If the principal U.S. market is not an exchange, issuers
must disclose the high and low bid quotations for the same periods as
above. Where applicable, issuers must identify the source of the
quotations and include appropriate qualifying language.\370\
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    \370\ Item 201(a)(1)(iii) of Regulation S-K [17 CFR
229.201(a)(1)(iii)]. This paragraph requires qualification where the
over-the-counter quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily
represent actual transactions. Reference to quotations must be
qualified by appropriate explanation where there is an absence of an
established public trading market.
---------------------------------------------------------------------------

     Foreign issuers that identify a principal established
foreign trading market for common equity are also required to provide
market price disclosure comparable to that of a domestic issuer. If the
primary U.S. market for the foreign issuer trades using American
Depositary Receipts (``ADRs''), then foreign issuers must disclose
prices based on the ADRs.\371\
---------------------------------------------------------------------------

    \371\ Item 201(a)(1)(iv) of Regulation S-K [17 CFR
229.201(a)(1)(iv)].
---------------------------------------------------------------------------

     When Item 201(a)(1) disclosure is included in a Securities
Act registration statement or an Exchange Act proxy or information
statement, issuers must also disclose the price for their common equity
as of the latest practicable date.\372\
---------------------------------------------------------------------------

    \372\ Item 201(a)(1)(v) of Regulation S-K [17 CFR
229.201(a)(1)(v)]. The Commission has required this or similar
pricing disclosure since the 1960s. See Guides for Preparation and
Filing of Registration Statements, Release No. 33-4936 (Dec. 9,
1968) [33 FR 18617].
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    Today, the daily market prices of most publicly traded common
equity securities, including those quoted on an automated quotation
system, are readily available for free on numerous Web sites, including
the exchanges' or quotation systems' Web sites.\373\ On these Web
sites, investors can view daily closing prices, up to the previous day,
and intra-day quotes, which would be more up-to-date than the prices
required by Item 201(a)(1)(v) of Regulation S-K. Additionally, many of
these Web sites allow users to download the daily historical data over
customized time horizons for their own consumption. These features
result in more robust information than the disclosure required by Item
201(a)(1) of Regulation S-K.\374\
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    \373\ See, e.g., www.finance.yahoo.com; www.google.com/finance;
www.bloomberg.com; www.nyse.com; www.nasdaq.com;
www.londonstockexchange.com; deutsche-boerse.com; www.otcbb.com; and
www.otcmarkets.com.
    \374\ Some commenters on the Disclosure Effectiveness Initiative
have also suggested that the stock price disclosures are obsolete
and should be eliminated. See, e.g., letters from ABA (Mar. 6,
2015); Corporate Governance Committee Business Roundtable (Apr. 15,
2015); CCMC (July 29, 2014); CFA Institute (Nov. 12, 2014); IBM
Corporation (Aug. 7, 2014); SCSGP (Sept. 10, 2014); and Shearman
(Nov. 26, 2014).
---------------------------------------------------------------------------

    Based on the foregoing, we propose the following amendments to Item
201(a)(1) of Regulation S-K:
     Issuers with one or more classes of common equity would be
required to disclose the principal U.S. market(s) where each class is
traded and the trading symbol(s) used by the market(s) for each class
of common equity. Foreign issuers also would be required to identify
the principal established foreign public trading market, if any, and
the trading symbol(s), for each class of their common equity.
     Issuers with common equity that is not traded on an
exchange must indicate, as applicable, that any over-the-counter
quotations in such trading systems reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
     Issuers with no class of common equity traded in an
established public trading market would be required to state such fact
and disclose the range of high and low bid information, if applicable,
for each quarter over the last two fiscal years and any subsequent
interim period.\375\ Also, such issuers would be required to disclose
the source and explain the nature of such quotations.
---------------------------------------------------------------------------

    \375\ Item 201(a)(1)(i) currently notes that the existence of
limited or sporadic quotations should not, by itself, be deemed to
constitute an established public trading market.
---------------------------------------------------------------------------

    As proposed to be amended, Item 201(a)(1) would eliminate the
detailed disclosure requirement of sale or bid prices for most issuers
whose common equity is traded in an established public trading market
and replace it with disclosure of the trading symbol.\376\ The proposed
amendments would also align Item 201(a)(1) with Item 501(b)(4) of
Regulation S-K.\377\
---------------------------------------------------------------------------

    \376\ Form N-2, which is used for registration of closed-end
management investment companies, includes disclosure requirements
relating to sales prices and bid information that are similar to
those in Item 201(a)(1) of Regulation S-K. Item 1, Instruction 1 and
Item 8.5(b) of Form N-2. In addition to these requirements, Form N-2
requires disclosure of information relating to net asset value and
discount or premium to net asset value. Item 8.5(b), Instructions 4
and 5 and Item 8.5(c) through (e) of Form N-2. Disclosure of sales
prices and bid information is needed in registration statements on
Form N-2 so that the required premium/discount disclosure can be
fully understood. Accordingly, we are not proposing to change the
requirements in Form N-2 relating to sales prices and bid
information.
    \377\ 17 CFR 229.501(b)(4). Item 501(b)(4) of Regulation S-K
requires prospectus cover page disclosure of the trading symbol(s)
and market(s) for securities being offered and registered on a
Securities Act registration statement.
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b. Item 9.A.4 of Form 20-F
    Foreign private issuers that file Form 20-F are subject to
disclosure requirements similar to those included in Item 201(a)(1) of
Regulation S-K. Item 9.A.4 of Form 20-F requires the following price
history of the stock to be offered or listed for both the U.S. market
and the principal trading market outside the United States, as
applicable:
     The annual high and low market prices for the last five
full financial years;
     Quarterly high and low market prices for the last two full
financial years and any subsequent period; and
     Monthly high and low market prices for the last six
months;
    For preemptive share issuances, the issuer must disclose the market
prices for the first trading day in the most recent six months, the
last trading day before the announcement of the offering, and for the
latest practicable date. If an issuer's securities are ``not regularly
traded in an organized market,'' the issuer must discuss any lack of
liquidity.
    We propose to amend Item 9.A.4 to be consistent with the proposals
related to Item 201(a)(1) of Regulation S-K. Specifically, we propose
to amend Item 9.A.4 to require disclosure of the U.S. and principal
market(s) where the issuer's common equity trades and the trading
symbol(s) assigned to the issuer's common equity that is traded in the
U.S. market and principal market. For those issuers whose common equity

is not traded in any established public trading market, disclosure of
that fact would still be required.
Request for Comment
    77. Is disclosure of trading symbols an adequate substitute for the
current required disclosures in Item 201(a)(1) of Regulation S-K and
Item 9.A.4 of Form 20-F? Why or why not?
    78. Would elimination of the detailed disclosure of sale or bid
prices place a burden on retail investors? Would the proposed
disclosures help retail investors by facilitating their research?
    79. Where a class of common equity is traded in multiple markets,
should issuers have to provide disclosure only for the principal
established public trading market or every established public trading
market? Why?
    80. Should foreign issuers be required to disclose the trading
symbol(s) for both the principal U.S. market and the principal
established foreign public trading market(s), as applicable? Why or why
not?
    81. How do investors and issuers currently understand the term
``established public trading market?'' Is further guidance needed to
determine what constitutes ``limited or sporadic quotations'' and
whether a quotation or trading medium is an established public trading
market?
    82. Is there uncertainty in the current marketplace regarding the
determination of the principal established public trading market?
5. Exchange Rate Data
    Item 3.A.3 of Form 20-F requires foreign private issuers to provide
exchange rate data where the financial statements required to be
provided in the Form 20-F are prepared in a currency other than the
U.S. dollar. In these situations, the exchange rate between the
financial reporting currency and the U.S. dollar must be provided:
     At the latest practicable date;
     The high and low exchange rates for each month during the
previous six months; and
     For the five most recent financial years and any
subsequent interim period for which financial statements are presented,
the average rates for each period, calculated by using the average of
the exchange rates on the last day of each month during the period.
    Exchange rate information is readily available for free on a number
of Web sites.\378\ These Web sites allow investors to obtain exchange
rate data for the relevant periods, and investors may obtain
information that is more current than the information provided in the
Form 20-F. In addition, although certain exchange rate information,
such as the average exchange rates for each of the five most recent
financial years and any subsequent interim period, may be more
difficult to obtain and necessitate investors to calculate the averages
themselves, we do not expect that investors would face significant
challenges in deriving this information.
---------------------------------------------------------------------------

    \378\ See, e.g., www.finance.yahoo.com; www.google.com/finance;
www.bloomberg.com; and www.reuters.com/finance.
---------------------------------------------------------------------------

    Based on the foregoing, we proposed to delete Item 3.A.3 of Form
20-F.
Request for Comment
    83. Is the exchange rate information that is available on Web sites
an adequate substitute for the current required disclosures? Why or why
not?
    84. Would the proposed amendments place a burden on retail
investors?
    85. What are the burdens and costs on registrants associated with
disclosing this information?
6. Foreign Private Issuer Initial Public Offering--Age of Financial
Statements
    Form F-1, through its reference to Item 8.A.4 of Form 20-F,
requires that audited financial statements for an initial public
offering by a foreign private issuer must not be older than 12 months
as of the date of the filing.\379\ Audited financial statements for all
other foreign private issuer offerings or listings must not be older
than 15 months at the time of the offering or listing.\380\
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    \379\ This age of financial statements requirement is more
stringent than the requirements for domestic issuers, which permit
the age of financial statements to exceed 12 months for a period of
between 45 days and 90 days after the fiscal year end, depending on
the issuer's filer status and other conditions if the issuer is a
smaller reporting company. See Rule 8-08 of Regulation S-X [17 CFR
210.8-08](applicable to SRCs) and Rule 3-12 of Regulation S-X [17
CFR 210.3-12] (applicable to non-SRCs)].
    \380\ Item 8.A.4 of Form 20-F.
---------------------------------------------------------------------------

    Instruction 2 to Item 8.A.4 states that we will waive the 12-month
requirement if the foreign private issuer adequately represents that it
is not required to comply with the 12-month requirement in any
jurisdiction outside the United States and that complying with the
requirement is impracticable or involves undue hardship. However, the
issuer must still comply with the 15-month requirement in these
circumstances.
    In light of this instruction, the Commission staff has almost
always granted these waiver requests. Based on the foregoing, we
propose to amend Instruction 2 to Item 8.A.4 to remove the requirement
that foreign private issuers in these situations seek a waiver. This
amendment would enable foreign private issuers that file the above
representations as an exhibit to the registration statement, as
currently required, to forgo the 12-month requirement and instead
comply with the 15-month requirement without incurring the time and
expense associated with the waiver process.
C. Request for Comment
    86. We solicit comment on the foregoing proposed amendments to
address outdated requirements. Is our approach to these outdated
requirements appropriate? Please be as specific as possible for each of
the proposed amendments on which you provide comments.
    87. Are there other Commission disclosure requirements that are
outdated? If so, why is the requirement outdated and how should it be
amended?

V. Superseded Requirements

A. Background

    As accounting, auditing, and disclosure requirements change over
time, inconsistencies may arise between the newer requirements and
existing Commission disclosure requirements. We propose amendments to
update Commission disclosure requirements to reflect, as applicable,
recent legislation, more recently updated Commission disclosure
requirements, or more recently updated U.S. GAAP requirements, as
discussed in section I.C.2.\381\
---------------------------------------------------------------------------

    \381\ Some of the proposed amendments to eliminate superseded
Commission disclosure requirements apply to both issuers that report
under U.S. GAAP and IFRS. We do not expect our proposed amendments
to conform these requirements to U.S. GAAP to cause confusion for
issuers that report under IFRS because U.S. GAAP and IFRS are
substantially converged for these topics.
---------------------------------------------------------------------------

    The Commission staff has observed in its filing reviews that, in
practice, issuers typically navigate these inconsistencies by complying
with the requirement that was updated more recently. This is
particularly the case with respect to changes in U.S. GAAP
requirements, as the Commission has designated the FASB as the private-
sector accounting standard setter for U.S. financial reporting
purposes, as discussed in section I.C.1. As such, we anticipate that
these proposed amendments generally will not affect current disclosure
practices. Periodically, however, issuers and their advisers express
confusion about how the more recently updated requirements

affect existing Commission disclosure requirements and seek guidance
from the Commission staff. In these situations, the proposed amendments
should help simplify compliance by updating superseded Commission
disclosure requirements and addressing any potential confusion by
codifying Commission staff guidance. In turn, investors and other users
should benefit from greater consistency across issuers.
    Section V.B below discusses each Commission disclosure requirement
that we believe is superseded and the proposed amendment.\382\
---------------------------------------------------------------------------

    \382\ This section also includes proposed technical corrections
of non-existent or incorrect references.
---------------------------------------------------------------------------

B. Proposed Amendments

1. Auditing Standards
    Section 103(a) of the Sarbanes-Oxley Act authorized the PCAOB to
establish auditing and related professional practice standards used by
registered public accountants when conducting audits of issuers.\383\
Prior to the creation of the PCAOB, public accounting firms conducted
audits of issuers pursuant to Generally Accepted Auditing Standards
(``GAAS'') \384\ and many Commission rules continue to refer to those
standards. In addition, section 10A of the Exchange Act also refers to
GAAS in its requirements for audits. The standards of the PCAOB are
different from GAAS.
---------------------------------------------------------------------------

    \383\ Public Law 107-204, 116 Stat. 745 (2002). Pursuant to
section 2(a)(7) of the Sarbanes-Oxley Act, an issuer is defined as
an issuer with securities registered under section 12 of the
Exchange Act or required to file reports under section 15(d) of the
Exchange Act. 15 U.S.C. 7201(a)(7).
    \384\ These standards are currently promulgated by the American
Institute of Certified Public Accountants.
---------------------------------------------------------------------------

    In 2004, the Commission published interpretive guidance explaining
that references to GAAS in Commission rules and staff guidance, as they
relate to issuers, should be understood to mean the standards of the
PCAOB plus any applicable rules of the Commission.\385\ The Commission
also stated its intent to codify this interpretation in the
future.\386\
---------------------------------------------------------------------------

    \385\ See Commission Guidance Regarding the Public Company
Accounting Oversight Board's Auditing and Related Professional
Practice Standard No. 1, Release No. 34-49708 (May 14, 2004) [69 FR
29064]. Subsequently, section 982 of the Dodd-Frank Wall Street
Reform and Consumer Protection Act (the ``Dodd-Frank Act'') amended
the Sarbanes-Oxley Act to establish the PCAOB's authority to oversee
the independent public accountants that audit registered brokers and
dealers. See Pub. L. 111-203, 124 Stat. 1376 (2010).
    \386\ Id.
---------------------------------------------------------------------------

    We propose to codify the 2004 interpretation by amending Rule 1-
02(d) of Regulation S-X to refer to ``the standards of the Public
Company Accounting Oversight Board (United States) (``PCAOB'')'' as it
relates to the audit of issuers and to note that, for different types
of non-issuers, the Commission requires PCAOB auditing standards or
GAAS or permits the use of either.\387\ We are also proposing
amendments to Rule 436(d)(4) of Regulation C and General Instructions
E(c)(3) and G(f)(1) and Instruction 2 to Item 8.A.2 of Form 20-F to
replace the references to GAAS with ``the standards of the Public
Company Accounting Oversight Board (United States) (``PCAOB'')'' and to
state that financial statements of entities other than the issuer must
be audited in accordance with applicable professional standards.
Additionally, we propose amending Rule 2-01(f)(7)(ii)(B) of Regulation
S-X to update its language to make it consistent with current auditing
standards, Rules 2-02(b)(1), 8-03, and 10-01 of Regulation S-X to refer
to ``applicable professional standards'' instead of GAAS, and Rules
10A-1(b)(3) \388\ and 13b2-2(b)(2) \389\ of the Exchange Act to replace
the references to GAAS with ``the standards of the Public Company
Accounting Oversight Board.'' Related to auditing, we are also
proposing an amendment to Instruction E(c)(3) of Form 20-F to clarify
the auditor independence requirement by replacing the reference to U.S.
standards for auditor independence with ``qualified and independent in
accordance with Article 2 of Regulation S-X.''
---------------------------------------------------------------------------

    \387\ The auditing standards of the PCAOB apply to all issuers
and only some entities that are not issuers as defined by the
Sarbanes-Oxley Act (e.g., broker-dealers). For other non-issuers,
GAAS is permitted.
    \388\ 17 CFR 240.10A-1(b)(3).
    \389\ 17 CFR 240.13b2-2(b)(2).
---------------------------------------------------------------------------

2. Statement of Cash Flows
    In October 1992, to conform to changes in U.S. GAAP,\390\ the
Commission amended various rules and forms to replace references to
``changes in financial position'' and ``funds flows'' with ``cash
flows.'' \391\ The 1992 amendments inadvertently failed to amend the
title of Rule 3-02 of Regulation S-X, which continues to refer to
changes in financial position. We propose to replace that reference in
the title of Rule 3-02.
---------------------------------------------------------------------------

    \390\ In November 1987, the FASB superseded APB Opinion No. 19,
Reporting Changes in Financial Position, with its issuance of SFAS
No. 95, Statement of Cash Flows.
    \391\ See Amendments to Rules and Forms, Release No. 33-6958A,
(Oct. 1, 1992) [57 FR 45287].
---------------------------------------------------------------------------

3. Gain or Loss on Sale of Properties by REITs \392\
---------------------------------------------------------------------------

    \392\ Please refer to the related discussions in sections
III.C.1 and III.E.1.
---------------------------------------------------------------------------

    Regulation S-X requires REITs to present separately all gains and
losses on the sale of properties outside of continuing operations in
the income statement.\393\ U.S. GAAP, however, restricts that
presentation to gains and losses on disposals that meet the definition
of discontinued operations.\394\
---------------------------------------------------------------------------

    \393\ See Rule 3-15(a)(1) of Regulation S-X [17 CFR 210.3-
15(a)(1)].
    \394\ ASC 205-20-45-1B.
---------------------------------------------------------------------------

    Prior to 2014, application of Regulation S-X often resulted in the
same presentation as U.S. GAAP because most REIT dispositions met the
definition of discontinued operations, such that any gains or losses
were presented outside of continuing operations in compliance with both
requirements. In 2014, the FASB narrowed the definition of discontinued
operations in U.S. GAAP,\395\ such that it now more frequently results
in a presentation that differs from that under Regulation S-X. We
propose to update Regulation S-X by eliminating Rule 3-15(a)(1).
---------------------------------------------------------------------------

    \395\ See Accounting Standards Update (``ASU'') No. 2014-08,
Presentation of Financial Statements (Topic 205) and Property,
Plant, and Equipment (Topic 360): Reporting Discontinued Operations
and Disclosures of Disposals of Components of an Entity. ASU No.
2014-08 is effective for public business entities on a prospective
basis to: (1) All disposals (or classifications as held for sale) of
components of an entity that occur within annual periods beginning
on or after December 15, 2014, and interim periods within those
years and (2) all businesses that, on acquisition, are classified as
held for sale that occur within annual periods beginning on or after
December 15, 2014, and interim periods within those years. Early
adoption is permitted, but only for disposals (or classifications as
held for sale) that have not been reported in financial statements
previously issued or available for issuance.
---------------------------------------------------------------------------

4. Consolidation \396\
---------------------------------------------------------------------------

    \396\ Please refer to the related discussions in sections
II.B.2, III.C.2, and III.E.2.
---------------------------------------------------------------------------

    The Commission provided guidance on the presentation of
consolidated and combined financial statements when it first issued
Regulation S-X in 1940.\397\ Since that time, certain U.S. GAAP
consolidation requirements have changed significantly, creating
inconsistencies between Regulation S-X and U.S. GAAP.\398\ To address
these

inconsistencies, we propose the amendments discussed below.
---------------------------------------------------------------------------

    \397\ See Adoption of Regulation S-X, 5 FR 954 (March 6, 1940)
[5 FR 954].
    \398\ For example, Accounting Research Bulletin (``ARB'') No.
51, Consolidated Financial Statements (``ARB No. 51''), was issued
in 1959. More recently, the FASB has issued SFAS No. 94,
Consolidation of All Majority-Owned Subsidiaries--an amendment of
ARB No. 51, with related amendments of APB Opinion No. 18 and ARB
No. 43, Chapter 12; FASB Interpretation No. 46, Consolidation of
Variable Interest Entities--an interpretation of ARB No. 51; FASB
Interpretation No. 46 (revised December 2003), Consolidation of
Variable Interest Entities--an interpretation of ARB No. 51; SFAS
No. 167, Amendments to FASB Interpretation No. 46(R); and ASU No.
2015-02, Consolidation (Topic 810): Amendments to the Consolidation
Analysis.
---------------------------------------------------------------------------

a. Difference in Fiscal Periods
    Regulation S-X prohibits the consolidation of an entity if its
fiscal period differs substantially, for example by more than 93 days,
from that of the issuer.\399\ U.S. GAAP, however, requires
consolidation despite different fiscal periods.\400\ Thus, we propose
to update Regulation S-X by deleting the consolidation prohibition in
Rule 3A-02(b).
---------------------------------------------------------------------------

    \399\ See Rule 3A-02(b) [17 CFR 210.3A-02(b)] and Rule 3A-
02(b)(1) [17 CFR 210.3A-02(b)(1)] of Regulation S-X.
    \400\ ASC 810-10-15-11.
---------------------------------------------------------------------------

    Regulation S-X permits the combination of entities under common
control even if their fiscal periods differ by more than 93 days, but
requires the recasting of the latest fiscal year to within 93 days and
disclosure of amounts excluded or included more than once as a result
of the recasting.\401\ Under U.S. GAAP, the fiscal periods of combined
entities must differ by less than about three months.\402\ Thus, we
propose to update Regulation S-X by deleting Rule 3A-02(b)(2).
---------------------------------------------------------------------------

    \401\ 17 CFR 210.3A-02(b)(2).
    \402\ ASC 810-10-45-10 and ASC 810-10-45-12.
---------------------------------------------------------------------------

b. Bank Holding Company Act of 1956
    The Bank Holding Company Act of 1956 (``BHC Act'') \403\ prohibits
a bank holding company from certain holdings and activities.\404\ When
a bank becomes involved in a prohibited activity, for example through a
business combination or possession of collateral, the bank holding
company may temporarily continue these activities, as long as the bank
holding company disposes of the restricted activities within the grace
period afforded by the BHC Act.\405\
---------------------------------------------------------------------------

    \403\ 12 U.S.C. 1841, et seq.
    \404\ 12 U.S.C. 1843.
    \405\ Id.
---------------------------------------------------------------------------

    Regulation S-X prohibits consolidation of subsidiaries of issuers
subject to the BHC Act when a divestiture has been made or it is
substantially likely that the divestiture will be necessary in order to
comply with provisions of the BHC Act.\406\ U.S. GAAP, however, does
not provide such an exception to consolidation.\407\ Instead, U.S. GAAP
requires consolidation of such subsidiaries until their disposal, but
provides for their separate presentation in the financial statements
prior to disposal if they meet the criteria for ``held for sale''
classification.\408\ Thus, we propose to delete Rule 3A-02(c).
---------------------------------------------------------------------------

    \406\ See Rule 3A-02(c) of Regulation S-X [17 CFR 210.3A-02(c)].
    \407\ ASC 810-10-15-10a. See also paragraph C2.a of SFAS No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets
(August 2001), which eliminated the pre-existing exception from
consolidation for subsidiaries under temporary control under ARB No.
51.
    \408\ See ASC 360-10-45-9, ASC 360-10-45-14, and ASC 205-20-45.
---------------------------------------------------------------------------

c. Intercompany Transactions Generally
    Regulation S-X provides disclosure requirements for intercompany
transactions that are not eliminated.\409\ U.S. GAAP, however, requires
the elimination of intercompany transactions from consolidated
financial statements.\410\ Accordingly, we propose to update Regulation
S-X by deleting this disclosure requirement in Rule 3A-04.
---------------------------------------------------------------------------

    \409\ Specifically, if an issuer does not eliminate intercompany
transactions from its financial statements, it must explain why and
how the transactions are treated. See Rule 3A-04 of Regulation S-X
[17 CFR 210.3A-04].
    \410\ See ASC 323-10-35-5a and ASC 810-10-45-1.
---------------------------------------------------------------------------

d. Intercompany Transactions in Separate Financial Statements
    When separate financial statements of a subset of a consolidated
group, such as a parent, subsidiaries, or investees, are presented,
Regulation S-X contemplates the elimination of some transactions
between the subset of the consolidated group presented in the separate
financial statements and other entities in the consolidated group.\411\
U.S. GAAP, however, does not permit elimination of these transactions
in the separate financial statements.\412\ Rather, U.S. GAAP treats
these transactions as related party transactions for which disclosure
is required.\413\ Accordingly, we propose to delete this requirement in
Rule 4-08(k)(2).
---------------------------------------------------------------------------

    \411\ This provision is implicit in the first sentence of Rule
4-08(k)(2) of Regulation S-X [17 CFR 210.4-08(k)(2)], which requires
disclosure of which intercompany amounts are eliminated or not
eliminated.
    \412\ U.S. GAAP requires elimination of intercompany
transactions only in consolidated financial statements. See ASC 810-
10-45-1.
    \413\ See ASC 850-10-50-1.
---------------------------------------------------------------------------

e. Dividends per Share in Interim Financial Statements
    Regulation S-X requires, for interim periods, the presentation of
dividends per share on the face of the income statement.\414\ U.S. GAAP
permits this disclosure in the notes to the financial statements, but
prohibits it on the face of the financial statements.\415\ Because of
this prohibition under U.S. GAAP, the requirement under Regulation S-X
results in a presentation that does not comply with U.S. GAAP.
---------------------------------------------------------------------------

    \414\ See Rule 8-03(a)(2) [17 CFR 210.8-03(a)(2)] and Rule 10-
01(b)(2) [17 CFR 210.10-01(b)(2)] of Regulation S-X . Rule 8-
03(a)(2) specifically applies to SRCs and Regulation A issuers in a
Tier 2 offering that report under U.S. GAAP, while Rule 10-01(b)(2)
applies to non-SRCs.
    \415\ See ASC 260-10-45-5.
---------------------------------------------------------------------------

    To address this issue, we propose to eliminate the requirement to
present dividends per share on the face of the income statement for
interim periods in Rule 8-03(a)(2) and Rule 10-01(b)(2). Because we
believe that the presentation of interim dividends per share is useful,
however, we propose to require its presentation alongside disclosure of
changes in stockholders' equity. To effect this relocation of the
interim dividends per share disclosure, as discussed in section
III.C.16, we propose to extend Rule 3-04 of Regulation S-X, which
requires annual disclosure of changes in stockholders' equity and the
amount of dividends per share for each class of shares, to interim
periods.\416\
---------------------------------------------------------------------------

    \416\ Rule 3-04 of Regulation S-X [17 CFR 210.3-04] provides
that annual disclosures of changes in stockholders' equity,
including dividends per share amounts, may be provided in a note to
the financial statements or in a separate financial statement. The
option to present dividend per share disclosures in a separate
financial statement does not comply with U.S. GAAP, which, as
discussed above, prohibits this per share presentation on the face
of financial statements. However, we see benefits in continuing to
provide (and extending to interim periods) an option to present
dividends per share on the face of the statement of stockholders'
equity, if an issuer elects to present changes in stockholders'
equity in a separate financial statement, irrespective of the
prohibition under U.S. GAAP. We believe that the presentation of
dividends per share alongside disclosure of changes in stockholders'
equity facilitates investor understanding of stockholders' equity,
as dividends are distributed from stockholders' equity. In addition,
the proposed amendments would address the more significant issue in
Regulation S-X associated with the requirement to present interim
dividends per share on the income statement, which is unrelated to
dividends, a component of stockholders' equity.
    For Regulation A issuers, we propose amendments directly to
Forms 1-A and 1-SA to require interim disclosures of changes in
stockholders' equity and dividends per share amounts to address the
inconsistency described above with U.S. GAAP, rather than to refer
to Rule 3-04. The proposed amendments to Form 1-A would apply to all
Regulation A issuers and the proposed amendments to Form 1-SA would
apply to all Regulation A issuers in a Tier 2 offering, even though
Rule 8-03(a)(2) only applies to Regulation A issuers in a Tier 2
offering that report under U.S. GAAP. However, we do not expect any
increased burdens for Regulation A issuers in a Tier 2 offering that
report under IFRS, as such issuers are already required to present a
condensed statement of changes in equity and dividend amounts either
in the aggregate or per share, pursuant to paragraphs 8 and 16A(f),
respectively, of IAS 34, Interim Financial Reporting. We expect the
burdens for Regulation A issuers in a Tier 1 offering that report
under U.S. GAAP on Form 1-A to be minimal, as the required
information already would be available from the preparation of the
interim financial statements.

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    This proposed amendment may create some additional burden for
issuers, including Regulation A issuers, because it would require
disclosure of dividends per share for each class of shares, rather than
only for common stock. The proposed amendment, as discussed in section
III.C.16, would also require disclosure of changes in stockholders'
equity in interim periods.\417\ However, we expect this burden would be
minimal, as the required information is already available from the
preparation of other aspects of the interim financial statements. The
proposed amendments may also give rise to Disclosure Location
Considerations in that issuers will now disclose dividends in a
separate financial statement or in the notes, instead of the face of
the income statement.
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    \417\ ASC 505-10-50-2 requires disclosure of changes in the
separate accounts comprising stockholders' equity during at least
the most recent annual fiscal period and any subsequent interim
period presented. The proposed amendments would require disclosure
of changes in stockholders' equity for each period presented, which
would include comparative periods.
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Request for Comment
    88. Should we retain the option to present dividends per share on
the face of the statement of stockholders' equity, despite the U.S.
GAAP prohibition?
    89. Should we extend requirements to disclose changes in
stockholders' equity to interim periods, as proposed? Would doing so
pose any significant burdens and costs on issuers? Would the proposed
requirements benefit investors? If so, how?
f. Interim Financial Statements--Pro Forma Business Combination
Information \418\
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    \418\ Please refer to the related discussion in section III.C.9.
---------------------------------------------------------------------------

    Regulation S-X \419\ and U.S. GAAP \420\ both require supplemental
pro forma information about business combinations in the notes to
interim financial statements. In 2010, the FASB clarified that the pro
forma financial information should reflect the business combination as
if it occurred at the beginning of the preceding fiscal year.\421\ At
the time, the Commission staff acknowledged that the U.S. GAAP
clarification diverged from Regulation S-X, but stated that it did not
object to application of Regulation S-X in a manner consistent with
U.S. GAAP, while it considered ways to update Regulation S-X.\422\ To
update Regulation S-X, we propose to delete reference in Rule 8-
03(b)(4) and Rule 10-01(b)(4) to when a business combination should be
assumed to have occurred in pro forma financial information.
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    \419\ See Rule 8-03(b)(4) [17 CFR 210.8-03(b)(4)] and Rule 10-
01(b)(4) [17 CFR 210.10-01(b)(4)] of Regulation S-X. Rule 8-03(b)(4)
specifically applies to SRCs and Regulation A issuers in a Tier 2
offering that report under U.S. GAAP, while Rule 10-01(b)(4) applies
to non-SRCs.
    \420\ See ASC 270-10-50-7, which refers to ASC 805-10-50-2h.3
for purposes of interim disclosures.
    \421\ ASU No. 2010-29, Business Combinations (Topic 805):
Disclosure of Supplementary Pro Forma Information for Business
Combinations (a consensus of the FASB Emerging Issues Task Force).
    \422\ See SEC Observer comments at Emerging Issues Task Force
Meeting, as cited in ASU No. 2010-29, paragraph BC7.
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5. Development Stage Entities
    Regulation S-X requires presentation in interim periods of
cumulative financial information from inception for development stage
companies.\423\ In June 2014, the FASB eliminated the U.S. GAAP
requirement for development stage companies to present cumulative
financial information from inception.\424\ To update Regulation S-X, we
propose to eliminate this requirement in Rule 8-03(b)(6) and Rule 10-
01(a)(7).
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    \423\ See Rule 8-03(b)(6) [17 CFR 210.8-03(b)(6)] and Rule 10-
01(a)(7) [17 CFR 210.10-01(a)(7)] of Regulations S-X. Rule 8-
03(b)(6) specifically applies to SRCs and Regulation A issuers in a
Tier 2 offering that report under U.S. GAAP, while Rule 10-01(a)(7)
applies to non-SRCs.
    \424\ ASU No. 2014-10, Development Stage Entities (Topic 915):
Elimination of Certain Financial Reporting Requirements, Including
an Amendment to Variable Interest Entities guidance in Topic 810,
Consolidation. The amendments related to the elimination of the
concept of development stage entities and cumulative financial
information from inception disclosures were effective for public
business entities on a retrospective basis for annual reporting
periods beginning after December 15, 2014, and interim periods
therein.
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6. Insurance Companies \425\
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    \425\ Please refer to the related discussions in sections II.B.9
and III.C.6.
---------------------------------------------------------------------------

a. Statutory Accounting Requirements
    Regulation S-X permits mutual life insurance companies and their
wholly-owned stock insurance company subsidiaries to prepare financial
statements in accordance with statutory accounting requirements.\426\
The Commission originally provided this alternative because, prior to
1995, U.S. GAAP did not address accounting by mutual life insurance
companies.\427\ In 1995, the FASB issued SFAS No. 120, Accounting and
Reporting by Mutual Life Insurance Enterprises and by Insurance
Enterprises for Certain Long-Duration Participating Contracts (``SFAS
No. 120''), which sets forth the accounting requirements for mutual
life insurance companies and does not permit use of statutory
accounting in U.S. GAAP financial statements.\428\ Currently, no
issuers under the Securities Act or the Exchange Act rely on Rule 7-
02(b) of Regulation S-X as a basis to report under statutory accounting
requirements.\429\ We, therefore, propose to eliminate Rule 7-02(b).
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    \426\ See Rule 7-02(b) of Regulation S-X [17 CFR 210.7-02(b)].
    \427\ See Notice of Adoption of Revision of Regulation S-X and
Amendment of Forms 10 and 10-K to Revise Requirements as to Form and
Content and Certification of Financial Statements of Life Insurance
Companies, Release No. 33-5456 (Feb. 14, 1974) [39 FR 10118].
    \428\ SFAS No. 120 extended the requirements of SFAS No. 60,
Accounting and Reporting by Insurance Enterprises (``SFAS No. 60''),
SFAS No. 97, Accounting and Reporting by Insurance Enterprises for
Certain Long-Duration Contracts and for Realized Gains and Losses
from the Sale of Investments, and SFAS No. 113, Accounting and
Reporting for Reinsurance of Short-Duration and Long-Duration
Contracts (``SFAS No. 113'') to mutual life insurance companies.
    \429\ Some insurance companies sponsoring variable annuity
contracts for registration on Forms N-3 and N-4 under the Investment
Company Act and the Securities Act and some insurance companies
offering variable life insurance contracts for registration on Form
N-6 under the Investment Company Act and Securities Act prepare
financial statements under statutory accounting requirements. These
companies are permitted to do so in certain circumstances by the
applicable form requirements. Specifically, each of these forms
requires financial statements of the insurance company and states
that if the insurance company would not have to prepare financial
statements in accordance with U.S. GAAP except for use in the
registration statement being filed or other specified registration
statements used for variable insurance contracts, then its financial
statements may be prepared in accordance with statutory accounting
requirements. See Form N-3, Item 28(b), Instruction 1; Form N-4,
Item 23(b), Instruction 1; Form N-6, Item 24(b), Instruction 1. The
proposed elimination of Rule 7-02(b) would not change these forms.
---------------------------------------------------------------------------

b. Reinsurance Recoverable
    Regulation S-X requires insurance company balance sheets to
separately present an asset called ``reinsurance recoverable on paid
losses.'' \430\ This requirement aligned with SFAS No. 60, Accounting
and Reporting by Insurance Enterprises, which required that amounts
recoverable from reinsurers on paid losses be classified as an asset,
but that amounts recoverable from reinsurers on unpaid losses be
classified as a reduction of liabilities.\431\ In 1992, the FASB issued
SFAS No. 113, which established that reinsurance receivables on unpaid
losses are also assets.\432\

SFAS No. 113 further provided that amounts recoverable from reinsurers
on unpaid losses may be presented together with other reinsurance
receivables or separately.\433\ To conform to SFAS No. 113, we propose
to delete the reference to paid losses in Rule 7-03(a)(6).
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    \430\ See Rule 7-03(a)(6) of Regulation S-X [17 CFR 210.7-
03(a)(6)].
    \431\ See Paragraph 38 of SFAS No. 60.
    \432\ See Paragraphs 74 and 75 of SFAS No. 113.
    \433\ See Paragraph 76, which was codified in ASC 944-20-50-5.
---------------------------------------------------------------------------

c. Separate Account Assets
    Regulation S-X requires the amount of assets held in separate
accounts--defined as assets used to fund liabilities related to
variable annuities, pension funds, and similar activities--to be
separately reported as a summary total, rather than included in other
lines, on the balance sheet.\434\ U.S. GAAP, however, defines
differently separate account assets that are required to be reported as
a summary total.\435\ We propose to replace the reference to variable
annuities, pension funds, and similar activities in Rule 7-03(a)(11)
with a reference to U.S. GAAP for assets to be reported as a summary
total.
---------------------------------------------------------------------------

    \434\ See Rule 7-03(a)(11) of Regulation S-X [17 CFR 210.7-
03(a)(11)].
    \435\ See ASC 944-80-25-1 to 5.
---------------------------------------------------------------------------

7. Bank Holding Companies \436\
---------------------------------------------------------------------------

    \436\ Please refer to the related discussion in section II.B.10.
---------------------------------------------------------------------------

a. Net Presentation
    Regulation S-X requires federal funds sold and securities purchased
under resale agreements or similar arrangements to be presented on the
balance sheet gross of federal funds purchased and securities sold
under agreement to repurchase.\437\ U.S. GAAP permits net presentation
under certain conditions.\438\ To conform with U.S. GAAP, we propose to
delete this requirement in Rule 9-03.3 of Regulation S-X.
---------------------------------------------------------------------------

    \437\ See Rule 9-03.3 of Regulation S-X [17 CFR 210.9-03.3].
    \438\ See ASC 210-20-45. Where amounts are presented net, ASC
210-20-50-3(a) requires disclosure in the notes to the financial
statements of the gross amounts.
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b. Goodwill
    Regulation S-X requires that goodwill net of amortization be
presented on the balance sheet or disclosed in a note to the financial
statements,\439\ with goodwill amortization presented on the income
statement.\440\ However, in June 2001, the FASB issued a standard that
prohibits amortization of goodwill.\441\ To update Regulation S-X, we
propose to eliminate the parenthetical reference to net of amortization
in Rule 9-03.10(1) of Regulation S-X.\442\ We also propose to delete
the reference to goodwill amortization in Rule 9-04.14(c).
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    \439\ See Rule 9-03.10(1) of Regulation S-X [17 CFR 210.9-
03.10(1)]. In referring to goodwill, Rule 9-03.10(1) uses the phrase
``Excess of cost over tangible and identifiable intangible assets
acquired.''
    \440\ See Rule 9-04.14(c) of Regulation S-X [17 CFR 210.9-
04.14(c)].
    \441\ See SFAS No. 142, Goodwill and Other Intangible Assets.
    \442\ We also propose to clarify Rule 9-03.10(1) by replacing
the phrase ``Excess of cost over tangible and identifiable
intangible assets acquired'' with ``goodwill.''
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8. Discontinued Operations
    Regulation S-X and Regulation S-K contain specific requirements
related to discontinued segments and disposed segments,
respectively.\443\ For purposes of these Commission disclosure
requirements, the term ``segments'' refers to discontinued operations
that are presented separately on the income statement, as prescribed by
a now-superseded requirement in U.S. GAAP.\444\ Since the adoption of
these Commission disclosure requirements, the definition of
``discontinued operations'' under U.S. GAAP has changed multiple times
and no longer incorporates the term ``segment.'' \445\
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    \443\ Specifically Instruction 1 to Rule 11-02(b) of Regulation
S-X [17 CFR 210.11-02(b)] states that the historical income
statement used in pro forma financial information shall not report
operations of discontinued segments, among other items. Item
302(a)(3) of Regulation S-K [17 CFR 229.302(a)(3)] requires a
description of the effect of any disposals of segments of a
business, among other items.
    \444\ See APB Opinion No. 30, Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions.
    \445\ See ASC 205.
---------------------------------------------------------------------------

    To update Commission disclosure requirements, we propose to replace
the reference to ``segments'' in Instruction 1 to Rule 11-02(b) of
Regulation S-X and Item 302(a)(3) of Regulation S-K with the more
appropriate term, ``discontinued operations.''
9. Pooling-of-Interests
    In April 2009, following the FASB's elimination of the pooling-of-
interests method of accounting,\446\ the Commission adopted technical
amendments to certain rules and forms to, among other items, eliminate
references to pooling-of-interests and replace them with references to
combinations of entities under common control.\447\ The 2009 amendments
inadvertently omitted to replace such references in Rule 11-
02(c)(2)(ii) of Regulation S-X,\448\ Rule 405 of Regulation C, Item
4A(b)(1)(iii) of Form F-1, Instruction 1 to paragraphs (e) and (f) of
Item 3 of Form F-4, Item 10(c)(3) of Form F-4, the introduction to Item
12 of Form F-4, and Item 12(b)(2)(iv) of Form F-4. We propose to update
these references accordingly.\449\
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    \446\ See SFAS No. 141, Business Combinations.
    \447\ See Technical Amendments to Rules, Forms, Schedules, and
Codification of Financial Reporting Policies, Release No. 33-9026,
(Apr. 23, 2009) [74 FR 18612].
    \448\ 17 CFR 210.11-02(c)(2)(ii).
    \449\ We also propose to replace references to ``acquired
businesses'' with ``transferred businesses'' in Item 4A(b)(1)(iii)
of Form F-1, Item 10(c)(3) of Form F-4, the introduction to Item 12
of Form F-4, and Item 12(b)(2)(iv) of Form F-4, as combinations of
entities under common control are not referred to as acquisitions.
See ASC 805-50.
---------------------------------------------------------------------------

10. Statement of Comprehensive Income
    Various Commission disclosure requirements and forms refer to
``income statements'' and variations thereof. In June 2011, the FASB
replaced the income statement with the statement of comprehensive
income.\450\ Comprehensive income is the change in equity of a business
entity during the period from transactions and other events and
circumstances from non-owner sources.\451\ In light of the FASB's
revision, various Commission disclosure requirements and forms that
refer only to an income statement (or similar term) are no longer
consistent with U.S. GAAP because they do not address the presentation
of comprehensive income.
---------------------------------------------------------------------------

    \450\ See ASU No. 2011-05, Comprehensive Income (Topic 220):
Presentation of Comprehensive Income. ASU No. 2011-05 was effective
for public entities on a retrospective basis for fiscal years, and
interim periods within those years, beginning after December 15,
2011.
    The statement of comprehensive income may be presented as
either: (1) A single statement of comprehensive income or (2) two
separate but consecutive statements, comprised of the income
statement and a separate statement, which begins with net income and
separately presents the components of other comprehensive income, a
total of other comprehensive income, and a total of comprehensive
income.
    \451\ See ASC Glossary.
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    To update Commission disclosure requirements, we propose to replace
(or, in some cases, supplement) the existing references to ``income
statement'' and variations thereof with ``statement of comprehensive
income'' in our rules and forms. We also propose to clarify the two
presentation options for the statement by defining the term ``statement
of comprehensive income'' in Regulation S-X.\452\
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    \452\ The proposed amendments apply to the following rules: Rule
1-02 [ 17 CFR 210.1-02], Rule 3-02 [17 CFR 210.3-02], Rule 3-03 [17
CFR 210.3-03], Rule 3-04 [17 CFR 210.3-04], Rule 3-05, Rule 3-12 [17
CFR 210.3-12], Rule 3-14 [17 CFR 210.3-14], Rule 3-17 [17 CFR, 210-
3.17], Rule 4-08 [17 CFR 210.4-08], Rule 4-10 [17 CFR 210.4-10],
Rule 5-02 [17 CFR 210.5-02], Rule 5-03 [17 CFR 210.5-03], Rule 5-04
[17 CFR 210.5-04], Rule 6-07 [17 CFR 210.6-07], Rule 6A-04 [17 CFR
210.6A-04], Rule 6A-05 [17 CFR 210.6A-05], Rule 7-03 [17 CFR 210.7-
03], Rule 7-04 [17 CFR 210.7-04], Rule 7-05 [17 CFR 210.7-05], Rule
8-02 [17 CFR 210.8-02], Rule 8-03 [17 CFR 210.8-03], Rule 8-05 [17
CFR 210.8-05], Rule 8-06 [17 CFR 210.8-06], Rule 9-03 [17 CFR 210.9-
03], Rule 9-04 [17 CFR 210.9-04], Rule 9-05 [17 CFR 210.9-05], Rule
9-06 [17 CFR 210.9-06], Rule 10-01 [17 CFR 210.10-01], Rule 11-02
[17 CFR 210.11-02], Rule 11-03 [17 CFR 210.11-03], Rule 12-16 [17
CFR 210.12-16], Rule 12-17 [17 CFR 210.12-17], Rule 12-18 [17 CFR
210.12-18], Rule 12-28 [17 CFR 210.12-28], and Rule 12-29 [17 CFR
210.12-29] of Regulation S-X, Item 10 [17 CFR 229.10], Item 302 [17
CFR 229.302], and Item 303 [17 CFR 229.303] of Regulation S-K, Item
1010 [17 CFR 229.1010] of Regulation M-A, Securities Act Rule 158
[17 CFR 230.158], Exchange Act Rule 15c3-1g [17 CFR 240.15c3-1g],
Exchange Act Rule 17a-5 [17 CFR 240.17a-5], Exchange Act Rule 17a-12
[240.17a-12], Exchange Act rule 17g-3 [17 CFR 240.17g-3], and
Exchange Act Rule 17h-1T [17 CFR 240.17h-1T]. The proposed
amendments also apply to the following forms: Form 1-A [17 CFR
239.90], Form 1-K [17 CFR 239.91], Form 1-SA [17 CFR 239.92], Form
20-F [17 CFR 249.220f], Form 11-K [17 CFR 249.311], and Form X-17A-5
[17 CFR 249.617].
    Investment companies generally do not have any other
comprehensive income. ASC 220-10-15-3(a) states that entities that
have no items of other comprehensive income are not required to
report other comprehensive income or comprehensive income.
Accordingly, we are not proposing to include references to
``statement of comprehensive income'' within the rules and forms
applicable to investment companies, other than a reference within
Rule 6-07 of Regulation S-X to allow for statements of operations to
be replaced with statements of comprehensive income, where
applicable.

---------------------------------------------------------------------------

    We further propose to amend Rule 5-03, Rule 7-04, and Rule 9-04 of
Regulation S-X to add line items to present comprehensive income and
related items in the statement of comprehensive income.
    In addition, U.S. GAAP requires accumulated other comprehensive
income to be separately presented in the equity section of the balance
sheet.\453\ We propose to amend Rule 5-02.30(a) \454\ and Rule 7-
03(a)(23)(a) \455\ of Regulation S-X to include accumulated other
comprehensive income in its list of balance sheet line items.\456\ We
also propose to delete the reference in Rule 7-03(a)(23)(a) to
unrealized appreciation or depreciation of equity securities, as it is
a component of accumulated other comprehensive income and, under U.S.
GAAP, is required to be presented separately either on the face of the
financial statements or in the notes thereto.\457\
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    \453\ See ASC 220-10-45-14.
    \454\ 17 CFR 210.5-02.30(a).
    \455\ 17 CFR 210.7-03(a)(23)(a).
    \456\ We do not propose to amend Rule 9-03 of Regulation S-X.
Through its reference to Rule 5-02.30, which we propose to amend,
Rule 9-03 would be effectively updated if we adopt the proposed
amendment to Rule 5-02.30.
    \457\ See ASC 220-10-45-14A.
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11. Extraordinary Items
    Various Commission disclosure requirements and forms refer to
extraordinary items. In January 2015, the FASB eliminated extraordinary
items from U.S. GAAP.\458\ To update Commission disclosure
requirements, we propose to delete references to extraordinary items in
our rules and forms.\459\
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    \458\ See ASU No. 2015-01, Income Statement--Extraordinary and
Unusual Items (Subtopic 225-20): Simplifying Income Statement
Presentation by Eliminating the Concept of Extraordinary Items.
Previously, ASC 225-20-45-2 defined ``extraordinary items'' as an
event or transaction that is unusual in nature and infrequent in
occurrence, and ASC 225-20-45-3 required separate presentation of
the effect of the extraordinary item on the income statement. ASU
No. 2015-01 is effective for public business entities on a
prospective or retrospective basis for fiscal years, and interim
periods within those fiscal years, beginning after December 15,
2015. Early adoption is permitted provided that the ASU is applied
from the beginning of the fiscal year of adoption.
    \459\ The proposed amendments apply to the following rules: Rule
1-02(w)(3) [17 CFR 210.1-02(w)(3)], Rule 1-02(bb)(1)(ii) [17 CFR
210.1-02(bb)(1)(ii)], Rule 3-01(c)(2) [17 CFR 210.3-01(c)(2)], Rule
3-01(c)(3) [17 CFR 210.3-01(c)(3)], Rule 3-15(a)(1) [17 CFR 210.3-
15(a)(1)], Rule 3A-02(b)(2) [17 CFR 210.3A-02(b)(2)], Rule 5-03(b)
[17 CFR 210.5-03(b)], Rule 7-04 [17 CFR 210.7-04], Rule 8-03(a)(2)
[17 CFR 210.8-03(a)(2)], Rule 8-04(b)(3) [17 CFR 210.8-04(b)(3)],
Rule 9-04 [17 CFR 210.9-04], Rule 10-01(b)(4) [17 CFR 210.10-
01(b)(4)], Rule 11-02(b)(7) [17 CFR 210.11-02(b)(7)], and
Instruction 1 to Rule 11-02 [17 CFR 210.11-02] of Regulation S-X,
Item 10(b)(2) [17 CFR 229.10(b)(2)], Item 302(a)(1) [17 CFR
229.302(a)(1)], and Item 302(a)(3) [17 CFR 229.302(a)(3)] of
Regulation S-K, Securities Act Rule 405, Exchange Act Rule 3a51-
1(a)(2)(i)(A)(3) [ 17 CFR 240.3a51-1(a)(2)(i)(A)(3)], Exchange Act
Rule 12b-2 [17 CFR 240.12b-2], Exchange Act Rule 13a-10(b) [17 CFR
240.13a-10(b)], and Exchange Act 15d-10(b) [17 CFR 240.15d-10(b)].
The proposed amendments also apply to Form X-17A-5 [17 CFR 249.617].
    Rule 3a51-1 of the Exchange Act contains a net income measure
that is used in evaluating whether certain equity securities are
penny stocks, which currently excludes ``extraordinary and non-
recurring items'' from the net income calculation. As a result of
the proposed amendment, the reference to ``extraordinary items''
will be deleted, but the exclusion of non-recurring items from net
income will remain. The deletion of the ``extraordinary items''
reference from net income calculations under Rule 3a51-1 is not
intended to affect the application of the rule, as the Commission
believes that non-recurring items encompass items that would have
been ``extraordinary items'' previously. Thus, the calculation of
net income for purposes of Rule 3a51-1 should not change.
    While the FASB has eliminated the concept of extraordinary items
from U.S. GAAP for general purpose financial reporting, the concept
of extraordinary expenses is still relevant for investment
companies, particularly in disclosure of expense ratios in
registration statements. Certain investment company registration
forms eliminate extraordinary expenses from expense ratios in the
fee table in order to disclose to investors the ongoing level of
expense that can be expected. We believe it is appropriate to
continue requiring that extraordinary expenses be excluded in the
fee table and require footnote disclosure reflecting extraordinary
expenses if they would have a material effect. Thus, the investment
company registration forms (Form N-1A, Form N-3, Form N-4 [17 CFR
239.17b and 274.11c], and Form N-6) that reference extraordinary
items in relation to expenses and the related historical U.S. GAAP
definition are being amended to include a definition of
extraordinary expenses, consistent with the historical U.S. GAAP
definition. With these proposed amendments, we do not intend to
change the content required to be presented in these forms.
---------------------------------------------------------------------------

12. Cumulative Effect of Changes in Accounting Principles
460
---------------------------------------------------------------------------

    \460\ Please refer to the related discussions in sections
II.B.11 and III.C.8.
---------------------------------------------------------------------------

    Various Commission disclosure requirements and forms refer to a
line on the income statement for a cumulative effect of a change in
accounting principle. A change in accounting principle is a change from
one generally accepted accounting principle to another generally
accepted accounting principle when there are two or more generally
accepted accounting principles that may be used or when the accounting
principle formerly used is no longer generally accepted.\461\ Prior to
2005, U.S. GAAP ordinarily required that the cumulative effect, or
total effect on prior periods, of a change in accounting principle be
reported separately in a single line in the income statement in the
period the change took effect.\462\ In 2005, the FASB eliminated from
U.S. GAAP the requirement to report cumulative effect of a change in
accounting principle in the income statement.\463\ U.S. GAAP now
requires, unless impracticable or otherwise provided for in a newly
issued accounting standards update, retrospective application of a
change in accounting principle to all prior periods, with the
cumulative effect reported in the opening balance of retained earnings
for the earliest period presented.\464\
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    \461\ See ASC Glossary.
    \462\ See APB Opinion No. 20, Accounting Changes.
    \463\ See SFAS No. 154, Accounting Changes and Error
Corrections. This is now reflected in ASC 250, Accounting Changes
and Error Corrections.
    \464\ See ASC 250-10-45-5. Where impracticable or otherwise
provided for in a newly issued accounting standards update, U.S.
GAAP requires prospective application such that the existing line on
the income statement for a cumulative effect of a change in
accounting principle is unnecessary.
---------------------------------------------------------------------------

    To update Commission disclosure requirements, we propose to
eliminate references to cumulative effect of a change in accounting
principle.\465\
---------------------------------------------------------------------------

    \465\ The proposed amendments apply to the following rules: Rule
1-02, Rule 3-01, Rule 3-15, Rule 5-03, Rule 7-04, Rule 8-03, Rule 8-
04, Rule 9-04, Rule 10-01, Rule 11-02, and Instruction 1 to Rule 11-
02 of Regulation S-X, Item 302 of Regulation S-K, Securities Act
Rule 405, Exchange Act Rule 12b-2, Exchange Act Rule 13a-10(b), and
Exchange Act Rule 15d-10(b). The proposed amendments also apply to
Form X-17A-5.
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13. Published Report Regarding Matters Submitted To Vote of Security
Holders
    Prior to 2009, Forms 10-K and 10-Q required disclosure of the
voting results for matters that were submitted to

shareholders.\466\ Issuers were able to satisfy this disclosure
requirement by providing the disclosure within the forms or by
referring to a report containing the voting results and filing such
report as an exhibit to the applicable form pursuant to Regulation S-
K.\467\
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    \466\ These requirements were contained in Item 4, Part I of
Form 10-K and Item 4, Part II of Form 10-Q prior to 2009.
    \467\ See Item 601(b)(22) of Regulation S-K [17 CFR
229.601(b)(22)].
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    In 2009, the Commission eliminated the requirement to disclose
shareholder voting results in Forms 10-K and 10-Q and added it to Item
5.07 of Form 8-K.\468\ As such, we propose to eliminate Item 601(b)(22)
of Regulation S-K and its accompanying inclusion in the Exhibit Table
within Item 601, as these requirements are no longer applicable.
---------------------------------------------------------------------------

    \468\ See Proxy Disclosure Enhancements, Release No. 33-9089,
(Dec. 16, 2009) [74 FR 68334]. In addition, the Form 8-K containing
the voting results must be filed within four business days after the
meeting at which the votes took place.
---------------------------------------------------------------------------

    We also propose to eliminate Item 5 of Form 10-D \469\ regarding
disclosure of matters submitted to a vote of security holders. In 2009,
when the Commission adopted Item 5.07 of Form 8-K, it did not exclude
asset-backed issuers from the requirements; however, Item 5 of Form 10-
D was not revised or eliminated following the adoption of Item 5.07 of
Form 8-K.\470\ Rather, current Item 5 of Form 10-D contains a reference
to Item 4 of Part II to Form 10-Q, which, as stated above, was
eliminated with the adoption of Item 5.07 to Form 8-K.\471\ As such, we
propose to eliminate Item 5 of Form 10-D.
---------------------------------------------------------------------------

    \469\ 17 CFR 249.312.
    \470\ A Form 10-D is a periodic distribution report for asset-
backed issuers that is typically filed three weeks or more after the
end of a reporting period. Reporting on Form 8-K provides users of
the information with a date certain upon which disclosure of the
results of a vote is required and reduces delay between the end of a
meeting and when voting results are disclosed in periodic reports.
See 17 FR 68334 at 68350. Investors in asset-backed securities may
vote for a variety of reasons, such as to amend the terms of the
securities (e.g., maturity date), substitute transaction parties, or
to trigger a review of the underlying assets.
    \471\ Current Item 4 of Part II to Form 10-Q refers to mine
safety disclosure requirements.
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14. Selected Financial Data for Foreign Private Issuers That Report
Under IFRS
    Prior to 2005, Form 20-F required all foreign private issuers,
including those that reported under IFRS, to present five years of
selected financial data under their primary basis of accounting and
U.S. GAAP.\472\ As a result of two amendments, foreign private issuers
that report under IFRS are now only required to present selected
financial data under IFRS for those periods for which the issuer has
prepared financial statements in accordance with IFRS. Specifically:
---------------------------------------------------------------------------

    \472\ Item 3.A of Form 20-F provides an exception from
presenting up to the earliest two of the five years of selected
financial data under the primary basis of accounting and U.S. GAAP
if the issuer represents that such information cannot be provided
without unreasonable effort or expense.
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     In April 2005, the Commission amended Form 20-F to allow
foreign private issuers to present two years of financial statements,
instead of three, in the year that they first adopt IFRS.\473\ At the
time, the Commission created a new General Instruction G(c), which
states that, for first-time IFRS adopters, selected financial data
prepared under IFRS is only required for the two most recent financial
years.
---------------------------------------------------------------------------

    \473\ See First-Time Application of International Financial
Reporting Standards, Release No. 33-8567 (Apr. 12, 2005) [70 FR
20674].
---------------------------------------------------------------------------

     In December 2007, the Commission eliminated the
reconciliation requirement for foreign private issuers that prepare
financial statements in accordance with IFRS.\474\ In adopting
amendments to Form 20-F to reflect the elimination of the
reconciliation requirement, the Commission also clarified that selected
financial data based on the U.S. GAAP reconciliation is only required
if the issuer prepares its financial statements using a basis of
accounting other than IFRS.\475\
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    \474\ See Acceptance From Foreign Private Issuers of Financial
Statements Prepared in Accordance With International Financial
Reporting Standards Without Reconciliation to U.S. GAAP, Release 33-
8879, (Dec. 21, 2007) [73 FR 986] (``2007 Adopting Release'').
    \475\ See Instruction 2 to Item 3.A of Form 20-F.
---------------------------------------------------------------------------

    However, General Instruction G(c) of Form 20-F continues to require
an issuer that reports under IFRS to present selected financial data in
accordance with U.S. GAAP for the five most recent years. To update
Form 20-F, we propose to amend: (1) General Instruction G(c) of Form
20-F to delete the requirement to present selected financial data in
accordance with U.S. GAAP and (2) Instruction 2 to Item 3.A of Form 20-
F to explicitly state that selected financial data is required only for
the periods for which the issuer has prepared financial statements in
accordance with IFRS.
15. Canadian Regulation A Issuers
    Foreign private issuers that report under IFRS must comply with
IFRS requirements for form and content within the financial statements
rather than the specific presentation and disclosure provisions in
Regulation S-X.\476\ Regulation A permits Canadian issuers to report
under IFRS.\477\ However, in certain places, Forms 1-A and 1-SA
inadvertently refer all Regulation A issuers, including Canadian
issuers that report under IFRS, to rules in Regulation S-X, rather than
IFRS, for the form and content within the financial statements.\478\ As
we did not intend for the form and content requirements in Regulation
S-X to apply to Canadian Regulation A issuers reporting under IFRS, we
propose to amend such references to Regulation S-X in Forms 1-A and 1-
SA only to apply to Regulation A issuers that report under U.S. GAAP.
---------------------------------------------------------------------------

    \476\ See 2007 Adopting Release.
    \477\ Paragraph (a)(2) of Part F/S of Form 1-A, Item 7(b) of
Form 1-K, and Item 3 of Form 1-SA.
    \478\ Paragraphs (b)(5) and (c)(1)(i) of Part F/S of Form 1-A
and Item 3 and Item 3(d) of Form 1-SA.
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16. Non-Existent or Incorrect References
    Various Commission disclosure requirements contain non-existent or
incorrect references. We propose to update them as follows:
     Rule 5-02 of Regulation S-X refers in four places \479\ to
Rule 4-05 of Regulation S-X, which no longer exists. We propose to
delete these references.
---------------------------------------------------------------------------

    \479\ See the header to current assets, Rule 5-02.6(a)(2), Rule
5-02.6(a)(3), and the header to current liabilities.
---------------------------------------------------------------------------

     Rule 5-02.22(a) of Regulation S-X refers to Rule 4-06 of
Regulation S-X, which no longer exists. We propose to delete this
reference.
     Rule 7-04.9 of Regulation S-X on income tax expense refers
to Rule 4-08(g) of Regulation S-X, which addresses summarized financial
information of investments accounted for under the equity method of
accounting. This reference should be to Rule 4-08(h) of Regulation S-X,
which addresses income tax expense. We propose to update this reference
accordingly.
     Rule 9-03.7(e)(3) of Regulation S-X refers to Rule 4-
08(L)(3), which no longer exists. We propose to delete this reference.
     Item 512(a)(4) of Regulation S-K provides that a post-
effective amendment need not be filed to include on Form F-3 the
financial statements and information required by Rule 3-19 of
Regulation S-X, if such financial statements and information are filed
or furnished on reports incorporated by reference in the Form F-3.\480\
However, Rule 3-19 no longer exists. When the Commission revised Form
20-F in 1999, it replaced references to Rule 3-19 with references to
Item 8.A of Form 20-F as the source for foreign private issuer
financial statement requirements, but inadvertently omitted to replace
the

reference in Item 512(a)(4).\481\ We propose to update Item 512(a)(4)
accordingly.
---------------------------------------------------------------------------

    \480\ See Item 512(a)(4) [17 CFR 229.512(a)(4)].
    \481\ See International Disclosure Standards, Release No. 33-
7745 (Sept. 28, 1999) [64 FR 53900].
---------------------------------------------------------------------------

     General Instruction J(1)(e) to Form 10-K is blank.
Although the Commission deleted the instruction in 2011,\482\ it did
not reserve the instruction. We propose to clarify that General
Instruction J(1)(e) is reserved.
---------------------------------------------------------------------------

    \482\ See Mine Safety Disclosure, Release No. 33-9286 (Dec. 21,
2011) [76 FR 81762].
---------------------------------------------------------------------------

     General Instruction J(1)(f) to Form 10-K permits asset-
backed issuers to omit Item 5 of Form 10-K, but the Instruction
incorrectly describes Item 5. We propose to conform the description in
Instruction J(1)(f) to the title of Item 5 of Form 10-K: Market for
Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
     Paragraph (c)(1)(i) of Part F/S of Form 1-A refers to the
age of interim financial statements discussed in paragraphs (b)(3)-(4)
of Part F/S. However, paragraphs (b)(3)-(4) address the age of both
interim and annual financial statements. To correct this reference, we
propose to delete ``interim'' in paragraph (c)(1)(i).
     Forms F-1, F-3, F-4, F-6,\483\ F-7,\484\ F-8,\485\ F-
10,\486\ F-80,\487\ 20-F, and 40-F \488\ include references to
incorrect telephone numbers and offices at the Commission. We propose
to update these references to the correct telephone numbers and
offices.
---------------------------------------------------------------------------

    \483\ 17 CFR 239.36.
    \484\ 17 CFR 239.37.
    \485\ 17 CFR 239.38.
    \486\ 17 CFR 239.40.
    \487\ 17 CFR 239.41.
    \488\ 17 CFR 249.240f.
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C. Request for Comment
    90. We solicit comment on the foregoing proposed amendments to
address superseded requirements. Should any proposed amendments not be
made? Should any proposed amendments be modified? If so, which ones and
why? Please be as specific as possible for each of the proposed
amendments on which you provide comments.
    91. Are there other superseded Commission disclosure requirements?
If so, which requirements have been superseded and how should they be
addressed?

VI. General Request for Comment

    We request and encourage any interested person to submit comments
regarding the proposals, specific issues discussed in this release, and
other matters that may have an effect on the proposals. With regard to
any comments, we note that such comments are of particular assistance
if accompanied by supporting data and analysis of the issues addressed
in those comments.

VII. Economic Analysis

    This section analyzes the expected economic effects of the
proposals relative to the current baseline, which consists of both the
regulatory framework of disclosure requirements in existence today and
the current use of such disclosure by investors and other users. As
discussed above, we are proposing amendments to certain of our
disclosure requirements that may have become redundant, duplicative,
overlapping, outdated, or superseded, in light of other Commission
disclosure requirements, U.S. GAAP, IFRS, or changes in the information
environment. We are also soliciting comment on certain Commission
disclosure requirements that overlap with, but require information
incremental to, U.S. GAAP to determine whether to retain, modify,
eliminate, or refer them to the FASB for potential incorporation into
U.S. GAAP. These proposals are a result of the Division of Corporation
Finance's Disclosure Effectiveness Initiative and part of our efforts
to implement title LXXII, section 72002(2) of the Fixing America's
Surface Transportation Act.
    The discussion below addresses the potential economic effects of
the proposals, including the likely benefits and costs, as well as the
likely effects on efficiency, competition, and capital formation.\489\
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    \489\ Section 2(b) of the Securities Act [15 U.S.C. 77b(b)] and
section 3(f) of the Exchange Act [17 U.S.C. 78c(f)] require the
Commission, when engaging in rulemaking where it is required to
consider or determine whether an action is necessary or appropriate
in the public interest, to consider, in addition to the protection
of investors, whether the action will promote efficiency,
competition, and capital formation. Further, section 23(a)(2) of the
Exchange Act [17 U.S.C. 78w(a)(2)] requires the Commission, when
making rules under the Exchange Act, to consider the impact that the
rules would have on competition, and prohibits the Commission from
adopting any rule that would impose a burden on competition not
necessary or appropriate in furtherance of the Exchange Act.
---------------------------------------------------------------------------

A. Baseline and Affected Parties

    Our baseline includes the current disclosure requirements in
Regulation S-K, Regulation S-X, and other rules and Commission forms
promulgated under the Securities Act, the Exchange Act, and the
Investment Company Act. The parties that are likely to be affected by
the proposals include investors and other users, auditors, and entities
subject to Regulation S-K, Regulation S-X, and other rules and
Commission forms promulgated under the Securities Act, the Exchange
Act, and the Investment Company Act.
    The proposals affect both domestic issuers and foreign private
issuers. We estimate approximately 7,600 issuers that file on domestic
forms \490\ and 800 foreign private issuers that file on F-forms would
be affected by the proposals. Among the issuers that file on domestic
forms, 26% are large accelerated filers, 18% are accelerated filers,
18% are non-accelerated filers, and 38% are SRCs. About 12% of issuers
that file on domestic forms are also EGCs. Among the foreign private
issuers that file on F-forms, 38% are large accelerated filers, 22% are
accelerated filers, and 40% are non-accelerated filers.\491\ About 15%
of foreign private issuers that file on Forms 20-F and 40-F are also
EGCs. With respect to foreign private issuer accounting standards, 43%
of foreign private issuers report under U.S. GAAP, 56% report under
IFRS, and less than 1% report under Another Comprehensive Body of
Accounting Principles with a reconciliation to U.S. GAAP.\492\
---------------------------------------------------------------------------

    \490\ This number includes fewer than 50 foreign private issuers
that file on domestic forms, approximately 100 business development
companies, and a portion of the approximately 12,000 investment
advisers, as discussed further below.
    \491\ Approximately 16% of foreign private issuers that file on
F-forms are Canadian issuers that file on Form 40-F under the
multijurisdictional disclosure system. Form 40-F does not require
disclosure of large accelerated, accelerated, or non-accelerated
filer status. Accordingly, these amounts exclude foreign private
issuers that file on Form 40-F.
    \492\ The number of domestic and foreign private issuers
affected by the proposals is estimated as the number of unique
companies, identified by Central Index Key (CIK), that filed Forms
10-K, Form 20-F, and Form 40-F with the Commission during calendar
year 2015. The estimates for the percentages of SRCs, accelerated
filers, large accelerated filers, and non-accelerated filers are
based on information from Form 10-K, Form 20-F, and Form 40-F. The
number of EGCs is estimated by analyzing several types of filings
filed with the Commission during calendar year 2015. The estimates
for the percentages of foreign private issuers' basis of accounting
used to prepare the financial statements are calculated from the
information in Forms 20-F and 40-F. These estimates do not include
issuers that filed initial registration statements during calendar
year 2015, which would also be affected by the proposals.
---------------------------------------------------------------------------

    Certain proposals also affect requirements applicable to:
     Fewer than 100 asset-backed issuers.
     Issuers that rely on Regulation A exemptions.\493\
---------------------------------------------------------------------------

    \493\ Between June 19, 2015 and July 5, 2016, approximately 48
Regulation A offerings have been qualified. Over the same time
period, approximately 108 Regulation A offering statements have been
filed. Withdrawals and post-qualification amendments are excluded.

---------------------------------------------------------------------------

     Approximately 4,100 investment companies, including
approximately 100 business development companies, and the portion of
the approximately 12,000 investment advisers to which Regulation S-X
and Regulation S-K apply.
     Up to approximately 4,200 registered broker-dealers.\494\
---------------------------------------------------------------------------

    \494\ The proposed amendments to Exchange Act Rules 17a-5, 17a-
12, and 17h-1T, and Part III of Form X-17A-5 collectively affect
approximately 4,230 broker-dealers who must file annual reports with
the Commission. The proposed amendments to Part II of Form X-17A-5
affect approximately 470 broker-dealers, based on the number of
broker-dealers who filed Part II as of September 30, 2015. The
proposed amendments to Part IIA of Form X-17A-5 affect approximately
3,685 broker-dealers, based on the number of broker-dealers who
filed Part IIA as of September 30, 2015. The proposed amendments to
Part IIB of Form X-17A-5 affect approximately 4 broker-dealers,
based on the number of broker-dealers who filed Part IIB as of
September 30, 2015.
---------------------------------------------------------------------------

     10 NRSROs.
    This release also solicits comment on certain Commission disclosure
requirements that overlap with, but require information incremental to,
U.S. GAAP.\495\ One potential outcome of this feedback is a referral of
these incremental requirements to the FASB for potential incorporation
into U.S. GAAP. While a referral alone would have no effect on issuers,
any changes to U.S. GAAP that may result from such a referral would
potentially affect all entities that report under U.S. GAAP, including
crowdfunding issuers and those outside the scope of our regulatory
authority. Any potential changes to U.S. GAAP would be subject to the
FASB's standard-setting process, as discussed in section I.C.
---------------------------------------------------------------------------

    \495\ As discussed in section III.E, we are not proposing
amendments to this category of disclosure requirements in this
release. Rather, the comments received in response to this release
may inform both potential future Commission rulemaking and FASB
standard-setting activities.
---------------------------------------------------------------------------

B. Potential Costs and Benefits

    In this section, we discuss the anticipated economic benefits and
costs of the proposals in each category of redundant, duplicative,
overlapping, outdated, and superseded disclosure requirements.
1. Redundant or Duplicative Requirements
    We have preliminarily identified redundant or duplicative
Commission disclosure requirements that require substantially the same
disclosures as U.S. GAAP, IFRS, or other Commission disclosure
requirements. The proposed amendments would eliminate certain redundant
or duplicative Commission disclosure requirements.
    Elimination of Commission disclosure requirements that are
considered redundant or duplicative with U.S. GAAP, IFRS, or other
Commission disclosure requirements would simplify issuer compliance
efforts by reducing the number of rules to consider. To the extent that
the redundant or duplicative requirements result in duplicative
disclosures, elimination of these requirements also would be
potentially beneficial to investors and other users. Academic research
suggests that duplication is associated with less efficient price
discovery \496\ and that individuals invest more in firms with more
concise financial disclosures.\497\ Thus, to the extent that the
proposed amendments alleviate duplication and do not affect the
completeness of financial disclosures,\498\ they could result in
improved price discovery, enhance the allocative efficiency of the
market, and facilitate capital formation.
---------------------------------------------------------------------------

    \496\ See A. Cazier and R. Pfeiffer, Say Again? Assessing
Redundancy in 10-K Disclosures (Working paper, 2015), available at
https://www2.aaahq.org/AM/display.cfm?Filename=SubID_2229.pdf&MIMEType=application%2Fpdf.
    \497\ See A. Lawrence, Individual Investors and Financial
Disclosure, Journal of Accounting and Economics 56, 2013 at 13-147.
    \498\ Recent academic research has suggested that more complete
financial disclosures benefit investors and firms. See, e.g., C.
Leuz and P. Wysocki, The Economics of Disclosure and Financial
Reporting Regulation: Evidence and Suggestions for Future Research
(Working paper, 2015), available at http://
research.chicagobooth.edu/~/media/
7628D551E7424DC08524879103870C12.pdf.
---------------------------------------------------------------------------

    The potential adverse effects of these proposed amendments on
investors and other users are likely to be limited as these parties
would still receive substantially the same information from issuers.
However, potential costs to investors may arise if U.S. GAAP were to
change in such a way that information previously required by Commission
disclosure requirements is no longer provided under U.S. GAAP.\499\ The
potential for such changes may be mitigated by the FASB's transparent,
public standard-setting process and our oversight of the FASB.\500\
---------------------------------------------------------------------------

    \499\ See discussion of current FASB projects with the potential
to broadly affect the proposed amendments in section I.C.3.
    \500\ See discussion in section I.C.
---------------------------------------------------------------------------

2. Overlapping Requirements
    We have preliminarily identified Commission disclosure requirements
that are related to, but not the same as, U.S. GAAP, IFRS, or other
Commission disclosure requirements. For certain of these overlapping
requirements, the proposed amendments would: (a) Delete the overlapping
Commission disclosure requirements or (b) integrate them with other
related Commission disclosure requirements. For certain other
overlapping requirements, we are soliciting comment on certain
Commission disclosure requirements to determine whether to retain,
modify, eliminate, or refer them to the FASB for potential
incorporation into U.S. GAAP. We discuss below the economic effects of
the proposals and provide examples of requirements affected by the
proposals.
    First, some proposals may give rise to Disclosure Location
Considerations. Where proposals relocate existing disclosure from
outside the financial statements to within the financial statements,
issuers may incur additional costs to comply with audit and/or interim
review and internal control over financial reporting requirements,
whereas investors and other users may benefit to the extent that
information is considered more reliable.\501\
---------------------------------------------------------------------------

    \501\ In contrast, some proposed amendments may require
disclosure to be moved from inside the financial statements to
outside the financial statements. In this case, the potential
economic effects would be similar to the effects discussed above but
in the opposite direction.
---------------------------------------------------------------------------

    The relocation of existing disclosures, for example, from outside
the financial statements to within the financial statements or from the
face of the financial statements to the notes to the financial
statements, may also affect the prominence of the disclosures. Some
experimental research provides indirect evidence that users may treat
information differently depending on the location of the disclosure.
For instance, research shows a weaker relation between equity prices
and disclosed items (in the notes to the financial statements) versus
recognized items (on the face of the financial statements).\502\
Additionally,

experimental research on laboratory participants shows that positioning
pro-forma (non-GAAP) earnings earlier than U.S. GAAP earnings in an
earnings announcement influences a nonprofessional investor's
judgment.\503\ Other research on the effect of disclosure location
shows recognized and disclosed items are treated equivalently by
investors.\504\
---------------------------------------------------------------------------

    \502\ See, e.g., R.M. Harper Jr., W.G. Mister, and J.R.
Strawser, The Impact of New Pension Disclosure Rules on Perceptions
of Debt, Journal of Accounting Research 25, 1987 at 327 (showing
that financial statement users do not treat pension information
included in a note to the financial statements as they would a
balance sheet liability); C. Viger, R. Belzile, and A.A.
Anandarajan, Disclosure versus Recognition of Stock Option
Compensation: Effect on the Credit Decisions of Loan Officers,
Behavioral Research in Accounting 20, 2008 at 93-113 (showing that
loan officers are more affected by the same earnings recognized in
the income statement than disclosed in the notes to the financial
statements); M. M[uuml]ller, E.J. Riedl, and T. Sellhorn,
Recognition versus Disclosure of Fair Values, The Accounting Review
90, 2015 at 2411-2447, (showing a lower association between equity
prices and disclosed investment property fair values relative to
recognized investment property fair values. The authors also find
that reduced information processing costs and higher readability
mitigates the discount applied to disclosed fair values); D. Aboody,
Recognition versus Disclosure in the Oil and Gas Industry, Journal
of Accounting Research 34, 1996, at 21-32 (using the disclosure
requirements for oil and gas companies, which requires the firm-
specific effect of a macroeconomic event to be recognized in the
financial statements for firms adopting the full cost method, but
only requires disclosure in the notes to the financial statements
for firms following the successful efforts method, to show that the
effect of note disclosure on price differs from the effect of
recognition on price); and H. Espahbodi, P. Espahbodi, Z. Rezaee,
and H. Tehranian, Stock Price Reaction and Value Relevance of
Recognition versus Disclosure: The Case of Stock-Based Compensation,
Journal of Accounting and Economics 33 (3), 2002 at 343-373
(examining the equity price reaction to the announcements related to
accounting for stock-based compensation to assess the value
relevance of recognition (on the face of the financial statements)
versus disclosure (in the notes to the financial statements) and
concluding that recognition and disclosure are not substitutes).
    \503\ See, e.g., W.B. Elliot, Are Investors Influenced by Pro
Forma Emphasis and Reconciliations in Earnings Announcements? The
Accounting Review 81 (1), 2006 at 113-133.
    \504\ P.Y. Davis-Friday, L.B. Folami, C.S. Liu, and H.F.
Mittelstaedt, The Value Relevance of Financial Statement Recognition
vs. Disclosure: Evidence from SFAS No. 106, The Accounting Review.
74 (4), 1999 at 403-423 (testing whether market agents treat
disclosed and recognized amounts equivalently by examining firms'
obligations for postretirement benefits other than pensions before
and after formal recognition. This research focuses on a sample of
229 firms that elected disclosure of the postretirement benefit
liability in the year(s) prior to adoption of SFAS 106). The authors
find that both post-retirement benefit liabilities disclosed prior
to adoption of SFAS No. 106, Employers' Accounting for
Postretirement Benefits Other than Pensions, and those recognized
subsequent to adoption significantly contribute to explaining stock
prices, thus suggesting that market agents treat disclosed and
recognized amounts equivalently).
---------------------------------------------------------------------------

    The relocation of existing disclosures from outside the financial
statements to within the financial statements may also subject the
disclosures to XBRL tagging requirements. Issuers may incur additional
costs to comply with these requirements, whereas investors and other
users may benefit from more readily-available information in structured
formats. In general, we believe the marginal costs of applying XBRL
data tagging likely would be relatively low, as issuers already have
implemented software enabled processes and controls to structure
previously mandated disclosures.
    Furthermore, the relocation of existing disclosures may affect the
extent of information that investors receive. Since the PSLRA does not
provide a safe harbor for forward-looking information located within
the financial statements, issuers may be less likely to voluntarily
supplement those disclosures with forward-looking information as
compared with disclosures made outside the audited financial
statements. However, issuers retain the option of providing forward-
looking information outside the financial statements if they so choose.
    Second, some proposed deletions, such as those related to bright
line disclosure thresholds, may change the mix of information available
to investors. Bright line thresholds set forth explicit quantitative
criteria for disclosure. If the bright line thresholds are consistent
with the preferences of investors and other users, they will result in
disclosure at an appropriate level of detail. If the bright line
thresholds differ from the preferences of investors and other users,
they will result in too much or too little detail.
    The economic effects of replacing the bright line thresholds with
new criteria will depend on the nature of the new criteria. If the new
criteria are more consistent with the preferences of investors and
other users, the changes may benefit them. If the new criteria are less
consistent with the preferences of investors and other users, the
changes may have negative impacts on them. On one hand, bright line
thresholds may be easier to apply. On the other hand, although other
criteria may require more judgment, may be more difficult to apply, and
may lead to more variation in disclosure, they may also permit more
tailored information to be presented.
a. Deletion of Commission Disclosure Requirements
    When we believe that Commission disclosure requirements: (1)
Require disclosures that convey reasonably similar information to or
are encompassed by the disclosures that result from compliance with the
overlapping U.S. GAAP, IFRS, or Commission disclosure requirements or
(2) require disclosures incremental to the overlapping U.S. GAAP or
Commission disclosure requirements and are no longer useful to
investors, we are proposing to eliminate the requirements.
    In addition to the economic effects of changing disclosure location
and bright line disclosure thresholds, as discussed above, potential
costs to investors may arise if U.S. GAAP were to change in such a way
that information previously required by Commission disclosure
requirements is no longer provided under U.S. GAAP.\505\ As noted
above, the potential for such changes may be mitigated by the FASB's
transparent, public standard-setting process and the Commission's
oversight of the FASB.\506\
---------------------------------------------------------------------------

    \505\ See discussion of current FASB projects with the potential
to broadly affect the proposals in section I.C.3.
    \506\ See discussion in section I.C.
---------------------------------------------------------------------------

    The effects of the proposed deletion of these overlapping
Commission disclosure requirements may also depend on the level of
overlap between the requirements. On the one hand, eliminating
overlapping requirements may reduce search costs and lead to more
efficient information processing for investors. This, in turn, may lead
to better informed investment decisions and an increase in allocative
efficiency. On the other hand, to the extent eliminating a requirement
results in a loss of information incremental to the overlapping
requirement, it could result in a loss of information for investors.
    The examples below illustrate the potential effects of the proposed
elimination of Commission disclosure requirements on issuers,
investors, and other users.
    One example of an item we propose to delete due to its sufficient
overlap with another item is Item 101(d)(3) of Regulation S-K. Item
101(d)(3) requires risk disclosures outside the financial statements
relating to geographic areas. We believe this provision requires
disclosures that are largely encompassed by the disclosures that result
from compliance with other parts of Regulation S-K. More specifically,
Item 101(d)(3) requires disclosure of ``any'' risks associated with an
issuer's foreign operations. This requirement is similar to Item 503(c)
of Regulation S-K, which requires disclosure of ``significant'' risk
factors. Item 101(d)(3) also requires disclosures of a segment's
dependence on foreign operations. This requirement is similar to Item
303(a) of Regulation S-K, which requires disclosure of trends and
uncertainties by segment, if appropriate to an understanding of the
issuer as a whole.
    Since Item 101(d)(3) is more expansive than other parts of
Regulation S-K, the economic effects of the deletion would depend on
the nature of the incremental information required by Item 101(d)(3).
Research shows that international corporate diversification may affect
issuers' stock market performance and valuation. For example, the
required rate of return among U.S. firms listed on the NYSE has been
shown to reflect the benefit of

geographical diversification.\507\ There is also a positive correlation
between the level of foreign operations and firm value,\508\ and
studies have found that the positive impact of intangible assets on
firm value can be enhanced by foreign operations to the extent the
intangible assets may be used across multiple countries.\509\
Therefore, some investors may want incremental information on foreign
operations. Deletion of Item 101(d)(3) may adversely affect this group
of investors. However, if the requirements in Item 101(d)(3), such as
the requirement to disclose ``any'' risk associated with foreign
operations, tend to yield immaterial disclosures, deletion of Item
101(d)(3) would benefit investors by eliminating immaterial
information, reducing search costs, and facilitating more efficient
information processing.\510\
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    \507\ See T. Agmon and D. R. Lessard, Investor Recognition of
Corporate International Diversification, Journal of Finance 32(4),
1977 at 1049-1055 (arguing that multinational firms have an
advantage relative to single-country firms because of their ability
to overcome the barriers to portfolio capital flows). The empirical
results of the study support the notion that U.S. investors
recognize the international composition of the activities of U.S.-
based corporations.
    \508\ See V. Errunza and L. Senbet, International Corporate
Diversification, Market Valuation and Size-Adjusted Evidence,
Journal of Finance 34, 1984 at 727-745 (developing a model where
international corporate intermediation through direct foreign
investment can undo barriers to international capital flows faced by
individual investors and lead to a positive valuation effect
associated with the degree of international involvement). The
authors tested the model using generalized least squares and maximum
likelihood procedures, controlling for the size and price to
earnings effects, and obtain results consistent with the theoretical
valuation effect.
    \509\ See R. Morck and B. Yeung, Why Investors Value
Multinationality, Journal of Business, 64 (2), 1991 at 165-187
(examining the value of multinationality as reflected in Tobin's Q).
The authors find that the positive impact of research and
development and advertising spending on Q is enhanced by
multinationality, but multinationality itself has no significant
impact on Q, supporting the notion that multinational corporations
have intangible assets that can be used internationally.
    \510\ See D. Hirshleifer and S. Teoh, Limited Attention,
Information Disclosure, and Financial Reporting, Journal of
Accounting and Economics 36, 2003 at 337-386 (developing a
theoretical model where investors have limited attention and
processing power). The authors show that with partially attentive
investors, means of presenting information may have an impact on
stock price reactions, misvaluation, long-run abnormal returns, and
corporate decisions.
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    Another example of an item we propose to delete because it results
in reasonably similar disclosures as other requirements is Item
101(c)(1)(xi) of Regulation S-K. Item 101(c)(1)(xi) requires disclosure
of the amount spent on research and development activities for all
periods presented.\511\ Although Commission disclosure requirements use
different terminology than U.S. GAAP,\512\ the meaning under U.S. GAAP
is either no different or broader in scope than that in Regulation S-K.
The most notable difference in terminology is Regulation S-K's
reference to ``customer-sponsored'' research and development
activities, as compared to U.S. GAAP's reference to ``research and
development performed on behalf of others.'' Since the U.S. GAAP
terminology is broader in scope, deletion of Item 101(c)(1)(xi) of
Regulation S-K and Item 101(h)(4)(x) of Regulation S-K should not
change the information available to investors and other users.
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    \511\ Item 101(c)(1)(xi) of Regulation S-K for non-smaller
reporting companies and Item 101(h)(4)(x) of Regulation S-K for
smaller reporting companies.
    \512\ See ASC 730-10-50-1 and ASC 730-20-50-1.
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    Finally, an example of a change that might affect the extent of
information disclosed as a result of the disclosure no longer being
subject to the PSLRA safe harbor involves Item 303(b) of Regulation S-
K. Item 303(b) requires seasonality disclosures outside of the
financial statements in interim periods. U.S. GAAP \513\ similarly
requires seasonality disclosures, but this disclosure is required in
the notes to the interim financial statements. Eliminating the
seasonality disclosure requirements in Item 303(b) would result in the
removal of this information from MD&A, with the effect that investors
and other users would likely have this disclosure available only in the
notes to the financial statements, unless issuers voluntarily provide
it in both locations. In addition, as discussed above, investors may
not receive certain forward-looking information that may be
supplementally provided on a voluntary basis in connection with
seasonality disclosure in MD&A, as issuers do not receive safe harbor
protection under the PSLRA for information disclosed in the notes to
the financial statements.
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    \513\ ASC 270-10-45-11 states: Revenues of certain entities are
subject to material seasonal variations. To avoid the possibility
that interim results with material seasonal variations may be taken
as fairly indicative of the estimated results for a full fiscal
year, such entities shall disclose the seasonal nature of their
activities, and consider supplementing their interim reports with
information for 12-month periods ended at the interim date for the
current and preceding years.
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b. Integration of Commission Disclosure Requirements
    When we believe that Commission disclosure requirements overlap
with, but require information incremental to, other Commission
disclosure requirements, the proposed amendments integrate the
Commission disclosure requirements. In addition to the economic effects
of changing disclosure location and bright line disclosure thresholds,
as discussed above, integration of overlapping Commission disclosure
requirements would simplify issuer compliance efforts by reducing the
number of rules to consider and the extent of disclosures that need to
be provided. Integration of these requirements should also facilitate
more efficient information processing by investors.
    One example to illustrate the potential effects of the proposed
integration of Commission disclosure requirements is Item 101(d)(4) of
Regulation S-K. Item 101(d)(4) requires, when interim financial
statements are presented, a discussion of the facts that indicate that
the three-year financial data for geographic performance may not be
indicative of current or future operations. This requirement is similar
to requirements in Instruction 3 to Item 303(a) of Regulation S-K and
Instruction 4 to Item 303(b) of Regulation S-K to identify elements of
income which are not necessarily indicative of the issuer's ongoing
business, except that there is no explicit reference to ``geographic
areas'' in either item requirement. To integrate the requirements into
one location of Regulation S-K, we propose to amend Item 303 explicitly
to refer to ``geographic areas.'' As noted above, integration of these
requirements should facilitate more efficient information processing by
investors. We note, however, that to the extent that some investors
focus more on the business description section or find it is easier to
interpret geographic performance information when presented with other
business description disclosures, these investors might be negatively
affected if this information is relocated to MD&A.
c. Potential Modification, Elimination or FASB Referral of Commission
Disclosure Requirements
    When we believe that the Commission disclosure requirements overlap
with, but require information incremental to, U.S. GAAP requirements,
we solicit comment on certain Commission disclosure requirements to
determine whether to retain, modify, eliminate, or refer them to the
FASB for potential incorporation into U.S. GAAP. The comments received
in response to this proposal may inform both potential future
Commission rulemaking and FASB standard-setting activities. If the
disclosure requirements are ultimately

added to U.S. GAAP and removed from Commission rules, some information
would be relocated from outside the financial statements to within the
financial statements, giving rise to Disclosure Location
Considerations, potentially impacting issuers, investors, and other
users.
    In addition to the economic effects of changing disclosure location
and bright line disclosure thresholds, as discussed above, a movement
of disclosure requirements from Commission rules to U.S. GAAP may
potentially increase costs to investors if U.S. GAAP were to change in
a way that this information is no longer provided, as discussed
above.\514\ As noted above, the potential for such changes may be
mitigated by the FASB's transparent, public standard-setting process
and the Commission's oversight of the FASB.\515\ The specific economic
effects of any potential amendments to our disclosure requirements if
these incremental disclosures are subsequently incorporated into U.S.
GAAP would be considered in connection with any future rulemaking in
this area.
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    \514\ See discussion of current FASB projects with the potential
to broadly affect the proposals in section I.C.3.
    \515\ See discussion in section I.C.
---------------------------------------------------------------------------

    As an alternative to referring these requirements to the FASB for
potential incorporation into U.S. GAAP, we could simply eliminate the
overlapping requirements and forego disclosure of the incremental
information. Although such an alternative would simplify issuer
compliance efforts, it also may result in less informed investment
decisions and diminished investor protections. To help inform
commenters' assessment of possible future changes to Commission
disclosure requirements, we provide below salient examples examined in
academic studies of potential economic uses of the incremental
information from some of the overlapping provisions.
    Waived Defaults: If a default of an obligation exists, but
acceleration of the obligation has been waived for a period of time,
Rule 4-08(c) of Regulation S-X requires disclosure of the amount of the
obligation and the period of the waiver.\516\ This disclosure
requirement is incremental to U.S. GAAP, which sets forth requirements
for when to present debt subject to a covenant violation as a current
liability on the balance sheet, but does not require disclosure of the
amount of the obligation and the period of the waiver for all waived
defaults. Waivers often come with additional fees and concessions,\517\
which likely vary with the amount of the obligation and the period of
the waiver. These additional concessions typically include restrictions
on investing and financing.\518\ Therefore, information on the amount
of the obligation and the period of waiver might be beneficial to
investors and other users.
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    \516\ 17 CFR 210.4-08(c).
    \517\ See, e.g., M. Beneish and E. Press, Cost of Technical
Violation of Accounting-Based Debt Covenants, The Accounting Review
68, 1993 at 233-257.
    \518\ See G. Nini, D. C. Smith, and A. Sufi, Creditor Control
Rights and Firm Investment Policy, Journal of Financial Economics 92
(3), 2009 at 400-420.
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    Major Customers: Regulation S-K and U.S. GAAP both require
disclosures about major customers. However, the requirements in
Regulation S-K and U.S. GAAP differ in the following respects. First,
Item 101(c)(1)(vii) of Regulation S-K requires disclosure if loss of a
customer, or a few customers, would have a material adverse effect on a
segment, whereas U.S. GAAP requires disclosure, for each customer that
comprises 10 percent or more of total revenue, of that fact. Second,
Item 101(c)(1)(vii) of Regulation S-K requires disclosure of the name
of any customer that represents 10 percent or more of the issuer's
revenue and whose loss would have a material adverse effect on the
issuer. Since the requirements in Regulation S-K differ from the
current requirement in U.S. GAAP, the incorporation of these
requirements into U.S. GAAP would potentially change the disclosure
threshold and add a requirement to name certain customers.
    Academic research shows that customer-supplier linkages affect
stock performance--for instance, financial distress affecting the
customer often spreads to suppliers.\519\ Academic research also shows
that the customer-supplier relationship has significant effects on firm
capital structure and investment activities, which may affect an
investor's valuation of the firm. For instance, a firm is more likely
to make relationship-specific investments when its supply-chain partner
has lower leverage.\520\ Further, information on supply chain partners
may inform portfolio decisions.\521\ Therefore, incremental audited
information on customers might be beneficial to investors and other
users.
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    \519\ M. G. Hertzel, Z. Li, M. Officer, and K. Rodgers, Inter-
Firm Linkages and the Wealth Effects of Financial Distress along the
Supply Chain, Journal of Financial Economics 87, 2008 at 374-387.
Specifically, bankruptcy filings of customers are associated with
negative price effects to suppliers.
    \520\ See, e.g., Jayrant R. Kale and Husayn Shahrur. Corporate
Capital Structure and the Characteristics of Suppliers and
Customers, Journal of Financial Economics 83, 2007 at 321-365. A
firm may need to encourage its supply chain partners to make
relationship-specific investments. These relationship-specific
investments may lose value if the firm goes into liquidation or
bankruptcy. To reduce the chance of liquidation, the authors argue
that the firm could reduce the debt in its capital structure,
thereby reducing the risk that is associated with the relationship-
specific investment. The authors find support for their argument.
    \521\ For example, recent academic research has suggested that
public information about concentrated sales relationships may be
profitably incorporated into equity trading strategies. See, D.
Alldredge and D. Cicero D, Attentive Insider Trading, Journal of
Financial Economics 115, 2015 at 84-101.
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    Amounts and Terms of Financing Arrangements: Regulation S-X \522\
and U.S. GAAP \523\ both require certain disclosures of an issuer's
financing arrangements. However, Rule 5-02.19(b) incrementally requires
disclosure of the amount and terms (including commitment fees and the
conditions under which lines may be withdrawn) of unused lines of
credit for short-term financing, the weighted average interest rate on
short-term borrowings outstanding as of each balance sheet date, and
the amount of any lines of credit which support a commercial paper
borrowing or similar arrangement. Rule 5-02.22(b) requires similar
disclosure of the amount and terms (including commitment fees and the
conditions under which commitments may be withdrawn) of unused
commitments for long-term financial arrangements.
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    \522\ 17 CFR 210.5-02.19(b) and 17 CFR 210. 5-02.22(b).
    \523\ ASC 470-10-50.
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    Research shows that credit lines and short-term financing offer
sources of liquidity to companies, affect investment decisions, and
affect capital structure. With respect to saving cash, firms that may
face capital market frictions save more cash out of cash flow,\524\
while those with access to credit lines do not.\525\ Among firms with
access to credit lines, those with higher cash flows and cash holdings
have smaller drawdowns from their credit lines, suggesting a
substitution effect between internal and external liquidity.\526\ Also
among firms with credit lines, an increase in cash leads to an increase
in investment activity, while for those without credit lines, increases

in cash are associated with a decrease in investment (increase in
savings).\527\ Availability of unused loan commitment financing affects
capital structure decisions in that it is positively related to firm
leverage and negatively related to the cost of funds.\528\ Therefore,
detailed information about a firm's credit lines and short-term
financing might be beneficial to investors and other users.
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    \524\ H. M. Almeida, M. Campello, and M. Weisbach, The Cash Flow
Sensitivity of Cash, Journal of Finance 59, 2004 at 1777-1804.
    \525\ A. Sufi, Bank Lines of Credit in Corporate Finance: An
Empirical Analysis, Review of Financial Studies 22, 2009 at 1057-
1088.
    \526\ M. Campello, G. Erasmo, J. Graham, and C Harvey, Liquidity
Management and Corporate Investment During a Financial Crisis,
Review of Financial Studies 24 (6), 2011 at 1944-1979. This study
surveys 800 chief financial officers in early 2009 on how they
manage liquidity and investment.
    \527\ Id.
    \528\ R. L. Shockley, Bank Loan Commitments and Corporate
Leverage, Journal of Financial Intermediation 4, 1995 at 272-301.
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3. Outdated Requirements
    Outdated requirements are Commission disclosure requirements that
we believe have become obsolete as a result of the passage of time or
changes in the regulatory, business, or technological environment. The
proposed amendments would eliminate certain outdated Commission
disclosure requirements. Elimination of outdated disclosure
requirements would simplify issuer compliance efforts by reducing the
number of rules to consider and the extent of disclosures that need to
be provided. In some cases, the proposed amendments also would require
additional disclosure of information to reduce any loss of information
or decrease the burden for investors and other users to retrieve such
information from other sources. Such information is expected to be
readily available at minimal to no cost to issuers.
    The effect of these proposed amendments on investors and other
users will depend on the information. If investors do not use the
deleted information to make informed decisions, these amendments may
have limited effect on investors, or the amendments may have a positive
effect on investors since elimination of such disclosures may reduce
search costs and facilitate more efficient information processing.
This, in turn, could enhance the allocative efficiency of the market
and facilitate capital formation. If the information is used by
investors but can be retrieved from alternative sources with little or
no cost to investors (e.g., share prices), the effects of these
revisions on investors should be minimal. In other cases where the
information is less readily available from alternative sources (e.g.,
average exchange rates for each of the five most recent financial years
and any subsequent interim period), these amendments may lead to a loss
of information for investors and other users with a potentially adverse
effect on the cost of capital of issuers. We do not expect these
potential adverse effects to be significant as we attempt to propose
deletion of only those requirements that call for information that is
either no longer relevant or is readily available or can be derived
from alternative sources, and may, in fact, be more robust than the
information currently required to be disclosed. As noted above, some
proposed amendments require additional disclosure of information (e.g.,
the issuer's Internet address, if available) to mitigate the loss of
information or decrease the burden for investors and other users.
    One example of outdated disclosure is the disclosure of historical
market price information. We propose substituting this disclosure with
disclosure of the issuer's ticker symbol, which can be used to obtain
information on stock price, among other information. This additional
disclosure may help reduce any loss of information as well as
facilitate access to additional information while imposing minimal or
no cost on issuers and saving them the expense of disclosing
information that is readily available in more up to date form from
alternative sources.
4. Superseded Requirements
    Superseded requirements are Commission disclosure requirements that
we believe are inconsistent with recent legislation, more recently
updated Commission disclosure requirements, or more recently updated
U.S. GAAP requirements. The proposed amendments would conform existing
Commission disclosure requirements to the more recent requirements.
    Elimination or amendment of Commission disclosure requirements that
are inconsistent with recent legislation, more recently updated
Commission disclosure requirements, or more recently updated U.S. GAAP
may simplify issuer compliance efforts by resolving some confusion for
issuers. Where there are superseded requirements, issuers may need to
expend time and resources seeking advice from outside professionals or
guidance from Commission staff as to compliance with such requirements.
To the extent that, in practice, many issuers already comply with the
more recently adopted requirements, we do not expect these costs to be
significant. In addition, investors and other users may benefit from
the reduction in the variation of disclosure practices that could
result from confusion about the superseded requirements among issuers.
    One example of superseded disclosure is the requirement to report
the cumulative effect of a change in accounting principle in the income
statement, which the FASB eliminated from U.S. GAAP in 2005. Instead,
U.S. GAAP now requires the cumulative effect of retrospectively-applied
changes in accounting principle to be reflected in the opening balance
of retained earnings for the earliest period presented. The Commission
disclosure requirements, by contrast, continue to refer to a line on
the income statement for a cumulative effect of a change in accounting
principle. Eliminating references to the cumulative effect of a change
in accounting principle in the income statement in the Commission
disclosure requirements would resolve this contradiction and remove any
resulting issuer confusion.
    As another example, Rule 10-01(b)(2) of Regulation S-X requires,
for interim periods, the presentation of dividends per share applicable
to common stock on the face of the income statement. These rules are
inconsistent with U.S. GAAP, which prohibits presentation of dividends
per share on the face of the income statement. We propose to delete
Rule 10-01(b)(2) to conform to U.S. GAAP. We also propose to create a
new requirement to disclose the amount of dividends per share for each
class of shares, rather than only for common stock, as part of changes
in stockholders' equity for interim periods.\529\ Investors and other
users may benefit from the additional information on dividends per
share for each class of shares for interim periods. Shareholders may
use dividends to value an issuer.\530\ Information about dividends is
also important for debtholders.\531\ There may also be different
dividend preferences based on an investor's characteristics.\532\
Therefore, dividend disclosure is likely

to be important to investors. The proposed amendments, however, may
give rise to Disclosure Location Considerations, in that issuers would
now disclose dividends in a separate financial statement or in the
notes, instead of the face of the income statement. The proposed
amendments may create additional costs for issuers to prepare the
additional information (i.e., dividends per share for other classes of
stock). However, such costs would be limited to the extent that the
required information is already available from the preparation of other
aspects of the interim financial statements. Disclosure of additional
information may also lead to additional costs for issuers, including
Regulation A issuers, to comply with internal control over financial
reporting, audit, and XBRL tagging requirements, as applicable.
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    \529\ See supra notes 414, 415, and 416.
    \530\ See M. Miller and F. Modigliani, Dividend Policy, Growth,
and the Valuation of Shares, Journal of Business 34 (4), 1961 at
411-433 (providing an early theory of the effects of dividend policy
on share price). See also, F. Black, The Dividend Puzzle, The
Journal of Portfolio Management 2(2), 1976 at 5-8 (discussing
reasons why firms pay dividends).
    \531\ See P. Healy and K. Palepu, Effectiveness of Accounting-
Based Dividend Covenants, Journal of Accounting and Economics 12,
1990 at 97-123 (examining the effectiveness of dividend covenants in
mitigating conflicts of interests between stockholders and
bondholders). See also, H. Fan and S. Sundaresan, Debt Valuation,
Renegotiation, and Optimal Dividend Policy, Review of Financial
Studies 13 (4), 2000 at 1057-1099 (developing a theoretical
framework for optimal dividend policy and capital structure).