished to the Commission.
(1) * * *
(2) Furnish the information required by paragraph (a)(1) above,
provided that in lieu of financial statements included in such
information, if the bidder satisfies the eligibility criteria in
Item 305(a) of Regulation S-B (Sec. 228.305(a) of this chapter) or
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter),
abbreviated financial statements meeting the requirements of Item
305 of such regulation may be furnished.
41. By amending Sec. 240.14d-103 by redesignating paragraph (a) of
Item 1 as paragraph (a)(1), adding a new paragraph (a) introductory
text and adding paragraph (a)(2) to read as follows:
Sec. 240.14d-103 Schedule 14D-9F. Solicitation/recommendation
statement pursuant to section 14(d)(4) of the Securities Exchange Act
of 1934 and rules 14d-1(b) and 14e-2(c) thereunder.
* * * * *
Item 1. Home Jurisdiction Documents.
(a) Furnish the information required by paragraph (a)(1) of this
item to the Commission. Either the information required by paragraph
(a)(1) or that required by paragraph (a)(2) of this item shall be
furnished to shareholders. If information is delivered to
shareholders pursuant to
[[Page 35629]]
paragraph (a)(2) of this item, such information shall be furnished to
the Commission.
(1) * * *
(2) Furnish the information required by paragraph (a)(1) above,
provided that in lieu of financial statements included in such
information, if the bidder satisfies the eligibility criteria in
Item 305(a) of Regulation S-B (Sec. 228.305(a) of this chapter) or
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter),
abbreviated financial statements meeting the requirements of Item
305 of such regulation may be furnished.
* * * * *
PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934
* * * * *
42. The authority for Part 249 continues to read, in part, as
follows:
Authority: 15 U.S.C. 78a, et seq., unless otherwise noted.
43. By amending Form 10-K (referenced in Sec. 249.310) by deleting
the second sentence in Item 8, and adding a sentence at the end of Note
1 to General Instruction G to read as follows:
Note--The text of Form 10-K does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
* * * * *
General Instructions
* * * * *
G. Information to be Incorporated by Reference.
* * * * *
Note 1. * * * In addition, if abbreviated financial statements
are included in the registrant's annual report that is incorporated
by reference, then full financial statements meeting the
requirements of Regulation S-X shall be filed under Item 8.
44. By amending Form 10-KSB (referenced in Sec. 249.310b) by adding
paragraph 2(c) to the General Instructions to read as follows:
Note--The text of Form 10-KSB does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form 10-KSB
* * * * *
General Instructions
* * * * *
E. Information to be Incorporated by Reference.
* * * * *
2. * * *
* * * * *
(c) If abbreviated financial statements are included in the
registrant's annual report that is incorporated by reference, then
full financial statements meeting the requirements of Regulation S-B
shall be filed under Item 7.
By the Commission.
Dated: June 27, 1995.
Margaret H. McFarland,
Deputy Secretary.
BILLING CODE 8010-01-P
Note: The following appendices will not appear in the Code of
Federal Regulations.
Appendix A--Summary of Common Footnote Disclosures That Would Be
Omitted From Abbreviated Financial Statements
The proposed rules for abbreviated financial statements would
omit footnote disclosure included in the full financial statements,
except with respect to a limited number of specified matters. Those
specified matters are discussed in the proposing release. The
following is a summary of the major types of disclosures that would
typically be omitted from abbreviated financial statements of
commercial and industrial companies. It may be useful in evaluating
the general extent to which the volume of footnote disclosures would
be reduced. The listing is not intended to include every specific
disclosure that would be omitted, nor is it intended to define what
disclosures would be omitted under the proposed rules. The listing
does not specifically address additional footnote disclosures that
may be required in full financial statements of registrants in
specialized industries. However, such disclosures would be omitted
from the notes to the abbreviated financial statements unless their
inclusion is required in response to a matter specified for
disclosure under the proposed rules. Certain information regarding
the financial statement captions listed below is required to be
shown on the face of the full financial statements, and that
information also is required on the face of the abbreviated
financial statements.
Omitted Disclosures by Major Financial Statement Caption
Cash
Restrictions, compensating balances
Inventories
Amounts by major classes, LIFO information, long term contract
terms and conditions, billed and unbilled amounts
Investment securities
Types, maturities, realized and unrealized gains or losses,
sales and transfers
Loan impairment information
Depreciable assets
Amounts by major classes, depreciation expense, depreciable
lives
Intangible assets
Amounts by major classes, amount and reasons for significant
additions, deletions and writeoffs, amortization periods
Investments accounted for under the equity method
Nature of investment, percentage ownership, market value,
summarized financial information of investee
Amount of assets subject to lien
Lease information
Operating leases
Amounts expensed, commitments, future minimum lease payments,
contingent rentals, terms and effects of sale-leaseback transactions
Capital leases
Assets subject to capital lease, interest portion of obligation,
future minimum lease payments
Long-term obligations
Terms, maturities, sinking fund requirements, security
interests, covenants, nature and terms of extinguishments, terms and
effects of troubled debt restructurings, capitalized interest
amounts, rates used to discount certain liabilities
On-balance sheet and off-balance sheet financial instruments
Financial instruments
Terms and characteristics of both on-balance sheet and off-
balance sheet financial instruments, notional or contract amounts,
concentrations of credit risk, amount of possible accounting loss on
off balance sheet instruments
Hedging activities
Nature of activities and offsetting amounts, risks
Derivatives
Nature, terms and objectives, characteristics by category,
notional or contract amounts
Fair value disclosures
Pension, post-employment, and post-retirement benefit plan
information
Description of plan, details of the expense, plan assets, plan
benefit obligations, net asset or liability recognized, assumptions
regarding weighted-average assumed discount rate, rate of
compensation increase used to measure the projected benefit,
weighted-average expected long-term rate of return on plan assets,
and health care cost trend rate, nature and gain or loss on
curtailment of settlement of plan
Income taxes
Components of tax expense, components of deferred tax assets/
liabilities and any valuation allowance, reconciliation of the
effective income tax rate, carryforward information, nature and
amounts of deferred taxes not recognized due to special exceptions
to SFAS 109
Redeemable preferred stock
Details of preferences, redemption terms and amounts
Stockholders equity
Details of preferences, redemption terms, conversion features,
voting rights, restrictions on net assets or payments of dividends,
details of sales of stock by subsidiaries
Stock options and warrants
Amounts granted, exercised, terminated and exercisable, changes
in terms or exercise prices
Employee stock ownership plans (ESOPs)
Details of plan, compensation expense during the period, number
of share allocated and committed to be released, fair value of
unearned ESOP shares and the existence of any obligation to
[[Page 35630]]
repurchase shares including the fair value of such shares
Commitments
Purchase, sale, delivery, guarantees etc.
Gain contingencies
Nonmonetary transactions
Transfers of receivable with recourse
Earnings per share
Supplementary earnings per share reflecting recent conversions
or issuances of debt or equity securities
Cash flows
Interest and taxes paid, noncash transactions, sales, purchases,
and maturities of investment securities
Research and development costs
Restructuring changes
Nature and basis for the charge, description of major
restructuring actions, amounts expensed by category, description and
number of employees to be terminated, nature and extent to which
actual restructuring action differed from original plan
Segment, geographic and currency translation information
Business segment information
Revenues, operating profit or loss, identifiable assets,
depreciation and capital expenditures
Revenue from major customers
Foreign operations
Reveues, operating profit or loss, identifiable assets
Currency translation
Balances, nature of foreign currency translated, exchange gains
or losses included in net income
Foreign exchange contracts
Contract amounts and nature of foreign currency
Certain Risks and Uncertainties as defined by AICPA SOP 94-6
Disclosures specified by recently issued or proposed FASB standards
that would be omitted from abbreviated financial statements
Accounting for the impairment of long-lived assets and for long-
lived assets to be disposed of (SFAS 121)
A description of impaired assets and facts and circumstances
leading to impairment
The amount of the impairment loss and how fair value was
determined
The caption in the income statement in which the impairment loss
is recognized
The business segment affected (if applicable)
Accounting for stock options
Any additional disclosures that may be required by the proposed
FASB statement with respect to disclosure of stock option
compensation.
Appendix B--Disclosure Guidelines From the 1983 Study
The following disclosure guidelines are reproduced from Summary
Reporting of Financial Information, published in 1983 by the
Financial Executives Research Foundation. The Guidelines were
developed by the companies participating in the 1983 FERF study
subsequent to the preparation of their prototype summary annual
reports.
These guidelines are based on the accounting and disclosure
standards in effect in 1983. They have not been updated for changes
since then.
General Guidelines
SEC Rule. The guidelines presume that the summary report would
not be materially misleading. This is implicit in SEC Rule 10(b)(5)
and was among the instructions given to the nineteen companies that
prepared mock summary reports.
Format. No specific guidelines are recommended for the format of
summary reports. Companies should have flexibility to make the most
meaningful presentation of their individual circumstances.
Narrative Financial Review. A summary report should include a
narrative financial review. The authors believe that the summary
reports that communicated most effectively were those that contained
a narrative financial review in which management presented the
company's financial results in layman's language. In addition, the
financial review serves as a place to include all significant
financial information, so as to avoid the duplication which occurs
in many of today's annual reports. Also, the financial review
provides a place where material now contained in the notes to the
financial statements in technical terms can be explained in everyday
language.
The reporting on various aspects of the results of operations,
of financial position, and of changes in financial position in a
narrative financial review should be on an exception basis. For
example, companies that are not incurring any liquidity problems or
that do not lack resources would not be required to include
``boilerplate'' language covering these matters.
There should be total flexibility as to format and location of a
narrative financial review. For example, a company could present
such a discussion in an expanded letter to shareholders, if it
wishes.
Basic Financial Statements. A summary report should include a
balance sheet and an income statement covering a minimum of two
years. These could be condensed from those presented in the Form 10-
K.
Funds flow information should be presented and should indicate
the principal sources and uses of funds for a minimum of two years.
This may be a condensed statement of changes in financial position,
or any suitable alternative, such as a table or graph with a
narrative explanation.
Notes. The style and placement of footnote-type disclosures,
when required by the summary reporting guidelines, are optional. The
traditional footnote format is acceptable but not required.
Guidelines for Specific Disclosures
Segment Data. A summary annual report should disclose industry
and geographic segment data if necessary to give the reader an
understanding of the company's business.
Industry segment data should include a description of the
segments, sales by segment and some meaningful measure of segment
earnings (e.g., operating income or net earnings).
Disclosure of identifiable assets, capital expenditures and
depreciation expense by industry segment may be necessary if they
would indicate a relationship among industry segments that is
different from that which a reader might presume from observing
sales and income.
Encouraged disclosure. Companies are encouraged to provide
additional information to aid readers in understanding the company's
lines of business. Disclosures, such as rate of return on investment
by segment, would be helpful in analyzing operations by segment.
Companies are encouraged to disclose major operations outside
the United States, especially when such operations are in countries
that are politically or economically unstable.
In addition, disclosing major customer information is
encouraged.
Accounting Policies and Accounting Changes. A company's
accounting policies should be disclosed if:
The policies are unique to the industry.
There are acceptable alternative accounting principles
that could be used and the choice would result in significantly
different reported financial results.
Factors to consider in determining whether or not to disclose an
accounting policy include how much impact the policy may have on the
financial statements and whether a reader would expect the policy to
be disclosed.
In addition, any material accounting changes should be
disclosed, along with the effects of the changes on financial
position or operating results.
Contingencies and Uncertainties. Summary reports should disclose
specific contingencies that could, on resolution, have a material
effect on financial position or operation results.
Acquisition and Dispositions. Summary reports should disclose
significant acquisitions and dispositions of businesses, so the
reader can more easily compare year-to-year reported financial
results.
Encourgaged disclosure. A company is encouraged to disclose the
business reasons for an acquisition or disposition if that
information might aid the reader in understanding the event and its
importance.
Long-term Debt. The total amount of long-term debt at the latest
balance sheet date should be disclosed, including capitalized lease
obligations. Scheduled maturities of this debt for each of the five
years subsequent to the latest balance sheet date should be
disclosed if it is anticipated that the maturities may cause or
contribute to liquidity problems.
Restrictive loan covenants (e.g., dividend restrictions, working
capital requirements, interest coverage ratios) should be disclosed
if the company is in or near violation of a covenant at the balance
sheet date, or the restrictions significantly impede the flow of
funds from subsidiaries to the parent company or from the company to
the shareholders.
Encouraged disclosure. Disclosure is also encouraged for larger
than usual annual debt maturities, unusual financing and abnormal
interest rates.
Financial information on Unconsolidated Subsidiaries and Equity
Investees. The
[[Page 35631]]
entities should be identified and the percentages of ownership
disclosed. In addition, aggregate totals of the following should be
disclosed:
Amount of the company's equity in earnings.
Dividends received.
Condensed balance sheet information.
Short-term Debt. The total amount of short-term debt and the
amount of unused lines of credit at the latest balance sheet date
should be disclosed.
Income Taxes. Companies should explain why the effective tax
rate differs from the statutory tax rate, if there is a significant
difference. Current guidance used by public companies would continue
to apply in a summary report to determine materiality thresholds for
disclosure. Such an explanation could be in the form of a
reconciliation or be accomplished via narrative discussion.
The amount of any significant operating loss or investment tax
credit carryforwards that the company expects to use should be
disclosed.
Changing Prices Information. No minimum guidelines are proposed.
Encouraged disclosure. Companies are encouraged to include
whatever quantitative inflation-adjusted data they consider
appropriate and to provide a narrative discussion of the effects of
inflation on reported financial results.
Quarterly Data. No minimum guidelines are proposed.
Market Price Data. No minimum guidelines are proposed.
Encouraged disclosure. Disclosure of the market price of the
company's common stock is encouraged. This information could be on a
monthly, quarterly or annual basis, indicating the highs, lows or
averages for the period. The degree of detail would depend on the
volatility of the stock's price.
Selected Five-year Data. Both income statement and balance sheet
data for a period of least five years should be presented. At a
minimum, this disclosure should include the items required by the
SEC's selected financial data rule--revenues, income from continuing
operations, income per share from continuing operations, total
assets, long-term obligations and cash dividends declared per common
share.
Encouraged disclosure. Companies are encouraged to disclose
trend information, such as rate of return on investment, that would
help the reader evaluate long-term performance and trends in
financial position.
Pension and Employee Benefit Plans. No minimum guidelines are
proposed, pending the forthcoming guidance from the FASB's current
pension accounting project.
Detail of Inventory and Property. No minimum guidelines are
proposed.
Leases. Five-year maturities of capitalized lease obligations
should be disclosed if the maturities may be the cause of or
contribute to liquidity problems. Such disclosure would typically be
included with long-term debt maturity information.
Companies that have significant leases as a lessor should
disclose information on their activities as a lessor, so the average
reader can understand the business. Also, significant commitments
for noncancelable operating leases should be disclosed.
Encouraged disclosure. Disclosure of significant leasing
transactions and other types of financing arrangements is
encouraged.
Shareholders' Equity. Minimum disclosure includes:
The number of common shares outstanding at the latest
balance sheet date.
The components of shareholders' equity in the balance
sheet at a minimum, a breakdown of retained earnings, total
preferred stock and the total of common stock accounts.
Total dividends declared.
Restrictions on the payment of dividends due to loan or
other covenants in cases where future dividend payments may be in
jeopardy because the company is in or near violation of these
covenants.
Extraordinary Items. Extraordinary items merit ample explanation
to help the average reader understand the significant items that
affect the comparability of reported financial results. Both the
nature of the items and effect on the financial statements should be
disclosed.
Other Income and Expense Data. Significant components of other
income and expense should be disclosed if they would assist the
average reader in understanding the comparability of reported
financial results.
Other Specific Expenses. No minimum guidelines are proposed for
depreciation, research and development, interest and advertising
expenses.
Encouraged disclosure. Companies are encouraged to disclose
these expenses when they are significant.
Capitalized Interest. No minimum guidelines are proposed.
Capital Expenditures and Firm Purchase Commitments. Companies
should disclose current year capital expenditures. No minimum
guidelines are proposed for firm purchase commitments that are in
the ordinary course of business.
Encouraged disclosure. Disclosure is encouraged of planned
capital expenditures for the next year and beyond, if significant,
as well as significant commitments and any plans for major new
capital projects.
Related Party Disclosures. Disclosure should include related
party transactions or relationships where it is necessary for the
reader to understand their present or potential future effects on
results of operations or financial position.
Prior Period Adjustments. Any adjustment of prior period
financial statements should be disclosed, along with reasons, to
inform the reader that comparative financial information is
different from that previously issued.
Ratios (Other Than Earnings Per Share). No minimum guidelines
are proposed.
Encouraged disclosure. Companies are encouraged to show ratios
that would be meaningful indicators of the results of operations,
funds flow and financial position.
Earnings Per Share. Earnings per share amounts should be
disclosed. In addition, fully diluted earnings per share should be
disclosed if it is significantly different from primary earnings per
share.
Treasury Stock. Significant amounts of common stock held in the
treasury should be disclosed. It is presumed that significant
acquisitions of treasury shares would be disclosed in the funds flow
data.
Preferred stock. Significant types of preferred stock should be
disclosed as separate line items in the balance sheet. Any scheduled
maturities of preferred stock with mandatory redemption features
should be disclosed if they may cause or contribute to liquidity
problems.
Reports on Financial Statements
Report of Management. Companies are encouraged to include a
management report. It could explain the basis on which the financial
information is prepared and management's objectives in simplifying
the presentation of financial information to shareholders and state
that the Form 10-K is available upon request.
Report of Independent Accountants. A summary report should
state, at a minimum, that the audited financial statements,
including the independent accountants' report, are available in the
Form 10-K. In addition, if the independent accountants' report is
qualified for a matter other than consistency due to a change in
accounting, such qualification should be mentioned in the summary
report.
Illustration of Independent Auditors' Report
Report on condensed Financial Statements of a Public Entity Included in
a Summary Annual Report
Independent Auditors' Report
Blank Company
We have audited the consolidated balance sheets of Blank Company
and subsidiaries as of December 31, 19x5 and 19x4 and the related
consolidated statements of income, stockholders' equity, and cash
flows for the years then ended. Such consolidated financial
statements and our report thereon dated March 15, 19x6, expressing
an unqualified opinion (which are not presented herein) are included
in Appendix A to the proxy statement for the 19x6 annual meeting of
stockholders. The accompanying condensed consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on such condensed
consolidated financial statements in relation to the complete
consolidated financial statements.
In our opinion, the information set forth in the accompanying
condensed consolidated balance sheets as of December 31, 19x5 and
19x4 and the related condensed consolidated statements of income,
stockholders' equity and cash flows for the years then ended is
fairly stated in all material respects in relation to the basic
consolidated financial statements from which it has been derived.
Appendix C--SEC Request for Investor Suggestions on How to Improve the
Financial Information Provided in Annual Reports and Other Disclosure
Documents Sent to Shareholders
The U.S. Securities and Exchange Commission (``the SEC''), the
federal government agency that oversees disclosure of information
about companies to investors, wants to hear from investors about how
they
[[Page 35632]]
use the annual report to shareholders that the SEC requires most
companies to send their shareholders every year. These annual
reports are required to contain financial statements, including
notes to the financial statements, as well as other information
about the company.
The SEC is proposing changes to its rules that would affect
annual reports and other disclosure documents, such as prospectuses,
containing financial statements that the SEC requires to be sent to
investors. Some people have suggested that the information now
required is too long and complex, and could discourage investors
from examining the financial information they receive. Streamlining
this information could highlight what is most important to
investors. In addition, companies and their shareholders might be
able to save substantial printing, mailing and other costs if the
information were streamlined.
The proposed changes to the SEC rules would allow companies to
include ``abbreviated financial statements'' in their annual reports
and other documents sent to investors. Abbreviated financial
statements would be the same as the financial statements now
required, except that most of the notes could be omitted. The
complete financial statements, with all of the notes, would still be
filed with the SEC, and companies would have to send this
information to investors promptly if they requested it.
The SEC also is asking questions about other approaches to
streamlining the information given to investors. For example, should
it allow companies to give their shareholders a ``summary annual
report'' that includes financial information that is more condensed
than abbreviated financial statements? Should it totally rescind the
requirement that companies send their shareholders an annual report,
and leave it up to the companies to decide when and what to
communicate to shareholders?
The SEC would like information about how investors use the
financial information they receive, and whether the proposed rule
changes would be helpful to them. Since many people now have
computers, the SEC would like to hear whether investors prefer to
receive information about companies in which they invest in
electronic format or in paper.
In addition, the SEC is proposing changes to its rules that
would streamline disclosures about executive and director
compensation in companies' annual proxy statements. Some of the
information now required could be put into the company's Form 10-K
report instead of the proxy statement. The Form 10-K is required to
be filed with the SEC and provided to shareholders by the company
upon request. The proposed rules also would require some of the
director compensation information to be put in tabular form.
Here is a series of questions. We urge you to respond, whether
you answer one question or all, or just have general comments. Feel
free to use this form or write a separate letter marked ``File No.
S7-13-95.''
Please mail your comments to the SEC so they arrive no later
than October 10, 1995. Directions for sending your comments to the
SEC are provided at the end of this document. The SEC will make your
comments and other comments received by the SEC available to the
public. In addition to receiving written comments, the SEC intends
to hold focus groups composed of investors to assess investors'
views as to the usefulness of sample abbreviated financial
statements, as compared with full financial statements.
1. Do you read notes to the financial statements?
Yes ____ No ____
Do you find notes to the financial statements useful in making
financial decisions?
Yes ____ No ____
Please add any comments you like about why the notes are or are
not useful.
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2. The SEC proposes to allow companies to send investors
``abbreviated financial statements'' that are the same as full
financial statements except for limiting the number of notes. Notes
would be limited to those covering the following matters:
1. Basis of presentation of the abbreviated financial statements.
2. Accounting policies.
3. Changes in accounting principle.
4. Restatements and reclassifications.
5. Changes in accounting estimate.
6. Business combinations.
7. Discontinued operations.
8. Circumstances identified in explanatory language added to the
independent accountant's standard report.
9. Loss contingencies.
10. Events of default under credit agreements.
11. Related party transactions.
12. Bankruptcies and quasi-reorganizations.
13. Subsequent events.
All other financial statement notes would be available from the
company on request and would be on file with the SEC. Are there some
notes you would always want to see that are not set forth above?
Yes ____ No ____
If yes, please identify which notes you would want to see.
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Are there notes listed above that you feel could be omitted?
Yes ____ No ____
If yes, please identify which notes could be omitted.
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3. What information is the most useful in the annual report to
shareholders--financial statements or other information?
Financial statements most useful ____
Other information most useful ____
If you think it is other information, please describe the type
of other information that you find the most useful.
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4. Would you like to receive shorter documents, with less
financial information, if you could still get the more detailed
information by asking the company for it?
Yes ____ No ____
Please explain:
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5. Should the SEC continue to require that companies send
shareholders annual reports?
Yes____ No ____
If the SEC does continue to require annual reports, should it
continue to tell companies what information should go into those
reports, instead of leaving it up to the company?
Yes____ No ____
Please explain:
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6. Financial statements are also in many prospectuses. Do you
examine the financial statements in prospectuses?
Yes____ No ____
Would you be more likely to read the financial statements in a
prospectus if they were shorter, with fewer notes?
Yes____ No ____
Please explain:
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7. Do you have easy access to a computer with a modem?
Yes____ No ____
If yes, do you use the computer to get information about
companies in which you are a shareholder or are considering
investing?
Yes____ No ____
Would you like to continue to get financial and other
information from companies in paper even if you can get it
electronically?
Yes____ No ____
Please explain or comment. If you do use the computer to get
information about
[[Page 35633]]
companies, describe what kind of information you get, and what database
you get it from.
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8. The SEC proposes to allow companies to provide some
information about executive and director compensation in the Form
10-K rather than the annual proxy statement. The proposed rule
changes still would require the following information to remain in
the proxy statement:
1. Summary Compensation Table
2. Option Grants
3. Director Compensation
4. Compensation Committee Interlocks
5. Compensation Committee Report on Executive Compensation
6. Graph of the Company's Shareholder Returns
The SEC proposes to allow companies to move the following
information to the Form 10-K:
7. Option Exercises and Value of Options Held
8. Long-Term Incentive Plan Awards
9. Pension Plans
10. Employment Contracts and Arrangements
11. Repricing of Options
Please state which of these items you find most useful, and give
any explanation you wish to add:
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Of the items proposed to be moved, are there any that you would
like to continue to have in the proxy statement?
Yes ____ No ____
If yes, which ones? Add any comments you wish.
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Of the items proposed to be retained in the proxy statement, are
there any that you feel could be moved to the Form 10-K?
Yes ____ No ____
If yes, which ones? Add any comments you wish.
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9. Would you like to receive shorter annual proxy statements,
with less information about the details of executive compensation,
if you could still get the more detailed information by asking the
company for it?
Yes ____ No ____
Please explain:
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How to Mail Your Ideas and Suggestions to the SEC:
This form can be mailed to the SEC by folding it in
half, with the return address showing. Please staple or tape this
form closed. No postage is necessary.
If you do not wish to use this form, you can write a
letter directly to the SEC. Mark your letter ``File No. S7-13-95,''
and send it to Jonathan G. Katz, Secretary, Securities and Exchange
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
Remember to send your ideas and suggestions in time to
arrive by October 10, 1995.
Do You Want Further Information About What the SEC is Considering?
If you would like a copy of the complete SEC releases
that describe what the SEC is considering, write to Office of
Consumer Affairs, Securities and Exchange Commission, Attn: Jonathan
M. Gottsegen, Mail Stop 2-6, 450 Fifth Street, N.W., Washington,
D.C. 20549. Please state whether you are asking for the release
proposing ``abbreviated financial statesments'' or the release
proposing changes to information about executive and director
compensation, or both.
Thank You For Responding.
Your Name--------------------------------------------------------------
Street Address---------------------------------------------------------
City________ State ________ Zip ________
[FR Doc. 95-16389 Filed 7-7-95; 8:45 am]
BILLING CODE 8010-01-M
