United States

Waivers: Financial statements of entities other than the registrant


The SEC’s Division of Corporation Finance recently updated its Financial Reporting Manual. Among other revisions, the update included the following paragraphs in a note to Topic 2 and in Section 2020.1, respectively, both of which clarify the application of Regulation S-X Rule 3-13 and Note 5 to Rule 8-01:

The staff may, where consistent with the protection of investors, permit the omission of one or more of the financial statements required by Regulation S-X or the filing in substitution therefor of appropriate statements of comparable character under Rule 3-13 of Regulation S-X. See “Communications with the Division of Corporation Finance’s Office of Chief Accountant” section for additional information about requesting relief. In addition, the staff may require other financial statements as necessary for a fair presentation of the financial condition of any entity whose financial statements are either required or otherwise necessary for the protection of investors.

The staff generally will not accept alternative significance tests. The tests should be performed based on the requirements of S-X 3-05, 3-09, and 4-08(g), as applicable. If after performing the required significance tests a registrant believes that the tests specify periods beyond those reasonably necessary to inform investors, the registrant may make a written request to CF-OCA to waive one or more years of financial statements. Such requests should set forth the relevant factors considered by the registrant. In making this request, registrants should consider all facts and circumstances that provide an indication of the relative size of the acquired business.