sufficient to protect the issuer in the event of counterparty
default.
    \375\ See ASC 260-10-50-1.
    \376\ See ASC 250-10-50-1 and 250-10-50-6 to 8.
    \377\ See ASC 805-50-45-1 to 5.
    \378\ See ASC 280-10-50-40.
    \379\ See ASC 932-235-50.
    \380\ See, e.g. letters from CAQ; Deloitte; E&Y KPMG; and PwC.
    \381\ Rule 3-15(c).
    \382\ See letter from NAREIT. The other Rule 3-15 amendments
described in Section III.B rely on this disclosure requirement that
is incremental to U.S. GAAP.
    \383\ See ASC 805; 810-10-50; and ASC 205-10-45.
    \384\ See letters from CAQ; E&Y Grant; and PwC.
    \385\ See letter from KPMG.
    \386\ See discussion in Section III.B.1.a below. See also
Section III.C.3 of the Proposing Release, supra note 1, at 51618.
    \387\ See E&Y letter. This commenter recommended that we delete
Rule 10-01(b)(2) of Regulation S-X and Item 601(b) of Regulation S-K
because these overlap with ASC 260-10-50-1. In addition, the
commenter recommended we delete all requirements related to changes
in reporting entities in Rule 10-01(b)(7) and Rule 8-03(b)(5) and
ask that the FASB reconsider the disclosure requirements in ASC 250-
10-50-6.
    \388\ Item 101(c)(1)(i) of Regulation S-K.
    \389\ See ASC 280
    \390\ See letters from CAQ; EEI and AGA; E&Y Grant; KPMG; and
PwC.
    \391\ See letters from CAQ; E&Y and PwC.
    \392\ See letter from E&Y.
---------------------------------------------------------------------------

    Most commenters, however, including some who recommended
eliminating certain disclosure requirements, supported the Commission
retaining most or all of these disclosure requirements and referring
them to the FASB for potential incorporation into U.S. GAAP.\393\ One
commenter specifically requested the Commission retain the disclosure
requirements for repurchase and reverse repurchase agreements as they
are complex financial instruments that can impact the financing and
liquidity of financial institutions and other businesses.\394\
---------------------------------------------------------------------------

    \393\ See letters from CAQ; Deloitte; E&Y IMA; KPMG; and PwC.
    \394\ See letter from Bean.
---------------------------------------------------------------------------

    Commenters had the following additional recommendations for both
the Commission and the FASB as it relates to the potential
incorporation of the Commission's disclosure requirements into U.S.
GAAP:
     Revisit the bright line disclosure thresholds in the
requirements (e.g., the 10% threshold in Rule 4-08(m)) and whether U.S.
GAAP should require similar bright line disclosure thresholds; \395\
---------------------------------------------------------------------------

    \395\ See letters from Clearing House and EEI and AGA.
---------------------------------------------------------------------------

     Clarify the concept of ``authorization of debt'' in Rule
4-08(f); \396\
---------------------------------------------------------------------------

    \396\ See letters from CAQ and Grant.
---------------------------------------------------------------------------

     Coordinate to provide enhanced disclosures for significant
accounting policies that provide a more comprehensive discussion of
critical accounting estimates, including more robust information about
underlying assumptions that are highly judgmental, as well as their
propensity to change; \397\
---------------------------------------------------------------------------

    \397\ See letters from CGCIV and FedEx.
---------------------------------------------------------------------------

     Consider the timing of the disclosure requirements related
to combinations of entities under common control because these
disclosures could be useful to investors on both an interim and annual
basis and ensure the disclosure objectives and requirements are clear;
\398\ and
---------------------------------------------------------------------------

    \398\ See letters from CAQ; E&Y and PwC.
---------------------------------------------------------------------------

     Work together to further reduce redundancies between
Commission disclosure requirements and U.S. GAAP, such as the oil and
gas disclosures in 17 CFR 229.1200 (``Item 1200'' of Regulation S-K)
and those in U.S. GAAP \399\ industry standards.\400\
---------------------------------------------------------------------------

    \399\ ASC 932
    \400\ See letters from CAQ; Deloitte; E&Y and PwC.
---------------------------------------------------------------------------

    We are retaining these requirements and referring all of the
disclosure requirements described in the table above to the FASB for
potential incorporation into U.S. GAAP.

IV. Outdated Requirements

A. Background

    The Commission proposed to amend certain requirements that have
become outdated as a result of the passage of time or changes in the
regulatory, business, or technological environments. These amendments
were intended to simplify issuer compliance efforts. Further, to reduce
any loss of information or increased burdens for investors, the
Commission also proposed to require additional disclosure of
information that is expected to be readily available to issuers.

B. Disclosure Requirements Outdated Due to Passage of Time

    In the Proposing Release, the Commission noted that some of its
disclosure requirements have become obsolete due to passage of time.
The table below describes each outdated requirement and what the
Commission proposed to eliminate.\401\
---------------------------------------------------------------------------

    \401\ These proposed amendments are discussed in further detail
in Section IV.B of the Proposing Release.

------------------------------------------------------------------------
                                    Commission
             Topic                  disclosure     Proposed amendment(s)
                                  requirement(s)
------------------------------------------------------------------------
Stale Transition Dates........  Rule 4-01(a)(3)    Delete references to
                                 and Note 6 to      transition dates
                                 Rule 8-01 of       given the passage of
                                 Regulation S-X;    these transition
                                 Forms S-3, F-1,    dates.
                                 F-3, F-4, and 20-
                                 F; and Exchange
                                 Act Rule 13a-
                                 10(g)(3), 15d-2,
                                 and 15d-10(g)(3).

Income Tax Disclosures........  Rule 4-            Delete the
                                 08(h)(1)(ii),      instructions to the
                                 the                rule that relate to
                                 parenthetical at   adoption of ASC 740--
                                 the end of Rule    Income Taxes because
                                 4-08(h)(1), part   all issuers are now
                                 of the             required to apply
                                 introductory       it.
                                 sentence of Rule
                                 4-08(h)(2), and
                                 all of Rule 4-
                                 08(h)(3) of
                                 Regulation S-X.
------------------------------------------------------------------------

    Commenters supported the proposed amendments to delete the
requirements above, which have become outdated.\402\ We are adopting
both of the amendments described in the table above as proposed.
---------------------------------------------------------------------------

    \402\ See letters from CAQ; Deloitte; E&Y Grant; PwC; and R.G.
Associates.
---------------------------------------------------------------------------

C. Disclosure Requirements Outdated due to Changes in the Regulatory,
Business, or Technological Environment

    In the Proposing Release, the Commission staff noted that some of
its disclosure requirements have become obsolete as the regulatory,
business, or technological environments have changed over time. For
example, some of the Commission's disclosure requirements are no longer
relevant, or some information required to be disclosed is no longer
readily available or can be derived from alternative sources. Below we
discuss these outdated requirements and the related proposed
amendments.
1. Market Price Disclosure
a. Proposed Amendments
    Item 201(a)(1) of Regulation S-K requires issuers to disclose the
following:
     The principal U.S. market(s) where its common equity is
traded. Foreign issuers must also disclose the principal established
foreign public trading market, if applicable. Where applicable, issuers
must disclose that there is no established public trading market for
their common equity.\403\
---------------------------------------------------------------------------

    \403\ Item 201(a)(1)(i) of Regulation S-K
---------------------------------------------------------------------------

     If the principal U.S. market is an exchange, the high and
low sale prices for their common equity for each quarter within the two
most recent fiscal years and subsequent interim period.\404\
---------------------------------------------------------------------------

    \404\ Item 201(a)(1)(ii) of Regulation S-K.
---------------------------------------------------------------------------

     If the principal U.S. market is not an exchange, 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.\405\
---------------------------------------------------------------------------

    \405\ Item 201(a)(1)(iii) of Regulation S-K. This provision
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.\406\
---------------------------------------------------------------------------

    \406\ Item 201(a)(1)(iv) of Regulation S-K.
---------------------------------------------------------------------------

     When Item 201(a)(1) disclosure is included in a Securities
Act registration statement or an Exchange Act proxy or information
statement, the price for their common equity as of the latest
practicable date.\407\
---------------------------------------------------------------------------

    \407\ Item 201(a)(1)(v) of Regulation S-K. 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 (Dec. 17, 1968)].
---------------------------------------------------------------------------

    Today, the daily market prices of most publicly traded common
equity securities, including those quoted on an automated quotation
system, are readily available free on numerous websites, including the
exchanges' or quotation systems' websites.\408\ On these websites,
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 websites allow users to download the daily historical data over
customized time horizons. These features result in more robust
information than the disclosure required by Item 201(a)(1) of
Regulation S-K.
---------------------------------------------------------------------------

    \408\ 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.
---------------------------------------------------------------------------

    As a result, the Commission proposed 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 would be required to 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 that 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.\409\ Also, such issuers would be required to disclose
the source and explain the nature of such quotations.
---------------------------------------------------------------------------

    \409\ 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.\410\ The proposed
amendments would also align Item 201(a)(1) with Item 501(b)(4) of
Regulation S-K.\411\
---------------------------------------------------------------------------

    \410\ 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, the Commission did not propose to
change the requirements in Form N-2 relating to sales prices and bid
information.
    \411\ 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. The proposed amendments to
Item 201(a)(1) are also consistent with those proposed to Item
501(b)(4) and the cover pages of Forms 10-K, 20-F, 40-F, 10-Q, and
8-K in a separate rulemaking. See FAST Act Modernization and
Simplification of Regulation S-K, Release No. 33-10425 (Oct. 10,
2017) [82 FR 50988 (Nov. 2, 2017)].

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

    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.
    The Commission also proposed to amend Item 9.A.4 of Form 20-F to be
consistent with the proposals related to Item 201(a)(1) of Regulation
S-K. Specifically, the Commission proposed 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 issuers whose common equity is not traded in any
established public trading market, disclosure of that fact would still
be required.
b. Comments on Proposed Amendments
    Commenters generally supported the proposed amendments.\412\ In the
Proposing Release the Commission asked if investors and issuers
understood the term ``established public trading market'' and whether
further guidance is needed to determine what constitutes ``limited or
sporadic quotations.'' \413\ One commenter recommended that the
Commission clarify and define these terms without suggesting specific
changes.\414\ Another commenter recommended that the Commission require
disclosure of trading symbol(s) for primary markets where all issued
``instruments'' are traded, and define clear standards for the ticker
notation so that all filers use the same notation.\415\ This commenter
also recommended disclosure of the security identifier (CUSIP) in
addition to the trading symbol and the ADR ratio,\416\ as applicable.
---------------------------------------------------------------------------

    \412\ See letters from E&Y EEI and AGA; FedEx; KPMG; R.G.
Associates; and XBRL US, Inc. (Oct. 3, 2016) (``XBRL'').
    \413\ See Section IV.B.4 of the Proposing Release, supra note 1,
at 51638.
    \414\ See letter from E&Y.
    \415\ See letter from XBRL.
    \416\ ADR ratio is the number of foreign shares represented by
one ADR.
---------------------------------------------------------------------------

c. Final Amendments
    To help investors locate listed securities and current trading
prices, we are adopting the amendment to Item 201(a)(1) of Regulation
S-K and Item 9.A.4 of Form 20-F substantially as proposed, with minor
modifications. First, we are removing the term ``established'' from
``principal established foreign public trading market'' in Item
201(a)(1) to be consistent with the scope of disclosure required for
domestic issuers in the U.S. market and for foreign private issuers in
Item 9.A.4. Second, we are retaining the clarification currently in
Item 9.A.4 that ``principal market'' means ``outside the host market''
as this language was inadvertently proposed for elimination. Finally,
we are adding the term ``principal'' in front of ``host market'' in the
amended first sentence of Item 9.A.4. to be consistent with Item 201,
which requires disclosure of ``principal United States market(s).''
\417\
---------------------------------------------------------------------------

    \417\ ``Host country,'' as defined in General Instruction F. of
Form 20-F, means the United States and its territories, as the term
is used in Form 20-F.
---------------------------------------------------------------------------

    In addition, while we acknowledge the commenter's recommendations
that we also require disclosure of trading symbol(s) for all issued
``instruments,'' as well as CUSIP and ADR ratio when applicable, we are
not adopting that suggestion as it is beyond the scope of this
rulemaking.
2. Other
    The table below describes each of the remaining disclosure
requirements that have become obsolete as the regulatory, business, or
technological environments changed over time, and the related proposed
amendments.\418\
---------------------------------------------------------------------------

    \418\ These proposed amendments are discussed in further detail
in Section IV.B of the Proposing Release.

------------------------------------------------------------------------
                                    Commission
             Topic                  disclosure      Proposed amendments
                                  requirement(s)
------------------------------------------------------------------------
Available Information--Public   Item 101(e)(2)     Delete the
 Reference Room.                 and Item           requirements to
                                 101(h)(5)(iii)     identify the Public
                                 of Regulation S-   Reference Room and
                                 K; Forms S-1, S-   disclose its
                                 3, S-4, S-11, F-   physical address and
                                 1, F-3, and F-4;   phone number. The
                                 Item 1118(b) of    Commission's Public
                                 Regulation AB;     Reference Room is
                                 and Forms SF-1,    rarely used by the
                                 SF-3, N-1A, N-2,   public to obtain or
                                 N-3, N-5, N-6,     review issuer
                                 and N-8B-2.        filings, as paper
                                                    filings are now only
                                                    permitted (and
                                                    sometimes required)
                                                    in very limited
                                                    circumstances.\419\
                                                    Also delete the
                                                    instruction in
                                                    certain N Forms on
                                                    how to send a
                                                    written request by
                                                    mail to the SEC's
                                                    Public Reference
                                                    Room to obtain
                                                    certain hard copy
                                                    information.
                                Item 101(e)(2) of  Retain the
                                 Regulation S-K;    requirement to
                                 and Forms S-1, S-  disclose the
                                 3, S-4, S-11, F-   Commission's
                                 1, F-3, F-4, 20-   Internet address and
                                 F, SF-1, SF-3,     a statement that
                                 and N-4.           electronic SEC
                                                    filings are
                                                    available there.
                                                    However, delete the
                                                    qualifier ``if you
                                                    are an electronic
                                                    filer'' because all
                                                    but a limited number
                                                    of issuers are now
                                                    required to file
                                                    electronically.\420\
                                                    Also expand this
                                                    requirement to Forms
                                                    20-F and F-1 in
                                                    order to align the
                                                    requirements for
                                                    foreign private
                                                    issuers with
                                                    domestic issuers.
Available Information--Issuer   Items 101(e) and   Require all issuers
 Internet Address.               101(h)(5) of       to disclose their
                                 Regulation S-K;    Internet addresses
                                 and Forms S-3, S-  (or, in the case of
                                 4, F-1, F-3, F-    asset-backed
                                 4, 20-F, SF-1,     issuers, the address
                                 and SF-3.          of the specified
                                                    transaction party),
                                                    if they have one.
                                                    Many non-accelerated
                                                    filers already
                                                    disclose their
                                                    Internet addresses
                                                    \421\ and the
                                                    Commission has
                                                    provided guidance
                                                    about the liability
                                                    framework for
                                                    certain types of
                                                    disclosures on
                                                    company websites.
                                                    Further, we believe
                                                    that such a
                                                    requirement would
                                                    help ensure that
                                                    investors are aware
                                                    of an additional
                                                    resource for
                                                    information about
                                                    issuers.

Exchange Rate data............  Item 3.A.3 of      Delete the
                                 Form 20-F.         requirement for
                                                    foreign private
                                                    issuers to provide
                                                    exchange rate data
                                                    when financial
                                                    statements are
                                                    prepared in a
                                                    currency other than
                                                    the U.S. dollar.
                                                    Exchange rate
                                                    information is
                                                    readily available
                                                    free on a number of
                                                    websites.\422\
Foreign Private Issuer Initial  Instruction 2 to   Remove the reference
 Public Offering--Age of         Item 8.A.4 of      to a waiver and
 Financial Statements.           Form 20-F.         clarify the facts
                                                    and circumstances
                                                    when foreign private
                                                    issuers may comply
                                                    with the aging
                                                    requirement to
                                                    include audited
                                                    financial statements
                                                    in an initial public
                                                    offering that are
                                                    not older than 15
                                                    months compared to
                                                    the 12 months aging
                                                    requirement.
------------------------------------------------------------------------

    Commenters supported the proposed amendments and agreed with the
reasons provided in the Proposing Release.\423\ We are adopting all of
the amendments described in the table above as proposed, which will
remove obsolete disclosure requirements and reduce issuers' compliance
burdens.
---------------------------------------------------------------------------

    \419\ See Rules 14 [17 CFR 232.14], 101 [17 CFR 232.101], and
102 [17 CFR 232.102] of Regulation S-T.
    \420\ See Rules 100 [17 CFR 232.100] and 101 [17 CFR 232.101] of
Regulation S-T.
    \421\ Existing rules only require the disclosure by accelerated
and large accelerated filers.
    \422\ See note [451].
    \423\ See letters from E&Y KPMG; and R.G. Associates.
---------------------------------------------------------------------------

V. Superseded Requirements

A. Background

    As accounting, auditing, and disclosure requirements have changed
over time, inconsistencies have arisen between the newer requirements
and existing Commission disclosure requirements. The Commission
proposed amendments to update Commission disclosure requirements to
reflect more recently updated U.S. GAAP requirements or more recently
updated Commission disclosure requirements.

B. Disclosure Requirements Superseded by U.S. GAAP

    The Commission staff has observed in its filing reviews that, in
practice, issuers are able to successfully navigate inconsistencies
between newer accounting and disclosure requirements and existing
Commission disclosure requirements 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.\424\ However, the Commission sought to simplify compliance
efforts by proposing changes to several disclosure requirements that
the Commission believed were superseded by U.S. GAAP.\425\
---------------------------------------------------------------------------

    \424\ See Section I.C.I of the Proposing Release, supra note 1,
at 51611.
    \425\ Some of the proposed amendments to eliminate superseded
Commission disclosure requirements apply both to issuers that report
under U.S. GAAP and IFRS. We do not expect the 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.
---------------------------------------------------------------------------

1. Gains or Loss on Sale of Properties by REITS
    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.\426\ U.S. GAAP, however, restricts that
presentation to gains and losses on disposals that meet the definition
of discontinued operations.\427\ As a result, the Commission proposed
to eliminate Rule 3-15(a)(1) of Regulation S-X.
---------------------------------------------------------------------------

    \426\ Rule 3-15(a)(1) of Regulation S-X.
    \427\ ASC 205-20-45-1B.
---------------------------------------------------------------------------

    Commenters were supportive of the proposed amendment.\428\ We are
adopting the elimination of Rule 3-15(a)(1) of Regulation S-X as
proposed. We believe this amendment will simplify compliance for
issuers by eliminating the disclosure requirement in Rule 3-15(a)(1) of
Regulation S-X that conflicts with the requirement in U.S. GAAP.
---------------------------------------------------------------------------

    \428\ See letters from CAQ; Deloitte; E&Y Grant; KPMG; NAREIT;
PwC; and R.G. Associates.
---------------------------------------------------------------------------

2. Consolidation
a. Proposed Amendments
    The Commission provided guidance on the presentation of
consolidated and combined financial statements when it first issued
Regulation S-X in 1940.\429\ Since that time, certain U.S. GAAP
consolidation requirements have changed significantly, creating
inconsistencies between Regulation S-X and U.S. GAAP.\430\ For
instance, Article 3A of Regulation S-X, Consolidated and Combined
Financial Statements, includes several inconsistencies with U.S. GAAP
related to difference in fiscal periods, the Bank Holding Company Act
of 1956 (``BHC Act''), and intercompany transactions. The table below
describes each requirement related to consolidation that the Commission
proposed to eliminate and the reason for its proposed elimination.\431\
---------------------------------------------------------------------------

    \429\ See Adoption of Regulation S-X, (March 6, 1940) [5 FR 954
(Mar. 6, 1940)].
    \430\ For example, Accounting Research Bulletin (``ARB'') No.
51, Consolidated Financial Statements (``ARB No. 51''), was issued
in 1959. Since then, the FASB has issued additional guidance,
including but not limited to 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.
    \431\ These proposed amendments are discussed in further detail
in Section V.B.4. of the Proposing Release.

------------------------------------------------------------------------
                                    Commission
             Topic                  disclosure      Proposed amendments
                                  requirement(s)
------------------------------------------------------------------------
Consolidation--Difference in    Rule 3A-02(b)      Delete the
 Fiscal Periods.                 \432\ and Rule     requirements because
                                 3A-02(b)(2)        U.S. GAAP \434\
                                 \433\ of           requires
                                 Regulation S-X.    consolidation
                                                    despite different
                                                    fiscal periods and
                                                    the fiscal periods
                                                    of combined entities
                                                    must differ by less
                                                    than three months.
Consolidation--Bank Holding     Rule 3A-02(c) of   Delete the
 Company Act of 1956.            Regulation S-X     requirement because
                                 \435\.             U.S. GAAP \436\ does
                                                    not provide an
                                                    exception to
                                                    consolidation for
                                                    subsidiaries of
                                                    issuers subject to
                                                    the BHC Act in
                                                    relation to a
                                                    divestiture.

Consolidation--Intercompany     Rule 3A-04 of      Delete the
 Transactions Generally.         Regulation S-X     requirement because
                                 \437\.             U.S. GAAP \438\
                                                    requires the
                                                    elimination of
                                                    intercompany
                                                    transactions from
                                                    consolidated
                                                    financial
                                                    statements.
Consolidation--Intercompany     Rule 4-08(k)(2)    Delete the
 Transactions in Separate        of Regulation S-   requirement to
 Financial Statements.           X \439\.           disclose, in
                                                    separate financial
                                                    statements of a
                                                    subset of a
                                                    consolidated
                                                    group,\440\ the
                                                    intercompany
                                                    transactions which
                                                    are eliminated or
                                                    not eliminated,
                                                    because U.S. GAAP
                                                    \441\ prohibits
                                                    elimination of these
                                                    transactions in the
                                                    separate financial
                                                    statements.
Dividends Per Share in Interim  Rule 8-03(a)(2)    Delete the
 Financial Statements.           and Rule 10-       requirements to
                                 01(b)(2) of        present dividends
                                 Regulation S-X     per share on the
                                 \442\.             face of the income
                                                    statement for
                                                    interim periods
                                                    because U.S. GAAP
                                                    \443\ (1) prohibits
                                                    this disclosure on
                                                    the face of the
                                                    financial statements
                                                    and (2) instead
                                                    permits it in the
                                                    notes to the
                                                    financial
                                                    statements.
                                Rule 3-04 of       Extend the annual
                                 Regulation S-X     disclosure
                                 \444\.             requirement of
                                                    changes in
                                                    stockholders' equity
                                                    and the amount of
                                                    dividends per share
                                                    for each class of
                                                    shares to interim
                                                    periods\445\
------------------------------------------------------------------------

b. Comments on Proposed Amendments
---------------------------------------------------------------------------

    \432\ 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.
    \433\ 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.
    \434\ ASC 810-10-15-11.
    \435\ 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.
    \436\ 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.
    \437\ If an issuer does not eliminate intercompany transactions
from its financial statements, Regulation S-X requires it to explain
why and how the transactions are treated.
    \438\ See ASC 323-10-35-5a and ASC 810-10-45-1.
    \439\ 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.
    \440\ A subset of a consolidated group that may present separate
financial statements includes financial statements of the
registrant, certain investees, or subsidiaries.
    \441\ ASC 810-10-45-1.
    \442\ Regulation S-X requires, for interim periods, the
presentation of dividends per share on the face of the income
statement. 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.
    \443\ See ASC 260-10-45-5.
    \444\ Rule 3-04 of Regulation S-X allows annual disclosures of
changes in stockholders' equity, including dividends per share
amounts, to be provided in a note to the financial statements or in
a separate financial statement.
    \445\ The option to present dividend per share disclosures in a
separate financial statement does not comply with U.S. GAAP, which
prohibits this per share presentation on the face of financial
statements. However, the Commission saw 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. The Commission believed 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 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, the Commission proposed 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,
the Commission did 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. The Commission expected 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.
---------------------------------------------------------------------------

    Commenters were generally supportive of the proposed
amendments.\446\ Some commenters asked for clarification on whether the
amendment to extend the changes in stockholders' equity and non-
controlling interests disclosure requirement to interim periods would
be presented only for the year-to-date period, or for quarterly
period(s) as well.\447\ One commenter supported the proposed
elimination of Rule 8-03(a)(2) and Rule 10-01(b)(2) in Regulation S-X,
but questioned whether the extension of the disclosure requirement in
Rule 3-04 of Regulation S-X to interim periods was necessary or
efficient.\448\ As an alternative, the commenter recommended amending
Regulation S-X to move the dividend per share disclosure requirements
from the face of the financial statements to the notes to the financial
statements, which would eliminate the conflict with U.S. GAAP.
---------------------------------------------------------------------------

    \446\ See letters from CAQ; Deloitte; E&Y Grant; KPMG; PwC; and
R.G. Associates.
    \447\ See letters from CAQ and PwC.
    \448\ See letter from E&Y.
---------------------------------------------------------------------------

    One commenter observed the need to update Rule 6-03(c)(1)(i) of
Regulation S-X, which also has been superseded by U.S. GAAP.\449\ The
commenter noted the Commission disclosure requirement permits the
consolidation of the financial statements of registered investment
companies and business development companies only with the financial
statements of subsidiaries which are investment companies, whereas U.S.
GAAP also permits consolidation when an investment company holds a
controlling financial interest in an operating entity that provides
services to the investment company.\450\
---------------------------------------------------------------------------

    \449\ See letter from E&Y.
    \450\ ASC 946-810-45.
---------------------------------------------------------------------------

c. Final Amendments
    We are adopting the amendments as proposed with one minor change.
As suggested by commenters, the final amendments clarify that Rule 3-04
of Regulation S-X requires both the year-to-date information and
subtotals for each interim period.
    The extension of the disclosure requirement in Rule 3-04 of
Regulation S-X may create some additional burden for issuers, including
Regulation A issuers, because it will require disclosure of dividends
per share for each class of shares, rather than only for common stock,
and disclosure of changes in stockholders' equity in

interim periods.\451\ However, as noted in the Proposing Release, we
expect this burden will be minimal, as the required information is
already available from the preparation of other aspects of the interim
financial information such as the balance sheet and earnings per
share.\452\ The amended rule will require companies to provide
information on the dividends issued and the relationship the dividends
have to stockholders' equity in one place, which may help investors
understand some of the strategic decisions made by management, such as
dividend payout versus share buyback.
---------------------------------------------------------------------------

    \451\ ASC 505-10-50-2 requires disclosure of changes in the
separate accounts comprising stockholders' equity (e.g., common
stock, additional paid-in capital, retained earnings) 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.
    \452\ Some registrants already include the disclosure required
by Rule 3-04 in the Form 10-Q. U.S. GAAP also requires disclosure of
significant changes in financial position, like stockholders'
equity, in interim reporting. ASC 270-10-50.
---------------------------------------------------------------------------

    In response to a commenter's suggestion, we are deleting the
requirements for consolidation by investment companies in Regulation S-
X \453\ because it conflicts with U.S. GAAP. The U.S. GAAP requirement
is broader and additionally requires consolidated financial statements
when a reporting entity has a controlling financial interest in another
entity.
---------------------------------------------------------------------------

    \453\ Rule 6-03(c)(1)(i) of Regulation S-X.
---------------------------------------------------------------------------

3. Development Stage Companies
    U.S. GAAP previously required presentation of cumulative financial
information from inception and related disclosures for development
stage companies.\454\ Regulation S-X requires the U.S. GAAP disclosures
for development stage companies in interim periods.\455\ In June 2014,
the FASB eliminated the U.S. GAAP disclosure requirements for
development stage companies.\456\ Accordingly, the Commission proposed
to eliminate the superseded U.S. GAAP disclosure requirement for
development stage companies in Rule 8-03(b)(6) and Rule 10-01(a)(7).
---------------------------------------------------------------------------

    \454\ FASB ASC Topic 915, Development Stage Entities.
    \455\ See Rule 8-03(b)(6) and Rule 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.
    \456\ 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. After public comment, the FASB determined that the
disclosure provided ``information that had limited relevance.''
---------------------------------------------------------------------------

    Commenters supported our proposal to eliminate these
requirements.\457\ Some of these commenters also recommended deleting
the definition of development stage company in in Rule 1-02(h) of
Regulation S-X.\458\
---------------------------------------------------------------------------

    \457\ See letters from CAQ; Deloitte; E&Y Grant; KPMG; PwC; and
R.G. Associates.
    \458\ See letters from CAQ; Deloitte; Grant; and PwC. The
definition of development stage entities under U.S. GAAP was the
same as development stage companies under Regulation S-X.
---------------------------------------------------------------------------

    We are adopting the amendments as proposed. We are not deleting the
definition of development stage company in Rule 1-02(h) of Regulation
S-X as it is used in other Commission requirements (e.g., Rule
251(b)(3) of Regulation A and Rule 419(a)(2)(i) of Regulation C). As a
result, we believe the definition in Rule 1-02(h) of Regulation S-X
continues to be useful when applying these other Commission
requirements.
4. Insurance Companies
a. Proposed Amendments
    17 CFR 210.7-02(b) (``Rule 7-02(b)'' of 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. In the proposing release, the
Commission proposed to eliminate this rule, as the Commission did not
believe that issuers under the Securities Act or the Exchange Act
currently rely on Rule 7-02(b) of Regulation S-X as a basis to report
under statutory accounting requirements.\459\
---------------------------------------------------------------------------

    \459\ 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; and Form N-6, Item 24(b), Instruction 1.
The proposed elimination of Rule 7-02(b) would not change these
forms.
---------------------------------------------------------------------------

    The Commission also proposed two other amendments related to
Insurance Companies and Regulation S-X. The first amendment relates to
the separate presentation on the balance sheet of an asset called
``reinsurance recoverable on paid losses.'' \460\ The Commission
proposed to delete the reference to ``paid losses'' in this line item
because U.S. GAAP was revised in 1992 to allow reinsurance recoverable
receivables on paid and unpaid losses to be presented together.\461\
The second amendment relates to the definition of ``Separate Account
Assets'' that are presented separately as a summary total on the
balance sheet.\462\ U.S. GAAP defines differently separate account
assets that are required to be reported as a summary total.\463\ Thus,
the Commission proposed 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.
---------------------------------------------------------------------------

    \460\ See Rule 7-03(a)(6) of Regulation S-X.
    \461\ In 1992 the FASB issued SFAS No. 113, which established
that reinsurance receivables on unpaid losses are also assets and
may be presented together or separately with other reinsurance
receivables. See paragraphs 74 to 76 in SFAS No. 113 and paragraph
76 was codified in ASC 944-20-50-5.
    \462\ See Rule 7-03(a)(11) of Regulation S-X.
    \463\ See ASC 944-80-25-1 to 5.
---------------------------------------------------------------------------

b. Comments on Proposed Amendments
    Many commenters supported all three proposals.\464\ However, some
commenters opposed the elimination of the ability of mutual life
insurance companies to utilize statutory accounting principles for
registration of insurance products under the Securities Act.\465\ These
commenters stated that the preparation of U.S. GAAP financial
statements would impose significant financial and administrative
burdens on mutual life insurers. These commenters indicated that if the
amendments to Rule 7-02(b) were adopted, a mutual insurance company
issuing a general account insurance product would have to comply with
the requirement to provide U.S. GAAP financial statements in Form S-1
or S-3, and as a result, mutual life insurance companies that do not
already prepare U.S. GAAP financial statements may limit their
offerings of general account insurance products. One commenter
suggested that the Commission should expand Rule 7-02(b) to allow its
application to all insurance companies that do not otherwise prepare
U.S. GAAP financial statements.\466\ Other commenters advised that
elimination of the rule should involve a full analysis of the

potential costs and benefits.\467\ These commenters also outlined the
relevance of financial statements prepared under statutory accounting
principles for general account insurance products.
---------------------------------------------------------------------------

    \464\ See letters from CAQ; Deloitte; E&Y Grant; KPMG; PwC; and
R.G. Associates.
    \465\ See letters from American Council of Life Insurers (Oct.
21, 2016) (``ACLI''); Committee of Annuity Insurers (Oct. 11, 2016);
and Northwestern Mutual Life Insurance Company (Nov. 1, 2016)
(``Northwestern Mutual'').
    \466\ See letter from Committee of Annuity Insurers.
    \467\ See letters from ACLI and Northwestern Mutual.
---------------------------------------------------------------------------

c. Final Amendments
    After further consideration and in light of the concerns expressed
by commenters, we are not adopting the proposed amendment to eliminate
Rule 7-02(b). We are adopting the amendments to Rule 7-03(a)(6) and 7-
03(a)(11) as proposed to simplify compliance for issuers by removing
the elements of those rules that conflict with U.S. GAAP.
5. Extraordinary Items
a. Proposed Amendments
    Various Commission disclosure requirements and forms refer to
extraordinary items. In January 2015, the FASB eliminated extraordinary
items from U.S. GAAP.\468\ To update Commission disclosure
requirements, the Commission proposed to delete references to
extraordinary items in our rules and forms.\469\ The Commission
proposed to delete the requirement in Item 302(a)(1) of Regulation S-K
to disclose ``income (loss) before extraordinary items and cumulative
effect of a change in accounting'' in supplemental quarterly financial
information, and in its place, require disclosure of ``Income (loss).''
The Commission also proposed amendments to the investment company
registration forms (Form N-1A, Form N-3, Form N-4, and Form N-6) to
replace the outdated reference to the U.S. GAAP definition of
extraordinary items with a definition of extraordinary expenses \470\
The Proposing Release indicated that the proposed amendments were not
intended to change the content required to be presented in these
forms.\471\
---------------------------------------------------------------------------

    \468\ 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.
    \469\ The proposed amendments apply to the following rules: Rule
1-02(w)(3), Rule 1-02(bb)(1)(ii), Rule 3-01(c)(2), Rule 3-01(c)(3),
Rule 3-15(a)(1), Rule 3A-02(b)(2), Rule 5-03(b), Rule 7-04, Rule 8-
03(a)(2), Rule 8-04(b)(3), Rule 9-04, Rule 10-01(b)(4), Rule 11-
02(b)(7), and Instruction 1 to Rule 11-02; Item 10(b)(2), Item
302(a)(1), and Item 302(a)(3) of Regulation S-K; Securities Act Rule
405, Exchange Act Rule 3a51-1(a)(2)(i)(A)(3); Exchange Act Rule 12b-
2; Exchange Act Rule 13a-10(b); and Exchange Act 15d-10(b). The
proposed amendments also apply to Form X-17A-5.
    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''
would be deleted, but the exclusion of non-recurring items from net
income would 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 we believe 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.
    \470\ The proposed definition is consistent with the historical
U.S. GAAP definition of ``extraordinary items.''
    \471\ 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. The proposed amendment did not seek to
change the requirement that extraordinary expenses be excluded in
the fee table and included in footnote disclosure reflecting
extraordinary expenses if they would have a material effect. See
Section V.B.11 of the Proposing Release.
---------------------------------------------------------------------------

b. Comments on Proposed Amendments
    While commenters \472\ generally supported the proposed amendments,
some commenters \473\ recommended requiring disclosure of ``income
(loss) from continuing operations'' and ``net income (loss)'' where the
existing rule previously required ``income (loss) before extraordinary
items and cumulative effect of a change in accounting principle.'' This
recommendation was based on a view that: (1) It was unclear what income
statement line ``income (loss)'' referred to; and (2) the alternative
formulation would highlight the effects of discontinued operations.
Additionally, these commenters recommended that the Commission
reconsider the per share financial metrics required to be disclosed in
interim periods, such as the disclosure requirement in Item 302(a)(1)
of Regulation S-K,\474\ and make the metrics consistent with measures
that are presented on the face of the interim income statements. One
commenter expressly supported the proposed amendments to retain the
historical U.S. GAAP definition of ``extraordinary expenses'' in
certain investment company registration forms.\475\
---------------------------------------------------------------------------

    \472\ See letters from CAQ: Deloitte; E&Y Grant; KPMG; PwC; and
R.G. Associates.
    \473\ See letters from CAQ, E&Y, and PwC.
    \474\ Item 302(a)(1) of Regulation S-K requires per share data
based upon the income (loss) before extraordinary items and
cumulative effect of a change in accounting.
    \475\ See letter from ICI.
---------------------------------------------------------------------------

c. Final Amendments
    We are adopting the amendments as proposed, eliminating all
references to extraordinary items and adding a definition of
extraordinary expenses within certain N-Forms. We are also making
several revisions recommended by commenters related to Item 302(a)(1).
Specifically, we are replacing the proposed reference to ``income
(loss)'' with ``income (loss) from continuing operations'' and the
reference to ``per share data based upon such income'' with ``per share
data based upon income (loss) from continuing operations'' \476\ and
``per share data based upon net income (loss).'' These additional
changes should help to simplify the resulting disclosure and reduce any
confusion for issuers.
---------------------------------------------------------------------------

    \476\ See ASC 260-10-45-2.
---------------------------------------------------------------------------

6. Other
    The table below describes each of the remaining disclosure
requirements that are superseded by U.S. GAAP and the related proposed
amendments.\477\
---------------------------------------------------------------------------

    \477\ These proposed amendments are discussed in further detail
in Section V.B. of the Proposing Release.
    \478\ See Amendments to Rules and Forms, Release No. 33-6958A,
(Oct. 1, 1992) [57 FR 45287 (Oct. 1, 1992)].
    \479\ See ASC 270-10-50-7, which refers to ASC 805-10-50-2h.3
for purposes of interim disclosures.

------------------------------------------------------------------------
                                   Commission
            Topic                  disclosure        Proposed amendments
                                 requirement(s)
------------------------------------------------------------------------
Statement of Cash Flows.....  Rule 3-02 of          Amend to replace the
                               Regulation S-X.       reference to
                                                     ``changes in
                                                     financial
                                                     position'' in the
                                                     title with ``cash
                                                     flows'' because
                                                     similar amendments
                                                     to various rules
                                                     and forms were made
                                                     in 1992.\478\
Consolidation--Interim        Rule 8-03(b)(4) and   Delete reference to
 Financial Statements--Pro     Rule 10-01(b)(4) of   when a business
 Forma Business Combination    Regulation S-X.       combination should
 Information.                                        be assumed to have
                                                     occurred in pro
                                                     forma financial
                                                     information because
                                                     U.S. GAAP \479\
                                                     requires reflection
                                                     of the business
                                                     combination at the
                                                     beginning of the
                                                     preceding fiscal
                                                     year.

Bank Holding Companies--Net   Rule 9-03.3 of        Delete requirement
 Presentation.                 Regulation S-X.       for 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 agreements to
                                                     repurchase because
                                                     U.S. GAAP \480\
                                                     permits net
                                                     presentation under
                                                     certain conditions.
Bank Holding Companies--      Rule 9-03.10(1) and   Delete the
 Goodwill.                     Rule 9-04.14(c) of    parenthetical
                               Regulation S-X.       reference to net of
                                                     amortization in
                                                     Rule 9-03.10(1) and
                                                     delete the
                                                     reference to
                                                     goodwill
                                                     amortization in
                                                     Rule 9-04.14(c)
                                                     because U.S. GAAP
                                                     \481\ prohibits
                                                     amortization of
                                                     goodwill.
Discontinued Operations.....  Instruction 1 to      Replace the
                               Rule 11-02(b) of      reference to
                               Regulation S-X; and   ``segments'' with
                               Item 302(a)(3) of     ``discontinued
                               Regulation S-K.       operations''
                                                     because the
                                                     definition of
                                                     ``discontinued
                                                     operations'' under
                                                     U.S. GAAP \482\ has
                                                     changed and no
                                                     longer incorporates
                                                     the term
                                                     ``segment.''
Pooling-of-Interests........  Rule 11-02(c)(2)(ii)  Delete references to
                               of Regulation S-X;    ``pooling-of-
                               Rule 405 of           interests'' and
                               Regulation C; Item    replace them with
                               4A(b)(1)(iii) of      references to
                               Form F-1;             ``combinations of
                               Instruction 1 to      entities under
                               paragraphs (e) and    common control''
                               (f) of Item 3 of      because similar
                               Form F-4; Item        amendments were
                               10(c)(3) of Form F-   made in 2009.\483\
                               4; Introduction to
                               Item 12 of Form F-
                               4; and Item
                               12(b)(2)(iv) of
                               Form F-4.
Statement of Comprehensive    Rule 1-02, Rule 3-    Replace (or, in some
 Income.                       02, Rule 3-03, Rule   cases, supplement)
                               3-04, Rule 3-05,      the existing
                               Rule 3-12, Rule 3-    references to
                               14, Rule 3-17, Rule   ``income
                               4-08, Rule 4-10,      statement'' and
                               Rule 5-02, Rule 5-    variations thereof
                               03, Rule 5-04, Rule   with ``statement of
                               6-07, Rule 6A-04,     comprehensive
                               Rule 6A-05, Rule 7-   income'' because
                               03, Rule 7-04, Rule   the FASB has
                               7-05, Rule 8-02,      replaced the income
                               Rule 8-03, Rule 8-    statement with the
                               05, Rule 8-06, Rule   statement of
                               9-03, Rule 9-04,      comprehensive
                               Rule 9-05, Rule 9-    income.\485\ Also
                               06, Rule 10-01,       amend to clarify
                               Rule 11-02, Rule 11-  the two
                               03, Rule 12-16,       presentation
                               Rule 12-17, Rule 12-  options for the
                               18, Rule 12-28, and   statement by
                               Rule 12-29 of         defining the term
                               Regulation S-X;       ``statement of
                               Item 10, Item 302,    comprehensive
                               and Item 303 of       income'' in
                               Regulation S-K;       Regulation S-X.
                               Item 1010 of
                               Regulation M-A;
                               Securities Act Rule
                               158; Exchange Act
                               Rule 15c3-1g, 17a-
                               5, 17a-12, 17g-3,
                               and 17h-1T; Forms 1-
                               A , 1-K, 1-SA, 20-
                               F, 11-K, and X-17A-
                               5.\484\
                              Rule 5-03, Rule 7-    Amend to add line
                               04, and Rule 9-04     items to present
                               of Regulation S-      comprehensive
                               X.\486\               income and related
                                                     items in the
                                                     statement of
                                                     comprehensive
                                                     income.
                              Rule 5-02.30(a) and   Amend to include
                               Rule 7-03(a)(23)(a)   accumulated other
                               of Regulation S-X;    comprehensive
                               and Form X-17-A-5.    income in its list
                                                     of balance sheet
                                                     line items. Also
                                                     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 required to
                                                     be presented
                                                     separately under
                                                     U.S. GAAP.
Cumulative Effect of Changes  Rule 1-02, Rule 3-    Delete references to
 in Accounting Principles.     01, Rule 3-15, Rule   cumulative effect
                               5-03, Rule 7-04,      of a change in
                               Rule 8-03, Rule 8-    accounting
                               04, Rule 9-04, Rule   principle because
                               10-01, Rule 11-02,    the FASB has
                               and Instruction 1     eliminated the
                               to Rule 11-02 of      requirement to
                               Regulation S-X;       report cumulative
                               Item 302 of           effect of a change
                               Regulation S-K;       in accounting
                               Securities Act Rule   principle in the
                               405; Exchange Act     income
                               Rule 12b-2, Rule      statement.\487\
                               13a-10(b), and Rule
                               15d-10(b); and Form
                               X-17A-5.
------------------------------------------------------------------------

    Commenters supported the proposed amendments.\488\ We are adopting
all of the amendments described in the table above as proposed.
---------------------------------------------------------------------------

    \480\ 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.
    \481\ See SFAS No. 142, Goodwill and Other Intangible Assets.
    \482\ See ASC 205.
    \483\ See Technical Amendment to Rules, Forms, Schedules, and
Codification of Financial Reporting Policies, Release No. 33-9026,
(Apr. 15, 2009) [74 FR 18612 (April 23, 2009)].
    \484\ See Rule 1-02, Rule 3-02, Rule 3-03, Rule 3-04, Rule 3-05,
Rule 3-12, Rule 3-14, Rule 3-17, Rule 4-08, Rule 4-10, Rule 5-02,
Rule 5-04, Rule 6-07, Rule 6A-04, Rule 6A-05, Rule 7-03, Rule 7-05,
Rule 8-02, Rule 8-03, Rule 8-05, Rule 8-06, Rule 9-03, Rule 9-05,
Rule 9-06, Rule 10-01, Rule 11-02, Rule 11-03, Rule 12-16, Rule 12-
17, Rule 12-18, Rule 12-28, and Rule 12-29 of Regulation S-X; Item
10, Item 302, and Item 303 of Regulation S-K; Item 1010 of
Regulation M-A; Securities Act Rule 158; Exchange Act Rule 15c3-1g;
Exchange Act Rule 17a-5; Exchange Act Rule 17a-12; Exchange Act Rule
17g-3; Exchange Act Rule 17h-1T; Form 1-A; Form 1-K; Form 1-SA; Form
20-F; Form 11-K; and Form X-17A-5.
    \485\ See ASU No. 2011-05, Comprehensive Income (Topic 220):
Presentation of Comprehensive Income. The statement of comprehensive
income may be presented as either: (1) A single statement of
comprehensive income or (2) two separate but consecutive statements,
composed 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.
    Items of other comprehensive income include, for example:
foreign currency translation adjustments, certain unrealized holding
gains and losses, and gains or losses associated with pension or
other postretirement benefits (that are not recognized immediately
as a component of net periodic benefit cost). See ASC 220-10-45-10A
for additional items.
    \486\ See Rule 5-03, Rule 7-04, and Rule 9-04.
    \487\ See SFAS No. 154, Accounting Changes and Error
Corrections. This is now reflected in ASC 250, Accounting Changes
and Error Corrections.
    \488\ See letters from CAQ; Deloitte; E&Y Grant; KPMG; PwC; and
R.G. Associates.
---------------------------------------------------------------------------

C. Disclosure Requirements Superseded by Other Commission Requirements

    Commission disclosure requirements have also changed over time,
which has resulted in inconsistencies within our disclosure
requirements. The Proposing Release identified disclosure requirements
that have been superseded by other Commission disclosure requirements.
1. Auditing Standards
a. Proposed Amendments
    Section 103(a) of the Sarbanes-Oxley Act authorized the PCAOB to
establish auditing and related professional practice standards used by
registered public accounting firms when conducting audits of
issuers.\489\ Prior to the creation of the PCAOB, public accounting
firms conducted audits of issuers pursuant to Generally Accepted
Auditing Standards (``GAAS'') \490\ 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.
---------------------------------------------------------------------------

    \489\ 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).
    \490\ 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.\491\ Further, the
Commission stated its intent to codify this interpretation in the
future.\492\ The table below describes each of the disclosure
requirements that the Commission proposed to amend as part of the
codification.\493\
---------------------------------------------------------------------------

    \491\ 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 (May 20, 2004)]. 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 Public Law 111-203, 124 Stat.
1376 (2010).
    \492\ Id.
    \493\ These proposed amendments are discussed in further detail
in Section V.B.1. of the Proposing Release.

------------------------------------------------------------------------
       Commission disclosure
          requirement(s)                     Proposed amendments
------------------------------------------------------------------------
Rule 1-02(d) of Regulation S-X....  Amend 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.
Rule 436(d)(4) of Regulation C and  Amend to replace the references to
 General Instruction G(f)(1) of      GAAS with ``the standards of the
 Form 20-F.                          Public Company Accounting Oversight
                                     Board (United States)
                                     (``PCAOB'')''. Replace the term
                                     ``examination'' with ``audit
                                     conducted.''
Instruction 2 to Item 8.A.2 of      Amend to state that financial
 Form 20-F.                          statements of entities other than
                                     the issuer must be audited in
                                     accordance with ``the standards of
                                     the Public Company Accounting
                                     Oversight Board (United States)
                                     (``PCAOB'').''
Rule 2-01(f)(7)(ii)(B) of           Amend to make language consistent
 Regulation S-X.                     with current auditing standards.
Rules 2-02(b)(1), 8-03, and 10-01   Amend to refer to ``applicable
 of Regulation S-X.                  professional standards'' instead of
                                     GAAS.
Rules 10A-1(b)(3) and 13b2-2(b)(2)  Amend to replace the references to
 of the Exchange Act.                GAAS with ``the standards of the
                                     Public Company Accounting Oversight
                                     Board (United States)
                                     (``PCAOB'').''
Instruction E(c)(3) of Form 20-F..  Amend to replace the reference to
                                     U.S. standards for auditor
                                     independence with ``qualified and
                                     independent in accordance with
                                     Article 2 of Regulation S-X.''
------------------------------------------------------------------------

b. Comments on Proposed Amendments
    Commenters generally supported these proposed amendments.\494\ Some
commenters \495\ also recommended that the Commission clarify when a
review of interim financial information in accordance with PCAOB
standards is not required under Rules 10-01 or 8-03 of Regulation S-X.
Further, one of these commenters requested that we adopt a rule that
explains which professional standards apply to every circumstance where
financial statements are filed with the Commission.\496\
---------------------------------------------------------------------------

    \494\ See letters from CAQ; Deloitte; E&Y Grant; KPMG; PwC; and
R.G. Associates.
    \495\ See letters from CAQ; and KPMG.
    \496\ See letter from KPMG.
---------------------------------------------------------------------------

c. Final Amendments
    We are adopting all of the amendments described in the table above
as proposed. We are also eliminating the reference to U.S. standards
for auditor independence from Instruction 2 to Item 8.A.2 of Form 20-F
to be consistent with the amendments to Instruction E(c)(3) of Form 20-
F. We believe the reference to ``applicable professional standards'' in
Rules 10-01 and 8-03 does not create significant confusion and
therefore we are not adopting any amendments to clarify the application
of these rules as suggested by commenters. Further, we are not adopting
a rule that explains which professional standards apply to every
circumstance where financial statements are filed with the Commission
because that is beyond the scope of this rulemaking.
2. Other
    The table below describes each of the remaining superseded
disclosure requirements that the Commission proposed to amend.\497\
---------------------------------------------------------------------------

    \497\ These proposed amendments are discussed in further detail
in Section V.B. of the Proposing Release.

------------------------------------------------------------------------
                                    Commission
             Topic                  disclosure      Proposed amendments
                                  requirement(s)
------------------------------------------------------------------------
Published Report Regarding      Item 601(b)(22)    Delete requirement in
 Matters Submitted to Vote of    of Regulation S-   light of changes
 Security Holders.               K (including       made in 2009 to
                                 accompanying       disclose shareholder
                                 inclusion in the   voting results in
                                 Exhibit Table      Forms 10-K and 10-Q
                                 within Item        and Item 5.07 of
                                 601); Item 5 of    Form 8-K.\498\
                                 Form 10-D.
Selected Financial Data for     General            Amend (1) General
 Foreign Private Issuers that    Instruction G(c)   Instruction G(c) to
 Report under IFRS.              and Instruction    delete the
                                 2 to Item 3.A of   requirement to
                                 Form 20-F.         present selected
                                                    financial data in
                                                    accordance with U.S.
                                                    GAAP, and (2)
                                                    Instruction 2 to
                                                    Item 3.A 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
                                                    because of
                                                    inconsistencies in
                                                    the Form 20-F
                                                    created by 2005
                                                    \499\ and 2007 \500\
                                                    amendments related
                                                    to foreign private
                                                    issuers that report
                                                    under IFRS.
Canadian Regulation A Issuers.  Forms 1-A and 1-   Amend references to
                                 SA.                Regulation S-X in
                                                    Forms 1-A and 1-SA
                                                    to apply only to
                                                    Regulation A issuers
                                                    that report under
                                                    U.S. GAAP as
                                                    Regulation A permits
                                                    Canadian issuers to
                                                    report under IFRS.
------------------------------------------------------------------------

    Commenters supported the proposed amendments,\501\ and no commenter
specifically opposed the amendment. Accordingly, we are adopting all of
the amendments described in the table above as proposed.
---------------------------------------------------------------------------

    \498\ See Proxy Disclosure Enhancements, Release No. 33-9089,
(Dec. 16, 2009) [74 FR 68334 (Dec. 23, 2009)]. 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.
    \499\ See First-Time Application of International Financial
Reporting Standards, Release No. 33-8567 (Apr. 12, 2005) [70 FR
20674 (Apr. 20, 2005)].
    \500\ See Acceptance From Foreign Private Issuers of Financial
Statements Prepared in Accordance With International Financial
Reporting Standards Without Reconciliation to U.S. GAAP, Release No.
33-8879, (Dec. 21, 2007) [73 FR 986 (Jan. 4, 2008)] and Instruction
2 to Item 3.A of Form 20-F.
    \501\ See letters from CAQ; Deloitte; E&Y Grant; KPMG; PwC; and
R.G. Associates.
---------------------------------------------------------------------------

D. Non-Existent or Incorrect References and Typographical Errors

    Various Commission disclosure requirements contain incorrect
references or references to rules that no longer exist. The table below
describes each of the disclosure requirements that contain these
references and the related proposed amendments.\502\
---------------------------------------------------------------------------

    \502\ These proposed amendments are discussed in further detail
in Section V.B.16. of the Proposing Release.

------------------------------------------------------------------------
       Commission disclosure
          requirement(s)                     Proposed amendments
------------------------------------------------------------------------
Rule 5-02 of Regulation S-X,        Delete reference to Rule 4-05 of
 Balance sheets.                     Regulation S-X, which no longer
                                     exists.
Rule 5-02.22(a) of Regulation S-X,  Delete reference to Rule 4-06 of
 Bonds, mortgages and other long-    Regulation S-X, which no longer
 term debt, including capitalized    exists.
 leases.
Rule 7-04.9 of Regulation S-X,      Replace reference to Rule 4-08(g) of
 Income tax expense.                 Regulation S-X that relates to
                                     investments accounted for under the
                                     equity method of accounting with
                                     Rule 4-08(h) that addresses income
                                     tax expense.
Rule 9-03.7(e)(3) of Regulation S-  Delete reference to Rule 4-08(L)(3)
 X, Loans.                           of Regulation S-X, which no longer
                                     exists.
Item 512(a)(4) of Regulation S-K,   Replace reference to Rule 3-19 of
 Undertakings.                       Regulation S-X, which no longer
                                     exists, with Item 8.A of Form 20-F,
                                     similar to changes made in
                                     1999.\503\
Instruction J(1)(e) to Form 10-K..  Clarify that General Instruction
                                     J(1)(e) is reserved because it is
                                     currently blank.
Instruction J(1)(f) to Form 10-K..  Conform 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  Delete reference to ``interim''
 Form 1-A.                           financial statements because this
                                     paragraph addresses the age of both
                                     interim and annual financial
                                     statements.
Forms F-1, F-3, F-4, F-6, F-7, F-   Replace references to the
 8, F-10, F-80, 20-F, and 40-F.      Commission's telephone numbers and
                                     offices with the correct
                                     references.
------------------------------------------------------------------------

    Commenters supported the amendments to correct these references and
errors,\504\ and no commenter specifically opposed the amendments.
Accordingly, we are adopting all of the amendments described in the
table above as proposed.
---------------------------------------------------------------------------

    \503\ See International Disclosure Standards, Release No. 33-
7745 (Sept. 28, 1999) [64 FR 53900 (Oct. 5, 1999)].
    \504\ See letters from CAQ; Deloitte; E&Y Grant; KPMG; PwC; and
R.G. Associates.
---------------------------------------------------------------------------

    Subsequent to the Proposing Release, we identified additional
incorrect references or references to rules that no longer exist that
also need to be updated, as well as typographical errors. We are
amending our rules to address these incorrect references and errors in
this release. We describe those amendments in the table below.

------------------------------------------------------------------------
  Commission disclosure requirement(s)         Technical amendments
------------------------------------------------------------------------
Rule 1-02(w) of Regulation S-X,          Replace the term ``submitted''
 Significant Subsidiary.                  with ``substituted'' which was
                                          inadvertently changed in a
                                          prior technical
                                          amendment.\505\
Rule 9-03(12)(a) of Regulation S-X,      Replace reference to Rule 0-05,
 Deposits.                                which does not exist, with
                                          reference to Rule 9-05 of
                                          Regulation S-X, which provides
                                          disclosure requirements
                                          concerning foreign activities.
Rules 12-21 to 24 of Regulation S-X,     Replace superseded references
 For Face-Amount Certificate Investment   to Rule 6-21 of Regulation S-X
 Companies.                               with correct references to
                                          Rule 6-03 and superseded
                                          reference to Rule 6-21(f) with
                                          Rule 6-03(d).\506\
Rules 12-22 to 24 and 12-27 of           Replace superseded references
 Regulation S-X, For Face-Amount          to Rule 6-22 of Regulation S-X
 Certificate Investment Companies.        with correct references to
                                          Rule 6-06.\507\
Footnote 6 of Rule 12-22 of Regulation   Replace superseded references
 S-X, For Face-Amount Certificate         to Rule 6-23(a) of Regulation
 Investment Companies.                    S-X with correct references to
                                          Rule 6-07(1).\508\
Item 508(e) of Regulation S-K..........  Replace reference to National
                                          Association of Securities
                                          Dealers with successor entity,
                                          the Financial Industry
                                          Regulatory Authority
                                          (``FINRA''). In addition,
                                          replace reference to Rules of
                                          Fair Practice with FINRA
                                          rules.\509\
General Instruction I.C.2 and            Replace outdated reference to
 I.D.1.(c)(iv) of Form S-3.               the title of General
                                          Instruction B.2 of Form S-3.
Instruction 3 of the Instructions to     Remove Instruction 3 which
 the Signatures of Form S-3.              relates to a superseded
                                          transaction requirement.\510\
Item 17(c)(2)(v) and (vi) of Form 20-F   Replace reference to the
 \511\.                                   definition of a ``significant
                                          subsidiary'' in Rule 1-02(v)
                                          of Regulation S-X with correct
                                          reference to Rule 1-
                                          02(w).\512\
Rule 405, Definition of Terms,           Revise the definition of
 Significant Subsidiary.                  ``significant subsidiary'' to
                                          correct for inadvertent
                                          omissions of changes to the
                                          definition and conform to the
                                          updated definition in Rule 1-
                                          02(w) of Regulation S-X.\513\

Rule 12b-2, Definitions, Significant     Revise the definition of
 Subsidiary.                              ``significant subsidiary'' to
                                          correct for inadvertent
                                          omissions of changes to the
                                          definition and conform to the
                                          updated definition in Rule 1-
                                          02(w) of Regulation S-X.\514\
Rule 12g-3, Registration of securities   Revise Rules 3-04, 12g-3(a)(2),
 of successor issuers under section       12g-3(b)(2), and 12g-3(c)(2)
 12(b) or 12(g) of the Securities         for punctuation errors.
 Exchange Act of 1934 and Rule 3-04 of
 Regulation S-X.
Rule 3-04, Rule 4-08(m)(2)(ii), Rule 5-  Correct typographical errors.
 03(b)(1), Rule 7-03(13)(a)(2), Rule 6-
 09(4)(b), Rule 9-03(10)(3), Rule 9-
 03(10)(4)(a), Rule 10-01(b)(7), and
 Rule 12-24 of Regulation S-X.
Item 406(d) and Item 601(b)(14) of       Replace superseded references
 Regulation S-K.                          to Item 10 of Form 8-K with
                                          correct references to Item
                                          5.05 of Form 8-K.\515\
Form 10, Subpart C of Forms, Securities  Remove outdated reference to
 Exchange Act of 1934.                    Form 10-SB in Form 10 heading.
------------------------------------------------------------------------

VI. Other Matters
---------------------------------------------------------------------------

    \505\ See Technical Amendments to Rules, Forms, Schedules, and
Codification of Financial Reporting Policies, Release No. 33-9026
(Apr. 15, 2009) [74 FR 18612 (Apr. 23, 2009)].
    \506\ In 1982, the Commission replaced all prior Article 6
provisions, including the ones referenced here, with revised Rules
6-01 through 6-10 of Regulation S-X. However, the Commission did not
also update the references to Article 6 rules in Article 12 of
Regulation S-X. See Financial Statement Requirements for Registered
Investment Companies, Release 33-6442 (Dec. 21, 1982) [47 FR 56835
(Dec. 21, 1982] (``1982 Investment Company Release'').
     Reference to Rule 6-21(f) of Regulation S-X is made in Footnote
4 of both Rule 12-21 and Rule 12-22, and Footnote 5 of Rule 12-24.
Reference to Rule 6-21 of Regulation S-X is made in Footnote 9 of
Rule 12-23.
    \507\ See 1982 Investment Company Release.
    \508\ See 1982 Investment Company Release.
    \509\ The Commission approved the creation of Financial Industry
Regulatory Authority (``FINRA'') through the consolidation of the
member firm regulatory functions of the NASD and NYSE Regulation,
Inc., a wholly-owned subsidiary of New York Stock Exchange LLC in
2007.
    See Self-Regulatory Organizations; National Association of
Securities Dealers, Inc.; Order Approving Proposed Rule Change to
Amend the By-Laws of NASD to Implement Governance and Related
Changes to Accommodate the Consolidation of the Member Firm
Regulatory Functions of NASD and NYSE Regulation, Inc., Release No.
34-56145 (Jul. 26, 2007) [72 FR 42169 (Aug. 1, 2007]; File No. SR-
NASD-2007-023 (July 26, 2007).
    \510\ Instruction 3 of Form S-3 refers to eligibility based on
the assignment of a securities rating pursuant to Transaction
Requirement B.5. of Form S-3. The Transaction Requirements of Form
S-3 no longer relate to securities ratings. See Asset-Backed
Securities Disclosure and Registration, Release No. 33-9638 (Sept.
4, 2014) [79 FR 57184 (Sept. 24, 2014)].
    \511\ Items 17(c)(2)(v) and (vi) include requirements for
financial statements on a basis of accounting other than U.S. GAAP
that are furnished pursuant to Rule 3-05 or 3-09 of Regulation S-X.
    \512\ Rule 1-02(v) defines the term ``share,'' while Rule 1-
02(w) defines ``significant subsidiary.''
    \513\ The definition of ``significant subsidiary'' in Rule 1-
02(w) of Regulation S-X, Securities Act Rule 405 and Exchange Act
Rule 12b-2 are generally intended to be conformed to each other.
See, e.g., Technical Amendments to Rules and Forms, Release No. 33-
6584 (Jun. 6, 1985) [50 FR 25214 (Jun. 18, 1985)]. Two releases
inadvertently changed the definitions of ``significant subsidiary''
in some, but not all of these three rules, resulting in a lack of
conformity. See Acceptance from Foreign Private Issuers of Financial
Statements Prepared in Accordance with International Financial
Reporting Standards Without Reconciliation to U.S. GAAP, Release No.
33-8879 (Dec. 21, 2007) [73 FR 986 (Jan. 4, 2008)], and Technical
Amendments to Rules, Forms, Schedules, and Codification of Financial
Reporting Policies, Release No. 33-9026 (Apr. 15, 2009) [77 FR 18612
(Apr. 23, 2009)]. Computational Note 3 to the definition of
``significant subsidiary'' is only in Rule 1-02(w) of Regulation S-
X. See Financial Statements and Regulation S-X; Technical Amendments
to Rules and Forms, Release No. 33-6612 (Nov. 21, 1985) [50 FR 49529
(Dec. 3, 1985)]. Computational Note 3 relates solely to issues
applicable to Regulation S-X and the use of Rule 1-02(w) therein and
is not relevant to the uses of the definition in Rule 405 and Rule
12b-2. We are therefore not including Computational Note 3 in Rule
405 and Rule 12b-2.
    \514\ See supra note 513.
    \515\ See Additional Form 8-K Disclosure Requirements and
Acceleration of Filing Date, Release No. 33-8400 (Mar. 16, 2004) [69
FR 15594 (Mar. 25, 2004)].
---------------------------------------------------------------------------

    If any of the provisions of these rules, or the application of
these provisions to any person or circumstance, is held to be invalid,
such invalidity shall not affect other provisions or application of
such provisions to other persons or circumstances that can be given
effect without the invalid provision or application.

VII. Economic Analysis

    We are adopting amendments to certain of our disclosure
requirements that 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. These amendments are the result of the staff's ongoing
evaluation of our disclosure requirements \516\ and also are part of
our efforts to implement Title LXXII, Section 72002(2) of the FAST Act.
---------------------------------------------------------------------------

    \516\ See supra note 12.
---------------------------------------------------------------------------

    We are sensitive to the costs and benefits of the amendments. In
this section, we examine 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,
and discuss the potential benefits and costs of the amendments,
relative to this baseline, and their potential effects on efficiency,
competition, and capital formation.\517\
---------------------------------------------------------------------------

    \517\ Section 2(b) of the Securities Act [15 U.S.C. 77b(b)],
Section 3(f) of the Exchange Act [17 U.S.C. 78c(f)], and Section
2(c) of the Investment Company Act [15 U.S.C. 80a-2(c), and 15
U.S.C. 80b-2(c)] 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.
---------------------------------------------------------------------------

    The Proposing Release requested comment on all aspects of the
economic effects of the proposed amendments, including the costs and
benefits and possible alternatives to the proposed amendments. The
Commission also solicited comment in the Proposing Release on whether
the proposed amendments, if adopted, would promote efficiency,
competition, or capital formation, or have an impact or burden on
competition. We received a number of comments addressing the potential
economic impacts of the proposed amendments, which we discuss below.

A. Baseline and Affected Parties

    Our baseline includes the current disclosure requirements in
Regulation S-K, Regulation S-X, and other Commission rules and forms
promulgated under the Securities Act, the Exchange Act, and the
Investment Company Act. The parties affected by the amendments include
investors and other users, auditors, and issuers. Additionally,
entities other than issuers may be affected (e.g., significant
acquirees for which financial statements are required under Rule 3-05
of Regulation S-X, significant equity method investees for which
financial statements are required under Rule 3-09

of Regulation S-X, broker-dealers, and NRSROs).
    The amendments affect both domestic issuers and foreign private
issuers.\518\ We estimate that approximately 7,570 issuers that file on
domestic forms \519\ and 745 foreign private issuers that file on F-
forms will be affected by the amendments. Among the issuers that file
on domestic forms, 25.6% are large accelerated filers, 18.6% are
accelerated filers, 19.3% are non-accelerated filers, and 36.2% are
SRCs. About 23.7% of issuers that file on domestic forms are EGCs.\520\
Among the foreign private issuers that file on F-forms, 40.4% are large
accelerated filers, 22.6% are accelerated filers, and 37.0% are non-
accelerated filers.\521\ About 19.8% of foreign private issuers that
file on Forms 20-F and 40-F are EGCs. With respect to foreign private
issuer accounting standards, approximately 38.5% of foreign private
issuers report under U.S. GAAP, 60.5% report under IFRS, and
approximately 1% report under Another Comprehensive Body of Accounting
Principles with a reconciliation to U.S. GAAP.
---------------------------------------------------------------------------

    \518\ 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 10-Q, Form 20-F, and Form 40-F or an amendment thereto
with the Commission during calendar year 2017. 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 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
only initial registration statements during calendar year 2017,
which will also be affected by the amendments.
    \519\ This number includes fewer than 25 foreign issuers that
file on domestic forms, approximately 100 business development
companies, and a portion of the approximately 12,000 investment
advisers.
    \520\ Staff determined whether a registrant claimed EGC status
by parsing several types of filings (e.g., Forms S-1, S-1/A, 10-K,
10-Q, 8-K, 20-F/40-F, and 6-K) filed by that registrant, with
supplemental data drawn from Ives Group Audit Analytics.
    \521\ Approximately 15.9% 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.
---------------------------------------------------------------------------

    Certain amendments also affect requirements applicable to:
     Fewer than 600 asset-backed issuing entities.\522\
---------------------------------------------------------------------------

    \522\ The number of asset-backed issuers is based on the number
of unique companies with the SIC code of 6189 that filed Forms 10-K
during calendar year 2017.
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     Issuers that rely on Regulation A exemptions.\523\
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    \523\ Between June 19, 2015 and December 31, 2017, approximately
182 Regulation A offerings have been qualified. Among these
qualified offerings, 57 offerings are Tier I and 125 offerings are
Tier II. Over the same time period, approximately 262 Regulation A
offering statements have been filed. Among these filed offerings, 94
offerings are Tier I and 168 offerings are Tier II. Withdrawals and
post-qualification amendments are excluded. There are annual and
semi-annual reporting requirements for Tier II offerings.
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     Approximately 4,100 investment companies, including
approximately 100 business development companies, and the portion of
the approximately 12,600 investment advisers to which Regulation S-X
and Regulation S-K apply.\524\
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    \524\ The number of registered investment companies, excluding
business development companies, is estimated from the number of
registered active investment companies in EDGAR as of the end of
December 2017. The number of business development companies is based
on the number of unique companies that filed Forms 10-K and Forms
10-Q whose reporting periods end in the last quarter of 2017,
adjusted by the number of active business development companies that
did not submit such filings and late filers. The number of
investment advisers is based on data from Investment Adviser
Registration Depository (IARD).
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     Up to approximately 3,883 registered broker-dealers.\525\
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    \525\ The amendments to Exchange Act Rules 17a-5, 17a-12, and
17h-1T, and Part III of Form X-17A-5 collectively affect
approximately 3,883 broker-dealers who must file periodic reports
with the Commission. The amendments to Part II of Form X-17A-5
affect up to approximately 467 broker-dealers, based on the number
of broker-dealers who filed Part II as of December 31, 2017. The
amendments to Part IIA of Form X-17A-5 affect approximately 3,413
broker-dealers, based on the number of broker-dealers who filed Part
IIA as of December 31, 2017. The amendments to Part IIB of Form X-
17A-5 affect approximately three broker-dealers, based on the number
of broker-dealers who filed Part IIB as of March 31, 2018.
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     10 NRSROs.
    This release also considers certain Commission disclosure
requirements that overlap with, but require information incremental to,
U.S. GAAP and refers some of these incremental requirements to the FASB
for potential incorporation into U.S. GAAP. While a referral alone has
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 SRCs and issuers relying on Regulation A or
Regulation Crowdfunding, as well as entities that are outside the scope
of our regulatory authority.

B. Anticipated Benefits and Costs

    In this section, we discuss the anticipated economic benefits and
costs of the amendments in each category of redundant, duplicative,
overlapping, outdated, and superseded disclosure requirements.
1. Redundant or Duplicative Requirements
    We are eliminating certain Commission disclosure requirements that
require substantially the same disclosures as U.S. GAAP, IFRS, or other
Commission disclosure requirements. In response to commenters'
suggestions, we are retaining some of the disclosure requirements that
we proposed to modify or eliminate on the basis that they required
redundant or duplicative disclosure and referring one of these
disclosure requirements to the FASB for potential incorporation into
U.S. GAAP.
    Elimination of Commission disclosure requirements that are
redundant or duplicative with U.S. GAAP, IFRS, or other Commission
disclosure requirements simplifies issuer compliance efforts by
reducing the number of rules to consider. To the extent that the
redundant or duplicative requirements result in substantially the same
disclosures, elimination of these requirements also potentially
benefits investors and other users. Academic research suggests that
duplication is associated with less efficient price discovery \526\ and
that individuals invest more in firms with more concise financial
disclosures.\527\ Thus, to the extent that the amendments alleviate
duplication and do not affect the completeness of financial
disclosures,\528\ they could result in improved price discovery,
enhance the allocative efficiency of the market, and facilitate capital
formation.
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    \526\ See A. Cazier and R. Pfeiffer, Say Again? Assessing
Redundancy in 10-K Disclosures, Journal of Financial Reporting,
2(1), 2017 at 107-131.
    \527\ See A. Lawrence, Individual Investors and Financial
Disclosure, Journal of Accounting and Economics 56, 2013 at 13-147.
    \528\ 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.
Journal of Accounting Research 54.2, 2016 at 525-622.
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    The potential adverse effects of the amendments on investors and
other users are likely to be limited as these parties would continue to
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. 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 and the ability of the Commission to require such information
through

rulemaking.\529\ In addition, issuers remain liable for their
disclosures, including the omission of any information required to make
the disclosures not misleading.
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    \529\ See discussion in Section I.D.
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2. Overlapping Requirements
    The Proposing Release 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, we are: (a) Deleting the overlapping Commission
disclosure requirements or (b) integrating them with other related
Commission disclosure requirements. For certain other overlapping
requirements, we are retaining the requirements and referring them to
the FASB for potential incorporation into U.S. GAAP. We discuss below
the economic effects of the amendments in this category and provide
examples of requirements affected by the amendments.
    First, some changes may give rise to Disclosure Location
Considerations. Where we proposed to relocate existing disclosure from
outside the financial statements to within the financial statements, a
number of commenters expressed reservations about the relocation
because it would create additional audit requirements for issuers.\530\
Issuers may incur additional costs to comply with these audit and/or
interim review and ICFR requirements, to the extent the relocation
results in additional information included in the financial statements.
A few commenters stated that investors would benefit from the annual
audit and interim review of the disclosure.\531\ Investors and other
users may consider the information more reliable because of the audit
and/or interim review requirements.\532\
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    \530\ See e.g., letters from CGCIV; EEI and AGA; and USCC.
    \531\ See letters from CII and Ohio CPAs.
    \532\ In contrast, there are a few amendments that relocate
disclosure from inside the financial statements to outside the
financial statements. In this case, the potential economic effects
would be opposite to the effects discussed above, reducing costs for
issuers, but potentially decreasing benefits to users of the
information to the extent that the information is considered less
reliable.
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    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 in the
financial statements as compared with disclosures made outside the
audited financial statements. A number of commenters expressed concern
regarding liability issues for preparers that would arise from the loss
of safe harbor provisions.\533\ However, issuers retain the option of
providing forward-looking information outside the financial statements
and may be required to disclose the information in certain
circumstances.\534\
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    \533\ See e.g., letters from CAQ; CalPERS; Crowe; Davis; E&Y
FEI; PwC; and R&G Associates.
    \534\ See Commission Guidance Regarding Management's Discussion
and Analysis of Financial Condition and Results of Operations,
Release No. 33-8350 (Dec. 19, 2003) [68 FR 75056]. For example, Item
303 of Regulation S-K requires disclosure of other information when
an issuer believes it to be necessary to an understanding of its
financial condition, changes in financial condition, and results of
operations.
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    The relocation of existing disclosures from outside the financial
statements to within the financial statements will also subject the
disclosures to XBRL tagging requirements. Commenters expressed concern
about XBRL tagging requirements because of additional administrative
burdens and potential costs on issuers to comply with these
requirements.\535\ A few commenters believed that XBRL tagging
requirements would be of benefit to investors.\536\ Investors and other
users may benefit from more readily-available information in structured
formats because of the increased use of electronic data analysis and
search tools. In general, we believe the costs of applying XBRL data
tagging to additional information likely would be relatively low, as
issuers already have implemented software enabled processes and
controls to structure previously mandated disclosures.\537\
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    \535\ See e.g., letters from CGCIV; EEI and AGA; and USCC.
    \536\ See letters from CII and Ohio CPAs.
    \537\ According to a recently released AICPA and XBRL US survey,
the total cost of XBRL preparation among small companies in 2017
averaged $5,476 per year. See Research shows XBRL filing costs are
lower than expected, AICPA, https://www.aicpa.org/InterestAreas/FRC/AccountingFinancialReporting/XBRL/DownloadableDocuments/XBRL%20Costs%20for%20Small%20Companies.pdf. The incremental costs of
tagging additional information under the amendments would be much
lower and depend on the mix of incremental disclosures (e.g.,
narrative and numeric). The tagging cost associated with narrative
disclosures would be minimal since these disclosures are tagged at
the block text level and registrants already block tag other
narrative disclosures in their filings. Numeric disclosures would
need to be individually tagged, and therefore, any incremental costs
would be directly associated with the volume of incremental numeric
disclosures.
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    Furthermore, 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 academic 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.\538\ 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.\539\ Other research on the
effect of disclosure location shows recognized and disclosed items are
treated equivalently by investors.\540\

Commenters that provided feedback on relocation prominence
considerations indicated that physical location of the disclosure is
less relevant in today's environment, given the use of electronic data
analysis and search tools.\541\
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    \538\ 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 and finding 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