[Federal Register Volume 81, Number 150 (Thursday, August 4, 2016)]
[Proposed Rules]
[Pages 51607-51692]
[FR Doc No: 2016-16964]

Vol. 81

Thursday,

No. 150

August 4, 2016

Part III

Securities and Exchange Commission

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17 CFR Parts 210, 229, 230, 240, et al.

Disclosure Update and Simplification; Proposed Rule

Federal Register / Vol. 81 , No. 150 / Thursday, August 4, 2016 /
Proposed Rules

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 210, 229, 230, 239, 240, 249, and 274

[Release No. 33-10110; 34-78310; IC-32175; File No. S7-15-16]
RIN 3235-AL82

Disclosure Update and Simplification

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: We are proposing amendments to certain of our disclosure
requirements that may have become redundant, duplicative, overlapping,
outdated, or superseded, in light of other Commission disclosure
requirements, U.S. Generally Accepted Accounting Principles (``U.S.
GAAP''), International Financial Reporting Standards (``IFRS''), or
changes in the information environment. We are also soliciting comment
on certain Commission disclosure requirements that overlap with, but
require information incremental to, U.S. GAAP to determine whether to
retain, modify, eliminate, or refer them to the Financial Accounting
Standards Board (``FASB'') for potential incorporation into U.S. GAAP.
The proposed amendments are intended to facilitate the disclosure of
information to investors, while simplifying compliance efforts, without
significantly altering the total mix of information provided to
investors. These proposals are part of an initiative by the Division of
Corporation Finance to review disclosure requirements applicable to
issuers to consider ways to improve the requirements for the benefit of
investors and issuers. We are also issuing these proposals as part of
our efforts to implement title LXXII, section 72002(2) of the Fixing
America's Surface Transportation Act.

DATES: Comments should be received on or before October 3, 2016.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/proposed.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number S7-15-16 on the subject line; or
     Use the Federal eRulemaking Portal (http://www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

     Send paper comments to Brent J. Fields, Secretary,
Securities and Exchange Commission, 100 F Street NE., Washington, DC
20549-1090.

All submissions should refer to File Number S7-15-16. This file number
should be included on the subject line if email is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's Web
site (http://www.sec.gov/rules/proposed.shtml). Comments also are
available for Web site viewing and printing in the Commission's Public
Reference Room, 100 F Street NE., Washington, DC 20549, on official
business days between the hours of 10:00 a.m. and 3:00 p.m. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make publicly available.
    Studies, memoranda, or other substantive items may be added by the
Commission or staff to the comment file during this rulemaking. A
notification of the inclusion in the comment file of any such materials
will be made available on the SEC's Web site. To ensure direct
electronic receipt of such notifications, sign up through the ``Stay
Connected'' option at www.sec.gov to receive notifications by email.

FOR FURTHER INFORMATION CONTACT: Nili Shah, Deputy Chief Accountant, at
(202) 551-3255, Division of Corporation Finance; Duc Dang, Senior
Special Counsel, at<PHONE_NUMBER>, Office of the Chief Accountant;
Matt Giordano, Chief Accountant, at<PHONE_NUMBER>, Division of
Investment Management; Valentina Minak Deng, Special Counsel, at (202)
551-5778 and Tim White, Special Counsel, at<PHONE_NUMBER>, Division of
Trading and Markets; Harriet Orol, Branch Chief, at<PHONE_NUMBER>,
Office of Credit Ratings; Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission is proposing amendments to,
or soliciting comment on potential FASB referrals of, Rules 1-02, 2-01,
2-02, 3-01, 3-02, 3-03, 3-04, 3-05, 3-12, 3-14, 3-15, 3-17, 3-20, 3A-
01, 3A-02, 3A-03, 3A-04, 4-01, 4-07, 4-08, 4-10, 5-02, 5-03, 5-04, 6-
03, 6-04, 6-07, 6-09, 6A-04, 6A-05, 7-02, 7-03, 7-04, 7-05, 8-01, 8-02,
8-03, 8-04, 8-05, 8-06, 9-03, 9-04, 9-05, 9-06, 10-01, 11-02, 11-03,
12-16, 12-17, 12-18, 12-28, and 12-29 of Regulation S-X under the
Securities Act of 1933 (the ``Securities Act'') and the Securities
Exchange Act of 1934 (the ``Exchange Act''), Items 10, 101, 103, 201,
302, 303, 503, 512, and 601 of Regulation S-K under the Securities Act
and the Exchange Act, Item 1010 of Regulation M-A under the Securities
Act and the Exchange Act, and Item 1118 of Regulation AB under the
Securities Act and the Exchange Act, Rule 158 of the Securities Act,
Rules 405 and 436 of Regulation C under the Securities Act, Forms S-1,
S-3, S-11, S-4, F-1, F-3, F-4, F-6, F-7, F-8, F-10, F-80, SF-1, SF-3,
1-A, 1-K, and 1-SA under the Securities Act, Rules 3a51-1, 10A-1, 12b-
2, 13a-10, 13b2-2, 14a-101, 15c3-1g, 15d-2, 15d-10, 17a-5, 17a-12, 17g-
3, and 17h-1T of the Exchange Act, Forms 20-F, 40-F, 10-K, 11-K, 10-D,
and X-17A-5 under the Exchange Act, Forms N-5, N-1A, N-2, N-3, N-4, and
N-6 under the Securities Act and the Investment Company Act of 1940
(the ``Investment Company Act''), and Form N-8B-2 under the Investment
Company Act.

Table of Contents

I. Introduction
    A. Objective
    B. Scope of Proposals
    1. Issuers with Offerings Registered Under the Securities Act
and Securities Registered Under the Exchange Act
    2. Issuers Offering Securities under Regulation A
    3. Issuers Regulated under the Investment Company Act
    4. Other Entities
    C. FASB-Related Considerations
    1. Role of the FASB
    2. Interaction of Commission Disclosure Requirements and U.S.
GAAP
    3. Current FASB Projects Concerning the Application of U.S. GAAP
II. Redundant or Duplicative Requirements
    A. Background
    B. Proposed Amendments
    1. Foreign Currency
    2. Consolidation
    3. Obligations
    4. Income Tax Disclosures
    5. Warrants, Rights, and Convertible Instruments
    6. Related Parties
    7. Contingencies
    8. Earnings per Share
    9. Insurance Companies
    10. Bank Holding Companies
    11. Changes in Accounting Principles
    12. Interim Adjustments
    13. Interim Financial Statements--Common Control Transactions
    14. Interim Financial Statements--Dispositions
    15. Report Furnished to Security Holders
    C. Request for Comment
III. Overlapping Requirements
    A. Background
    B. Broad Considerations
    1. Disclosure Location Considerations
    2. Bright Line Disclosure Threshold Considerations
    C. Overlapping Requirements--Proposed Deletions

    1. REIT Disclosures
    2. Consolidation
    3. Repurchase and Reverse Repurchase Agreements
    4. Derivative Accounting Policies
    5. Distributable Earnings for Registered Investment Companies
    6. Insurance Companies
    7. Interim Financial Statements--Material Events Subsequent to
the End of the Most Recent Fiscal Year
    8. Interim Financial Statements--Changes in Accounting
Principles
    9. Interim Financial Statements--Pro Forma Business Combination
Information
    10. Interim Financial Statements--Dispositions
    11. Segments
    12. Geographic Areas
    13. Seasonality
    14. Research and Development Activities
    15. Warrants, Rights, and Convertible Instruments
    16. Dividends
    17. Equity Compensation Plans
    18. Ratio of Earnings to Fixed Charges
    19. Invitations for Competitive Bids
    20. Request for Comment
    D. Overlapping Requirements--Proposed Integrations
    1. Foreign Currency Restrictions
    2. Restrictions on Dividends and Related Items
    3. Geographic Areas
    4. Request for Comment
    E. Overlapping Requirements--Potential Modifications,
Eliminations, or FASB Referrals
    1. REIT Disclosures--Tax Status of Distributions
    2. Consolidation
    3. Discount on Shares
    4. Assets Subject to Lien
    5. Obligations
    6. Preferred Shares
    7. Income Tax Disclosures
    8. Related Parties
    9. Repurchase and Reverse Repurchase Agreements
    10. Interim Financial Statements--Computation of Earnings Per
Share
    11. Interim Financial Statements--Retroactive Prior Period
Adjustments
    12. Interim Financial Statements--Common Control Transactions
    13. Products and Services
    14. Major Customers
    15. Legal Proceedings
    16. Oil and Gas Producing Activities
    17. Request for Comment
IV. Outdated Requirements
    A. Background
    B. Proposed Amendments
    1. Stale Transition Dates
    2. Income Tax Disclosures
    3. Available Information
    4. Market Price Disclosure
    5. Exchange Rate Data
    6. Foreign Private Issuer Initial Public Offering--Age of
Financial Statements
    C. Request for Comment
V. Superseded Requirements
    A. Background
    B. Proposed Amendments
    1. Auditing Standards
    2. Statement of Cash Flows
    3. Gain or Loss on Sale of Properties by REITs
    4. Consolidation
    5. Development Stage Entities
    6. Insurance Companies
    7. Bank Holding Companies
    8. Discontinued Operations
    9. Pooling-of-Interests
    10. Statement of Comprehensive Income
    11. Extraordinary Items
    12. Cumulative Effect of Changes in Accounting Principles
    13. Published Report Regarding Matters Submitted to Vote of
Security Holders
    14. Selected Financial Data for Foreign Private Issuers that
Report under IFRS
    15. Canadian Regulation A Issuers
    16. Non-Existent or Incorrect References
    C. Request for Comment
VI. General Request for Comment
VII. Economic Analysis
    A. Baseline and Affected Parties
    B. Potential Costs and Benefits
    1. Redundant or Duplicative Requirements
    2. Overlapping Requirements
    3. Outdated Requirements
    4. Superseded Requirements
    C. Anticipated Effects on Efficiency, Competition and Capital
Formation
    D. Request for Comments
VIII. Paperwork Reduction Act
    A. Background
    B. Summary of the Proposed Amendments' Impacts on Collection of
Information
    C. Estimate of Burdens
    1. Forms 10, 10-K, 10-Q, 20-F, and 1-SA
    2. Forms S-1, S-3, S-4, S-11, SF-1, SF-3, F-1, F-3, F-4, and 1-A
    D. Request for Comment
IX. Initial Regulatory Flexibility Act Analysis
    A. Reasons for, and Objectives of, the Proposed Action
    B. Legal Basis
    C. Small Entities Subject to the Proposed Amendments
    D. Duplicative, Overlapping, or Conflicting Federal Rules
    E. Reporting, Recordkeeping, and Other Compliance Requirements
    F. Significant Alternatives
    G. Solicitation of Comments
X. Small Business Regulatory Enforcement Fairness Act
XI. Statutory Authority

I. Introduction

A. Objective

    We are proposing amendments to certain of our disclosure
requirements that may have become redundant, duplicative, overlapping,
outdated, or superseded, in light of other Commission disclosure
requirements, U.S. GAAP, IFRS, or changes in the information
environment. As discussed further below, the proposed amendments are a
result of the Division of Corporation Finance's Disclosure
Effectiveness Initiative and part of our efforts to implement title
LXXII, section 72002(2) of the Fixing America's Surface Transportation
Act \1\ (the ``FAST Act''). We are also soliciting comment on certain
Commission disclosure requirements that overlap with, but require
information incremental to, U.S. GAAP \2\ to determine whether to
retain, modify, eliminate, or refer them to the FASB for potential
incorporation into U.S. GAAP.\3\ The proposals are intended to
facilitate the disclosure of information to investors, while
simplifying compliance efforts, without significantly altering the
total mix of information provided to investors.\4\
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    \1\ Public Law 114-94.
    \2\ In this release, we refer to such requirements as
``incremental'' Commission disclosure requirements.
    \3\ We refer to the proposed amendments and this additional
comment solicitation collectively as ``proposals.''
    \4\ The Supreme Court in TSC v. Northway held that a fact is
material if there is ``a substantial likelihood that the disclosure
of the omitted fact would have been viewed by the reasonable
investor as having significantly altered the `total mix' of
information made available.'' See TSC Industries, Inc. v. Northway,
Inc., 426 U.S. 438 (1976).
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    This release is part of a comprehensive evaluation of the
Commission's disclosure requirements recommended in the staff's Report
on Review of Disclosure Requirements in Regulation S-K (``S-K
Study''),\5\ which was mandated by section 108 of the Jumpstart Our
Business Startups Act.\6\ Based on the S-K Study's recommendation and
at the request of the Commission Chair, the Commission staff initiated
a comprehensive evaluation of the type of information our rules require
issuers to disclose, how this information is presented, where and how
this information is disclosed, and how we can better leverage
technology as part of these efforts (``Disclosure Effectiveness
Initiative''). The overall objective of the Disclosure Effectiveness
Initiative is to improve our disclosure regime for both investors and
issuers. This initiative

may result in the addition,\7\ revision,\8\ or elimination \9\ of
certain disclosure requirements and seeks input on how potential
changes might affect investors, issuers, efficiency, competition, and
capital formation.
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    \5\ Report on Review of Disclosure Requirements in Regulation S-
K (Dec. 2013), available at http://www.sec.gov/news/studies/2013/reg-sk-disclosure-requirements-review.pdf. Comment letters are
available at http://www.sec.gov/comments/jobs-title-i/reviewreg-sk/reviewreg-sk.shtml.
    \6\ Jumpstart Our Business Startups Act, Public Law 112-106, 126
Stat. 306 (2012).
    \7\ For example, in this release, we propose to require
disclosure of changes in stockholders' equity and dividends per
share for each class of shares, rather than only for common stock in
interim periods (please refer to sections III.C.16 and V.B.5), an
issuer's Web site address (please refer to section IV.B.3), and the
ticker symbol of their common equity that is publicly traded (please
refer to section IV.B.4). We also propose to change the threshold at
which disclosures on dividend restrictions are provided in the
audited financial statements, which may result in additional
disclosures subject to audit, internal control over financial
reporting, and XBRL tagging (please refer to section III.D.2).
    \8\ For example, in this release, please refer to our proposals
in section III.D. on overlapping requirements proposed for
integration, section IV on outdated requirements, and section V on
superseded requirements.
    \9\ For example, in this release, please refer to our proposals
in section II on redundant or duplicative requirements, section
III.C on overlapping requirements proposed for deletion, section IV
on outdated requirements, and section V on superseded requirements.
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    In connection with the Disclosure Effectiveness Initiative, the
Commission staff requested public input.\10\ In a separate concept
release,\11\ we are seeking public comment on modernizing certain
business and financial disclosure requirements in Regulation S-K. We
have also separately requested comment \12\ on the financial disclosure
requirements in Regulation S-X for certain entities other than the
issuer. In addition, we have requested comment on the proposed rules to
modernize the disclosure requirements for mining properties.\13\
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    \10\ See Request for Public Comment at http://www.sec.gov/spotlight/disclosure-effectiveness.shtml and comment letters at
http://www.sec.gov/comments/disclosure-effectiveness/disclosureeffectiveness.shtml.
    \11\ Business and Financial Disclosure Required by Regulation S-
K, Release No. 33-10064 (Apr. 13, 2016) [81 FR 23915] (``S-K Concept
Release''). See comment letters at http://www.sec.gov/comments/s7-06-16/s70616.htm.
    \12\ Request for Comment on the Effectiveness of Financial
Disclosures About Entities Other than the Registrant, Release No.
33-9929 (Sept. 25, 2015) [80 FR 59083] (``Regulation S-X Request for
Comment''). See comment letters at http://www.sec.gov/comments/s7-20-15/s72015.shtml.
    \13\ Modernization of Property Disclosures for Mining
Registrants, Release No. 33-10098 (June 16, 2016) [81 FR 41651].
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    We are also issuing this release as part of our effort to implement
title LXXII, section 72002(2) of the FAST Act, which, among other
things, requires the Commission to eliminate provisions of Regulation
S-K that are duplicative, overlapping, outdated, or unnecessary.

B. Scope of Proposals

    The proposals, if adopted, would affect a variety of entities we
regulate in different ways, as discussed below. For ease of discussion,
throughout this release, we refer to the affected entities as issuers.
The requirements under discussion may apply to entities other than
issuers or to subsets of issuers and, thus, should be referenced for
their specific scope. Entities other than issuers include significant
acquirees for which financial statements are required under Rule 3-05
of Regulation S-X,\14\ significant equity method investments for which
financial statements are required under Rule 3-09 of Regulation S-
X,\15\ broker-dealers, and nationally recognized statistical rating
organizations (``NRSROs'').
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    \14\ 17 CFR 210.3-05.
    \15\ 17 CFR 210.3-09.
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1. Issuers With Offerings Registered Under the Securities Act and
Securities Registered Under the Exchange Act
    Because the proposals affect issuers filing forms prescribed under
the Securities Act and the Exchange Act differently, our discussion is
tailored accordingly. Our references to domestic issuers encompass
large accelerated filers,\16\ accelerated filers,\17\ and non-
accelerated filers,\18\ as well as emerging growth companies \19\
(``EGCs'') and smaller reporting companies \20\ (``SRCs''). In this
release, we have highlighted the Commission disclosure requirements
that affect SRCs differently from non-SRCs. Our references to foreign
private issuers \21\ encompass large accelerated filers, accelerated
filers, and non-accelerated filers, as well as EGCs.\22\ More
specifically:
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    \16\ Under Exchange Act Rule 12b-2 [17 CFR 240.12b-2], a large
accelerated filer is an issuer with an aggregate worldwide market
value of voting and non-voting common equity held by its non-
affiliates of $700 million or more, as of the last business day of
its most recently completed second fiscal quarter. In addition, the
issuer needs to have been subject to reporting requirements for at
least twelve calendar months, have filed at least one annual report,
and not be eligible to use the requirements for smaller reporting
companies for its annual and quarterly reports.
    \17\ Under Exchange Act Rule 12b-2, an accelerated filer is an
issuer with an aggregate worldwide market value of voting and non-
voting common equity held by its non-affiliates of $75 million or
more, but less than $700 million, as of the last business day of its
most recently completed second fiscal quarter. In addition, the
issuer needs to have been subject to reporting requirements for at
least twelve calendar months, have filed at least one annual report,
and not be eligible to use the requirements for smaller reporting
companies for its annual and quarterly reports.
    \18\ Although the term ``non-accelerated filer'' is not defined
in Commission rules, we use it throughout this release to refer to a
reporting company that does not meet the definition of either an
``accelerated filer'' or a ``large accelerated filer'' under
Exchange Act Rule 12b-2.
    \19\ An EGC is defined in section 2(a)(19) of the Securities Act
[15 U.S.C. 77b(a)(19)] and section 3(a)(80) of the Exchange Act [15
U.S.C. 78c(a)(80)] to mean an issuer with less than $1 billion in
total annual gross revenues during its most recently completed
fiscal year. If an issuer qualifies as an EGC on the first day of
its fiscal year, it maintains that status until the earliest of (1)
the last day of the fiscal year of the issuer during which it has
total annual gross revenues of $1 billion or more; (2) the last day
of its fiscal year following the fifth anniversary of the first sale
of its common equity securities pursuant to an effective
registration statement; (3) the date on which the issuer has, during
the previous 3-year period, issued more than $1 billion in non-
convertible debt; or (4) the date on which the issuer is deemed to
be a ``large accelerated filer'' (as defined in Exchange Act Rule
12b-2).
    \20\ SRC is defined to mean an issuer that had a public float of
less than $75 million as of the last business day of its most
recently completed second fiscal quarter or had annual revenues of
less than $50 million during the most recently completed fiscal year
for which audited financial statements are available. See Rule 405
of Regulation C [17 CFR 230.405], Rule 12b-2 of the Exchange Act,
and Item 10(f) of Regulation S-K [17 CFR 229.10(f)].
    The Commission has proposed to amend this definition. Under the
proposed amendments, the $75 million public float threshold would be
increased to $250 million and the $50 million revenue threshold
would be increased to $100 million. See Amendments to Smaller
Reporting Company Definition, Release No. 33-10107 (Jun. 27, 2016)
[81 FR 43130].
    \21\ See Rule 405 of Regulation C and Exchange Act Rule 3b-4(c)
[17 CFR 240.3b-4(c)]. A foreign private issuer is any foreign issuer
other than a foreign government, except for an issuer that has more
than 50 percent of its outstanding voting securities held of record
by U.S. residents and any of the following: A majority of its
officers or directors are citizens or residents of the United
States; more than 50 percent of its assets are located in the United
States; or its business is principally administered in the United
States.
    \22\ Foreign private issuers may only use the scaled rules
available to SRCs if they file on domestic forms under U.S. GAAP.
See Rule 8-01 of Regulation S-X [17 CFR 210.8-01]. The proposals
affect these SRCs in the same ways as domestic SRC issuers.
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     Proposals involving Regulation S-K relate only to domestic
issuers \23\ and foreign private issuers that elect to file on forms
used by domestic issuers.
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    \23\ Domestic issuers include foreign issuers that do not meet
the definition of foreign private issuer.
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     Proposals involving Regulation S-X generally relate only
to domestic issuers and foreign private issuers that report under U.S.
GAAP or a comprehensive body of accounting principles other than U.S.
GAAP or IFRS as issued by the International Accounting Standards Board
(``IASB'') \24\ with a reconciliation to U.S. GAAP.\25\
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    \24\ Throughout this release, we refer to a comprehensive body
of accounting principles other than U.S. GAAP or IFRS as ``Another
Comprehensive Body of Accounting Principles.''
    \25\ Foreign private issuers that report under IFRS must comply
with the IFRS requirements for the form and content of financial
statements, rather than with the specific presentation and
disclosure provisions in Articles 3A, 4, 5, 6, 6A, 7, 8, 9, 10, and
certain parts of Article 3 of Regulation S-X. Where a proposal on
Regulation S-X also affects foreign private issuers that report
under IFRS, we discuss both U.S. GAAP and IFRS.
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     Proposals involving Commission forms relate to either
domestic issuers or

foreign private issuers, depending on the form under discussion. For
example, proposed amendments to the ``F'' series of forms \26\ only
affect foreign private issuers. Because foreign private issuers may
report under U.S. GAAP, Another Comprehensive Body of Accounting
Principles with a reconciliation to U.S. GAAP, or IFRS, discussion of
proposals involving F-forms includes consideration of both U.S. GAAP
and IFRS, where applicable.
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    \26\ For example, these forms include Forms F-1 [17 CFR 239.31],
F-3 [17 CFR 239.33], F-4 [17 CFR 239.34], and 20-F [17 CFR
249.220f].
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    Some of the proposals also affect asset-backed issuers.\27\
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    \27\ ``Asset-backed issuer'' is defined in Item 1101(b) of
Regulation AB [17 CFR 229.1101(b)]. See the proposals regarding: (1)
Invitations for competitive bids discussed in section III.C.19, (2)
available information discussed in section IV.B.3, (3) matters
submitted to a vote of security holders discussed in section V.B.15,
and (4) incorrect references in General Instruction J(1)(e) to Form
10-K discussed in section V.B.18.
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2. Issuers Offering Securities Under Regulation A
    Some of our proposals affect Regulation A issuers, as follows: \28\
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    \28\ See Rules 251-263 of Regulation A [17 CFR 230.251-230.263].
A Tier 1 offering under Regulation A limits the sum of the aggregate
offering price and the aggregate sales within 12 months before the
start of the offering to $20 million. Rule 251(a)(1) of Regulation
A. A Tier 1 offering also limits sales by affiliated selling
security holders to $6 million. A Tier 2 offering under Regulation A
limits the sum of the aggregate offering price and the aggregate
sales to $50 million and limits the amount offered by affiliated
selling security holders to $15 million. Rule 251(a)(2) of
Regulation A.
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     Proposals involving Regulation S-K would affect Regulation
A issuers that provide narrative disclosure that follows Part I of Form
S-1 \29\ or Part I of Form S-11 \30\ in Part II of Form 1-A.\31\
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    \29\ 17 CFR 239.11.
    \30\ 17 CFR 239.18.
    \31\ 17 CFR 239.90.
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     Proposals involving Rule 4-10,\32\ Rule 8-04,\33\ Rule 8-
05,\34\ and Rule 8-06 \35\ of Regulation S-X would affect all
Regulation A issuers. Proposals involving Rule 8-03(a) \36\ of
Regulation S-X would affect all Regulation A issuers that report under
U.S. GAAP. Proposals involving the remaining rules in Article 8 of
Regulation S-X would affect only Regulation A issuers in a Tier 2
offering that report under U.S. GAAP. No other proposals involving
Regulation S-X would affect Regulation A issuers.
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    \32\ 17 CFR 210.4-10.
    \33\ 17 CFR 210.8-04.
    \34\ 17 CFR 210.8-05.
    \35\ 17 CFR 210.8-06.
    \36\ 17 CFR 210.8-03(a).
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     Proposals involving Regulation A forms may affect issuers
that report under U.S. GAAP or Canadian issuers that report under
IFRS.\37\ For this reason, discussion of proposals affecting these
forms includes consideration of both U.S. GAAP and IFRS, where
applicable.
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    \37\ Only U.S. and Canadian issuers may rely on Regulation A and
use Form 1-A. See Rule 251(b)(1) of Regulation A [17 CFR
230.251(b)(1)]. U.S. issuers must report under U.S. GAAP. Canadian
issuers may report under U.S. GAAP or IFRS. See paragraph (a)(2) of
Part F/S of Form 1-A [17 CFR 239.90], Item 7(b) of Form 1-K [17 CFR
239.91], and Item 3 of Form 1-SA [17 CFR 239.92].
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    In this release, we have highlighted the Commission disclosure
requirements that affect Regulation A issuers.\38\
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    \38\ Statements about the effect of a proposal on Regulation A
issuers throughout this release reflect that the form and content
requirements in Regulation S-X do not apply to Canadian Regulation A
issuers that report under IFRS. Please refer to section V.B.17.
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    We are also soliciting comment on certain Commission disclosure
requirements that overlap with, but require information incremental to,
U.S. GAAP. As discussed in section III.E, we are not proposing
amendments to this category of disclosure requirements in this release.
Rather, the comments received in response to this release may inform
both potential future Commission rulemaking and FASB standard-setting
activities. One potential outcome of this feedback is a referral of
these incremental requirements to the FASB for potential incorporation
into U.S. GAAP.\39\ A referral alone would have no effect on issuers.
Any changes to U.S. GAAP that may result from such a referral would be
subject to FASB's standard-setting process, as discussed below, and
would potentially affect all entities that report under U.S. GAAP,
including crowdfunding issuers and those outside the scope of our
regulatory authority.
---------------------------------------------------------------------------

    \39\ The IASB, which is subject to oversight by the IFRS
Foundation, is responsible for IFRS and establishes its own
standard-setting agenda. For further information, see http://www.ifrs.org/About-us/Pages/IFRS-Foundation-and-IASB.aspx.
---------------------------------------------------------------------------

3. Issuers Regulated Under the Investment Company Act
    Certain proposals affect requirements applicable to issuers
regulated under the Investment Company Act, as follows:
     Proposals involving Regulation S-K would affect business
development companies to which the regulation applies.
     Proposals involving Regulation S-X would affect investment
companies to which the regulation applies.
     Proposals involving Investment Company Act forms may
affect investment companies, depending on the form in question.
4. Other Entities
    Certain proposals also affect requirements applicable to registered
broker-dealers, investment advisors, and NRSROs.

C. FASB-Related Considerations

1. Role of the FASB
    The federal securities laws set forth the Commission's broad
authority and responsibility to prescribe the methods to be followed in
the preparation of accounts and the form and content of financial
statements to be filed under those laws,\40\ as well as its
responsibility to ensure that investors are furnished with other
information necessary for investment decisions.\41\ To assist it in
meeting this responsibility, the Commission historically has looked to
private-sector standard-setting bodies designated by the accounting
profession to develop accounting principles and standards.\42\ At the
time of the FASB's formation in 1973, the Commission reexamined its
policy and formally recognized pronouncements of the FASB that
establish and amend accounting principles and standards as
``authoritative'' in the absence of any contrary determination by the
Commission.\43\ The Commission concluded at that time that the
expertise and resources that the private sector could offer to the
process of setting accounting standards would be beneficial to
investors.
---------------------------------------------------------------------------

    \40\ See, e.g., sections 7 [15 U.S.C. 77g], 19(a) [15 U.S.C.
77s(a)] and Schedule A, Items (25) and (26) of the Securities Act
[15 U.S.C. 77aa(25) and (26)]; sections 3(b) [15 U.S.C. 78c(b)],
12(b) [17 CFR 78l(b)] and 13(b) [17 CFR 78m(b)] of the Exchange Act;
and sections 8 [15 U.S.C. 80a-8], 30(e) [15 U.S.C. 80a-29(e)], 31
[15 U.S.C. 80a-30], and 38(a) [15 U.S.C. 80a-37(a)] of the
Investment Company Act.
    \41\ See Policy Statement: Reaffirming the Status of the FASB as
a Designated Private-Sector Standard Setter, Release No. 33-8221
(Apr. 25, 2003) [68 FR 23333], available at http://www.sec.gov/rules/policy/33-8221.htm (``2003 FASB Policy Statement'').
    \42\ Id.
    \43\ See Accounting Series Release No. 150 (Dec. 20, 1973).
---------------------------------------------------------------------------

    The Sarbanes-Oxley Act of 2002 \44\ (``Sarbanes-Oxley Act'')
established criteria that must be met in order for the work product of
an accounting standard-setting body to be recognized as ``generally
accepted.'' \45\ In accordance with these criteria, the Commission has
designated the FASB as the private-sector accounting standard setter
for U.S. financial reporting

purposes.\46\ As required under the securities laws, including the
Sarbanes-Oxley Act, the Commission monitors the FASB's ongoing
compliance with the expectations and views expressed in the 2003 FASB
Policy Statement.
---------------------------------------------------------------------------

    \44\ Pub. L. 107-204, 116 Stat. 745 (2002)
    \45\ See section 19 of the Securities Act [15 U.S.C. 77s].
    \46\ Section 108 of the Sarbanes-Oxley Act amended section 19 of
the Securities Act to provide that the Commission ``may recognize,
as `generally accepted' for purposes of the securities laws, any
accounting principles established by a standard setting body that
met certain criteria.'' The Commission has determined that the FASB
satisfies the criteria in section 19 and, accordingly, the FASB's
financial accounting and reporting standards are recognized as
``generally accepted'' for purposes of the federal securities laws.
See 2003 FASB Policy Statement.
---------------------------------------------------------------------------

    As the designated private-sector accounting standard setter in the
United States, the FASB seeks to undertake a transparent, public
standard-setting process.\47\
---------------------------------------------------------------------------

    \47\ See http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1351027215692. See also pages 2 and 5 of the FASB
Rules of Procedures, available at http://www.fasb.org/cs/ContentServer?c=Document_C&pagename=FASB%2FDocument_C%2FDocumentPage&cid=1176162391050.
---------------------------------------------------------------------------

2. Interaction of Commission Disclosure Requirements and U.S. GAAP
    Although the FASB functions as the designated private-sector
accounting standard setter in the United States, some Commission rules
contain accounting and disclosure requirements. In some cases, these
Commission requirements mandate disclosures which the FASB later added
to U.S. GAAP.\48\ Other Commission disclosure requirements include
concepts that have been superseded by U.S. GAAP.\49\ From time to time,
the Commission has reviewed and amended its disclosure requirements to
eliminate rules that became redundant, duplicative, or overlapping as
the FASB updated U.S. GAAP.\50\ In keeping with this historical
practice, many of the proposed amendments revise or eliminate
Commission disclosure requirements related to information that is
addressed by more recently updated U.S. GAAP requirements.
---------------------------------------------------------------------------

    \48\ See, e.g., Rule 4-08(h) of Regulation S-X [17 CFR 210.4-
08(h)], parts of which were subsequently incorporated into U.S.
GAAP.
    \49\ See, e.g., Rule 10-01(a)(7) of Regulation S-X [17 CFR
210.10-01(a)(7)], which refers to the disclosures required by ASC
915 on development stage entities, which the FASB has since
eliminated.
    \50\ See, e.g., General Revision of Regulation S-X, Release No.
33-6233 (Sept. 2, 1980) [45 FR 63660], Phase One Recommendations of
Task Force on Disclosure Simplification Release No. 33-7300 (May 31,
1996) [61 FR 30397], and Technical Amendments to Rules, Forms,
Schedules, and Codification of Financial Reporting Policies, Release
No. 33-9026, (Apr. 15, 2009) [74 FR 18612].
---------------------------------------------------------------------------

    In addition, a number of Commission disclosure requirements are
related, but require information that is incremental, to U.S. GAAP. In
this release, we solicit comment on certain of those incremental
Commission disclosure requirements to determine whether to retain,
modify, eliminate, or refer them to the FASB for potential
incorporation into U.S. GAAP.\51\ The comments received in response to
this release may inform both potential future Commission rulemaking and
FASB standard-setting activities. Future amendments to these Commission
disclosure requirements may depend on the outcome of any FASB's
standard-setting activities to address the disclosure requirements. Our
staff has discussed these requirements with the FASB staff.
---------------------------------------------------------------------------

    \51\ The incorporation of incremental Commission disclosure
requirements into U.S. GAAP may streamline disclosures for investors
and simplify requirements for issuers.
---------------------------------------------------------------------------

3. Current FASB Projects Concerning the Application of U.S. GAAP
    The FASB maintains U.S. GAAP by updating it from time to time
through its standard-setting projects. Among a number of projects on
the FASB's agenda, there are two current standard-setting projects that
we invite commenters to consider when evaluating the proposals and
providing feedback.\52\ In one project,\53\ the FASB has proposed
amendments, which, among other things,\54\ would clarify that with
respect to disclosures in the notes to the financial statements an
omission of immaterial information is not an accounting error.\55\
---------------------------------------------------------------------------

    \52\ The FASB also has other standard-setting projects underway
that may affect specific topics within this release. Those projects
are identified in the discussion of the specific topics they affect.
    \53\ FASB Exposure Draft, Notes to Financial Statements (Topic
235): Assessing Whether Disclosures Are Material (Sept. 24, 2015),
available at: http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176166402325&acceptedDisclaimer=true.
    \54\ Among the other proposed amendments is an amendment related
to the legal concept of materiality. Commenters have expressed a
range of views on the proposed amendments and their potential impact
on the volume of financial disclosures. The comment letters are
available at: http://www.fasb.org/jsp/FASB/CommentLetter_C/CommentLetterPage&cid=1218220137090&project_id=2015-310.
    \55\ In 2014, the IASB amended IFRS to clarify that an entity
does not have to disclose information required by IFRS if that
information would not be material. See Disclosure Initiative
(Amendments to IAS 1).
---------------------------------------------------------------------------

    In the other project, the FASB is addressing disclosures in interim
reports. The FASB has reached a tentative decision that disclosures
about matters required to be provided in annual financial statements
should be updated in the interim report if there is a substantial
likelihood that the updated information would be viewed by a reasonable
investor as significantly altering the total mix of information
available to the investor.\56\
---------------------------------------------------------------------------

    \56\ See Minutes from FASB Board Meeting (May 29, 2014),
available at: http://www.fasb.org/jsp/FASB/FASBContent_C/ProjectUpdatePage&cid=1176164227056.
---------------------------------------------------------------------------

    Both projects are subject to further stakeholder comment and FASB
deliberation. If we ultimately decide to eliminate or revise certain of
our disclosure requirements on the basis that U.S. GAAP requires the
same or similar disclosure, these projects, if finalized, may impact
certain disclosures currently provided under Commission disclosure
requirements that we propose to eliminate or amend. In particular, for
information currently provided under Commission rules that do not
contain a specified disclosure threshold, investors may receive less
information if such information is only required by U.S. GAAP and the
issuer determines that the information is not material. Throughout this
release, we identify those Commission disclosure requirements that
contemplate a disclosure threshold in some manner, for example, through
the use of terms such as ``material'' or ``significant'' or through the
use of bright line disclosure thresholds.
Request for Comment
    1. Would the FASB's projects discussed above affect our: (1)
Proposed amendments to eliminate certain Commission disclosure
requirements due to a U.S. GAAP requirement or (2) potential referrals
to the FASB of certain Commission disclosure requirements? If so, how?
    2. Would the information provided to investors in the notes to the
financial statements change if the source of the disclosure requirement
(i.e., Commission rule or U.S. GAAP) changed? If so, how and why?
    3. Do the other proposed amendments within the FASB Exposure Draft
related to notes to the financial statements \57\ impact the proposals
made in this release? If so, how?
---------------------------------------------------------------------------

    \57\ See supra note 53 and 54.
---------------------------------------------------------------------------

II. Redundant or Duplicative Requirements

A. Background
    In reviewing our disclosure requirements, we have preliminarily
identified a number of requirements that require substantially the same
disclosures as U.S. GAAP, IFRS, or other Commission disclosure
requirements. We propose to eliminate these redundant or duplicative
Commission disclosure requirements to

simplify issuer compliance efforts while providing substantially the
same information to investors.\58\
---------------------------------------------------------------------------

    \58\ Some proposed amendments, however, may be affected by
certain FASB projects, as discussed in section I.C.3.
---------------------------------------------------------------------------

    The table in section II.B below describes each redundant or
duplicative requirement that we propose to eliminate and identifies the
corresponding U.S. GAAP, IFRS, or Commission disclosure requirement
that requires substantially the same information.

B. Proposed Amendments
---------------------------------------------------------------------------

    \59\ Where a Commission disclosure requirement proposed for
elimination does not apply to foreign private issuers that report
under IFRS, the proposed change would not result in a change to the
requirements for foreign private issuers and we do not identify a
corresponding IFRS requirement. See supra note 25.
    \60\ 17 CFR 210.3-20(d).
    \61\ 17 CFR 249.220f.
    \62\ Please refer to the related discussions in sections
III.C.2, III.E.2, and V.B.4.
    \63\ 17 CFR 210.4.08(a).
    \64\ 17 CFR 210.3A-01 through 210.3A-04.
    \65\ 17 CFR 210.3A-01.
    \66\ 17 CFR 210.3A-02(b)(1).
    \67\ ASC 810-10-45-12 uses the phrase ``about three months.''
    \68\ 17 CFR 210.3A-02(d).
    \69\ Rule 3A-02(d) requires due consideration of the propriety
of consolidation in the presence of political, economic, or currency
restrictions. ASC 810-10-15-10 states that subsidiaries shall not be
consolidated in the presence of foreign exchange restrictions,
controls, or other governmentally imposed uncertainties so severe
that they cast significant doubt on the parent's ability to control
the subsidiary.
    \70\ 17 CFR 210.3A-02.
    \71\ 17 CFR 210.3A-03(a).
    \72\ Rule 3A-02 states that the accounting policy disclosure
should also include the circumstances associated with any departure
from the normal practice of consolidating majority owned
subsidiaries and not consolidating entities that are not majority
owned. ASC 235-10-50-1 states that the accounting disclosure shall
encompass important judgments about the appropriateness of
accounting principles and unusual or innovative applications of U.S.
GAAP.
    \73\ 17 CFR 210.3A-04.
    \74\ Please refer to the related discussion in section III.E.5.
    \75\ 17 CFR 210.4-08(f).
    \76\ ASC 855-10-50-2 requires disclosure of events subsequent to
the balance sheet date that are of such a nature that non-disclosure
would render the financial statements misleading. ASC 855-10-55-55-
2a provides that the sale of a bond subsequent to the balance sheet
date is an example of such a subsequent event.
    \77\ Please refer to the related discussions in sections III.E.7
and IV.B.2.
    \78\ 17 CFR 210.4-08(h)(2).

------------------------------------------------------------------------
                                 Description of      Corresponding U.S.
    Commission disclosure          Commission        GAAP, IFRS,\59\ or
  requirement proposed for         disclosure            Commission
         elimination          requirement proposed       disclosure
                                 for elimination         requirement
------------------------------------------------------------------------
                           1. Foreign Currency
------------------------------------------------------------------------
Third sentence of Rule 3-     Defines: (1) The      Accounting Standards
 20(d) of Regulation S-X.      currency of an        Codification
 \60\                          operation's primary   (``ASC'') 830-10-45-
                               economic              2, ASC 830-10-45-
                               environment and (2)   12, and ASC 830-10-
                               a hyperinflationary   55-10.
                               environment.
Last sentence of Rule 3-      States that foreign   Item 17(c)(2) of
 20(d) of Regulation S-X.      private issuers       Form 20-F. Also
                               must comply with      Item 4 of Form F-1,
                               Item 17(c)(2) of      General
                               Form 20-F,\61\        Instructions I.B of
                               which requires        Form F-3, and Items
                               disclosure and        11, 12, and 13 of
                               quantification of     Form F-4, which
                               departures from the   indirectly refer to
                               methodology of this   Item 17 of Form 20-
                               rule if their         F.
                               financial
                               statements are
                               prepared on a basis
                               other than U.S.
                               GAAP or IFRS.
------------------------------------------------------------------------
                          2. Consolidation \62\
------------------------------------------------------------------------
Rule 4-08(a) of Regulation S- Requires compliance   Article 3A \64\
 X \63\.                       with Article 3A.      itself requires
                                                     compliance. The
                                                     requirement is
                                                     repeated in Rule 4-
                                                     08(a).
Rule 3A-01 of Regulation S-X  States subject        The same information
 \65\.                         matter of Article     is set forth in the
                               3A.                   title of Article
                                                     3A.
All except fourth sentence    Permits               ASC 810-10-45-12.
 of Rule 3A-02(b)(1) of        consolidation of an
 Regulation S-X. \66\          entity's financial
                               statements for its
                               fiscal period if
                               the period does not
                               differ from that of
                               the issuer by more
                               than 93 days \67\
                               and requires
                               recognition by
                               disclosure or
                               otherwise of
                               material
                               intervening events.
First sentence of Rule 3A-    Requires              ASC 810-10-15-10.
 02(d) of Regulation S-X.      consideration of
 \68\                          the propriety of
                               consolidation under
                               certain
                               restrictions. \69\
Last two sentences of first   Requires disclosure   ASC 235-10-50-1 and
 paragraph of Rule 3A-02 of    of the accounting     ASC 810-10-50-1.
 Regulation S-X \70\ and 3A-   policies followed
 03(a) of Regulation S-X       in consolidation or
 \71\.                         combination \72\.
First sentence of Rule 3A-04  Requires elimination  ASC 323-10-35-5a and
 of Regulation S-X. \73\       of intercompany       ASC 810-10-45.
                               transactions.
------------------------------------------------------------------------
                           3. Obligations \74\
------------------------------------------------------------------------
Reference to issuances in     Requires disclosure   ASC 855-10-50-2 and
 Rule 4-08(f) of Regulation    of significant        855-10-55-2a.
 S-X. \75\                     changes \76\ in
                               issued amounts of
                               debt subsequent to
                               the latest balance
                               sheet date.
------------------------------------------------------------------------
                     4. Income Tax Disclosures \77\
------------------------------------------------------------------------
First sentence of Rule 4-     Requires an income    ASC 740-10-50-12.
 08(h)(2) of Regulation S-X.   tax rate
 \78\                          reconciliation.
Fourth sentence of Rule 4-    Permits the income    ASC 740-10-50-12.
 08(h)(2) of Regulation S-X.   tax rate
                               reconciliation to
                               be presented in
                               either percentages
                               or dollars.
------------------------------------------------------------------------

          5. Warrants, Rights, and Convertible Instruments \79\
------------------------------------------------------------------------
Rule 4-08(i) of Regulation S- Requires disclosure   Non-compensatory
 X \80\.                       of the title and      warrants or rights:
                               amount of             ASC 505-10-50-3 and
                               securities subject    ASC 815-40-50-5.
                               to warrants or
                               rights, the
                               exercise price, and
                               the exercise
                               period. \81\
                                                    Compensatory
                                                     warrants or rights:
                                                     ASC 505-10-50-3,
                                                     ASC 718-10-50-1,
                                                     and ASC 718-10-50-
                                                     2.
------------------------------------------------------------------------
                         6. Related Parties \82\
------------------------------------------------------------------------
Reference to identification   Requires              ASC 850-10-50-1.
 of related party              identification of
 transactions in Rule 4-       related party
 08(k)(1) of Regulation S-X    transactions.
 \83\.
------------------------------------------------------------------------
                            7. Contingencies
------------------------------------------------------------------------
References to ``material      Require disclosure    ASC 270-10-50-6.
 contingencies'' in Rule 8-    of material
 03(b)(2) \84\ and the         contingencies in
 second sentence of Rule 10-   interim financial
 01(a)(5) of Regulation S-X    statements,
 and the entire last           notwithstanding
 sentence of Rule 10-          disclosure in the
 01(a)(5) of Regulation S-X    annual financial
 \85\.                         statements.
------------------------------------------------------------------------
                       8. Earnings per Share \86\
------------------------------------------------------------------------
Reference to ``earnings per   Requires              ASC 270-10-50-1b.
 share'' in first sentence     presentation of
 of Rule 10-01(b)(2) of        earnings per share
 Regulation S-X \87\.          on interim income
                               statement.
Item 601(b)(11) of            Require disclosure    ASC 260-10-50-1a,
 Regulation S-K \88\ and       of the computation    Rule 10-01(b)(2) of
 Instruction 6 to              of earnings per       Regulation S-X, and
 ``Instructions as to          share in annual       IAS 33, paragraph
 Exhibits'' of Form 20-F.      filings.              70.
------------------------------------------------------------------------
                       9. Insurance Companies \89\
------------------------------------------------------------------------
Last sentence of Rule 7-      Requires a            ASC 944-80-50-1a.
 03(a)(11) of Regulation S-X   description of the
 \90\.                         activities being
                               reported in the
                               separate accounts
                               \91\.
Rule 7-04.3(c) of Regulation  Requires disclosure   ASC 235-10-50-1 and
 S-X \92\.                     of the method         ASC 320-10-50-9b.
                               followed in
                               determining the
                               cost of investments
                               sold \93\.
------------------------------------------------------------------------
                     10. Bank Holding Companies \94\
------------------------------------------------------------------------
Rule 9-03.6(a) of Regulation  Requires disclosure   ASC 320-10-50-1B,
 S-X \95\.                     of the carrying and   ASC 320-10-50-2,
                               market values of      ASC 320-10-50-5,
                               (1) securities of     and ASC 942-320-50-
                               the U.S. Treasury     2.
                               and other U.S.
                               Government agencies
                               and corporations,
                               (2) securities of
                               states of the U.S.
                               and political
                               subdivisions, and
                               (3) other
                               securities.
Rule 9-03.7(d) of Regulation  Requires disclosure   ASC 310-10-50-
 S-X \96\.                     of changes in the     11B(c).
                               allowance for loan
                               losses.
First part of Rule 9-         Requires disclosure   ASC 235-10-50-1 and
 04.13(h) of Regulation S-X    of the method         ASC 320-10-50-9b.
 \97\.                         followed in
                               determining the
                               cost of investment
                               securities sold.
------------------------------------------------------------------------
                11. Changes in Accounting Principles \98\
------------------------------------------------------------------------
Requirement to disclose       Requires disclosure   ASC 250-10-45-12 to
 reason for change in          of the reasons for    16, ASC 250-10-50-
 accounting principle in       making material       1a, and ASC 270-10-
 Rule 8-03(b)(5) \99\ and      accounting changes    50-1g.
 Rule 10-01(b)(6) of           in an interim
 Regulation S-X \100\.         period.
------------------------------------------------------------------------
                         12. Interim Adjustments
------------------------------------------------------------------------
Third sentence of Rule 3-     Provide examples of   ASC 270-10-45-10.
 03(d) \101\ and third         adjustments in
 sentence of Rule 10-          order for interim
 01(b)(8) \102\ of             financial
 Regulation S-X.               statements to be
                               fairly stated.
------------------------------------------------------------------------
   13. Interim Financial Statements--Common Control Transactions \103\
------------------------------------------------------------------------
Part of first sentence of     Requires that common  ASC 805-50-45-1 to
 Rule 10-01(b)(3) of           control               5.
 Regulation S-X \104\.         transactions be
                               reflected in
                               current and prior
                               comparative
                               period's interim
                               financial
                               statements.
------------------------------------------------------------------------

          14. Interim Financial Statements--Dispositions \105\
------------------------------------------------------------------------
Rule 10-01(b)(5) of           Requires disclosure   ASC 205-20-50-5B,
 Regulation S-X \106\.         of the effect of      ASC 205-20-50-5C,
                               discontinued          ASC 260-10-45-3,
                               operations on         and ASC 270-10-50-
                               interim revenues,     7.
                               net income, and
                               earnings per share
                               for all periods
                               presented.
------------------------------------------------------------------------
                15. Report Furnished to Security Holders
------------------------------------------------------------------------
Item 601(b)(19) of            Provides specific     General Instruction
 Regulation S-K \107\.         instructions to       D(3) to Form 10-Q,
                               address the           which refers to
                               incorporation by      Item 601(b)(13) of
                               reference into Form   Regulation S-
                               10-Q \108\ of         K.\109\
                               information that is
                               separately made
                               available to
                               security holders.
------------------------------------------------------------------------

C. Request for Comment

    4. We solicit comment on the foregoing proposed amendments to
eliminate redundant or duplicative requirements.
---------------------------------------------------------------------------

    \79\ Please refer to the related discussion in section III.C.15.
    \80\ 17 CFR 210.4-08(i).
    \81\ For compensatory warrants or rights, U.S. GAAP requires
disclosure of the nature and terms of such arrangements, the number
and weighted-average exercise price, and the weighted-average
contractual term.
    \82\ Please refer to the related discussion in section III.E.8.
    \83\ 17 CFR 4-08(k)(1).
    \84\ 17 CFR 210.8-03(b)(2). This rule specifically applies to
SRCs and Regulation A issuers in a Tier 2 offering that report under
U.S. GAAP.
    \85\ 17 CFR 210.10-01(a)(5). This rule specifically applies to
companies other than SRCs (``non-SRCs'').
    \86\ Please refer to the related discussion in section III.E.10.
    \87\ 17 CFR 210.10-01(b)(2).
    \88\ 17 CFR 229.601(b)(11). We also propose conforming revisions
to delete references to Item 601(b)(11) of Regulation S-K in the
Exhibit Table and in Rule 10-01(b)(2) of Regulation S-X.
    \89\ Please refer to the related discussions in sections III.C.6
and V.B.8.
    \90\ 17 CFR 210.7-03(a)(11).
    \91\ ASC 944-80-50-1a requires disclosure of the nature of the
contracts reported in separate accounts.
    \92\ 17 CFR 210.7-04.3(c).
    \93\ ASC 320-10-50-9b refers to the ``cost of a security sold.''
    \94\ Please refer to the related discussion in section V.B.9.
    \95\ 17 CFR 210.9-03.6(a).
    \96\ 17 CFR 210.9-03.7(d).
    \97\ 17 CFR 210.9-04.13(h).
    \98\ Please refer to the related discussions in section III.C.8
and V.B.14.
    \99\ 17 CFR 210.8-03(b)(5). This rule specifically applies to
SRCs and Regulation A issuers in a Tier 2 offering that report under
U.S. GAAP.
    \100\ 17 CFR 210.10-01(b)(6). This rule specifically applies to
non-SRCs.
    \101\ 17 CFR 210.3-03(d).
    \102\ 17 CFR 210.10-01(b)(8).
    \103\ Please refer to the related discussion in section
III.E.12.
    \104\ 17 CFR 210.10-01(b)(3).
    \105\ Please refer to the related discussion in section
III.C.10.
    \106\ 17 CFR 210.10-01(b)(5).
    \107\ 17 CFR 229.601(b)(19). We also propose conforming
revisions to delete the reference to Item 601(b)(19) of Regulation
S-K in the Exhibit Table.
    \108\ 17 CFR 249.308a.
    \109\ 17 CFR 229.601(b)(13). We also propose to amend the
Exhibit Table within Item 601 of Regulation S-K to clarify that Item
601(b)(13) applies to Form 10-Q.
---------------------------------------------------------------------------

    a. Do the requirements proposed for elimination require
substantially the same disclosures as U.S. GAAP, IFRS, or other
Commission disclosure requirements? If eliminated, would investors
continue to receive substantially the same information? If not, which
redundant or duplicative requirements preliminarily identified above do
not require substantially the same disclosures and why?
    b. Should any proposed amendments not be made? Should any proposed
amendments be modified? If so, which ones and why? Please be as
specific as possible for each of the proposals on which you provide
comments.
    5. Are there other Commission disclosure requirements that are
redundant or duplicative with U.S. GAAP, IFRS, or other Commission
disclosure requirements that we should consider eliminating? If so,
which requirements should be eliminated and how are they redundant or
duplicative?

III. Overlapping Requirements

A. Background

    We also have preliminarily identified Commission disclosure
requirements that are related to, but not the same as, U.S. GAAP, IFRS,
or other Commission disclosure requirements, which we refer to in this
release as overlapping requirements. In this section, we:
     Propose to delete Commission disclosure requirements that,
as discussed further in section III.C below, we believe: (1) Require
disclosures that convey reasonably similar information to or are
encompassed by the disclosures that result from compliance with the
overlapping U.S. GAAP, IFRS, or Commission disclosure requirements or
(2) require disclosures incremental to the overlapping U.S. GAAP, IFRS,
or Commission disclosure requirements and may no longer be useful to
investors.
     Propose to integrate Commission disclosure requirements
that overlap with, but require information incremental to, other
Commission disclosure requirements, as discussed further in section
III.D below, or
     Solicit comment on certain Commission disclosure
requirements that overlap with, but require information incremental to,
U.S. GAAP to determine whether to retain, modify, eliminate, or refer
them to the FASB for potential incorporation into U.S. GAAP, as
discussed further in section III.E below.\110\
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    \110\ One commenter to the Regulation S-X Request for Comment
recommended that we ``[c]oordinate with and encourage the FASB to
complete a disclosure project that would eliminate the need for SEC-
specific footnote disclosure requirements (e.g., S-X 4-08 and 5-02)
and financial statement schedules and incorporate them within the US
GAAP required disclosures if necessary. This commenter also noted
that ``US GAAP and SEC disclosure requirements often overlap. Slight
differences in requirements cause confusion about whether there are
different disclosure objectives and often result in redundancies.''
See letter from Ernst & Young LLP (Nov. 20, 2015).
---------------------------------------------------------------------------

B. Broad Considerations

    Our objective with these proposals is to streamline disclosures for
investors and simplify requirements for issuers. In some cases, the
proposed streamlining of overlapping disclosure requirements would give
rise to the considerations discussed below.\111\
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    \111\ Some proposals may also be affected by certain FASB
projects, as discussed in section I.C.3.
---------------------------------------------------------------------------

1. Disclosure Location Considerations
    In some cases, the streamlining of disclosure requirements would
result in the relocation of disclosures within a filing,\112\ with the
following consequences:
---------------------------------------------------------------------------

    \112\ For example, as discussed in section III.C.1, our proposed
amendments would result in the elimination of disclosures about an
issuer's status as a real estate investment trust (``REIT'') in the
audited notes to the financial statements, in reliance on
disclosures within the same filing, but outside the audited
financial statements. As another example, as discussed in section
III.D.2, our proposed amendments would result in the relocation of
disclosures about material restrictions on the payment of dividends
in a filing from outside to within the audited notes to the
financial statements. For equity compensation plans, the proposed
amendments would result in the need to reference a different filing,
as discussed in section III.C.17.

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

     Prominence Considerations--the current location of some
disclosures may provide a certain level of prominence and/or context to
other disclosures located with them. The relocation of these
disclosures may affect investors by changing the prominence and/or
context of both the relocated disclosures and the remaining
disclosures. Throughout this release, we collectively refer to these
consequences as ``Disclosure Location--Prominence Considerations.''
     Financial Statement Considerations--the proposals related
to some topics would result in the relocation of disclosures from
outside to inside the financial statements, subjecting this information
to annual audit and/or interim review, internal control over financial
reporting, and XBRL tagging requirements, as applicable. The safe
harbor under the Private Securities Litigation Reform Act of 1995
(``PSLRA'') would not be available for such disclosures.\113\
Conversely, relocation of disclosures from inside to outside the
financial statements would have the opposite effect--namely, this
information would not be subject to annual audit and/or interim review,
internal control over financial reporting, and XBRL tagging
requirements, as applicable, while the safe harbor under the PSLRA
would be available. These topics would also be subject to Disclosure
Location--Prominence Considerations. Throughout this release, we
collectively refer to these consequences as ``Disclosure Location--
Financial Statement Considerations.''
---------------------------------------------------------------------------

    \113\ Pub. L. 104-67, 109 Stat. 737 (1995).
---------------------------------------------------------------------------

    We refer to the foregoing considerations collectively as
``Disclosure Location Considerations.''
Request for Comment
    6. For each of the disclosures subject to Disclosure Location--
Prominence Considerations discussed below:
    a. Do investors benefit from the prominence of this information in
its current location or from the context these disclosures provide to
other disclosures located with them?
    b. Would the proposed changes to the disclosure location either
benefit or adversely affect investors or issuers? If so, how? Please be
specific.
    c. Should we mandate a cross-reference in the prior location of the
disclosures to assist investors in navigating the issuer's disclosures
and help maintain the prominence and/or context of the disclosures?
    d. Do electronic data analysis tools affect the importance of the
disclosure location?
    7. For disclosures subject to Disclosure Location--Financial
Statement Considerations, in addition to the above questions about
prominence, what are the benefits and costs of the inclusion/exclusion
of these disclosures in the financial statements for investors and
issuers? How important are these benefits and costs to investors and
issuers? Please quantify the benefits and costs, to the extent
practicable.
2. Bright Line Disclosure Threshold Considerations
    Some overlapping requirements, while similar, are not redundant or
duplicative because one set of requirements includes a bright line
disclosure threshold, while the other set of requirements does
not.\114\ Where a requirement contains a bright line disclosure
threshold, matters involving amounts below that threshold are not
required to be disclosed. With the exception of disclosure requirements
about major customers, as discussed in section III.E.14, the Commission
disclosure requirements we discuss contain bright line disclosure
thresholds, while the corresponding requirement does not. For these
topics, the elimination of the bright line threshold would potentially
change the disclosure provided to investors. Throughout this release,
we refer to these considerations as ``Bright Line Disclosure Threshold
Considerations.''
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    \114\ For example, Regulation S-K requires, as discussed in
section III.E.13, disclosure of the amount of revenue from products
and services which account for 10 percent or more of consolidated
revenue and, as discussed in section III.E.15, disclosure of legal
proceedings involving environmental matters that exceed 10 percent
of the issuer's consolidated current assets. The corresponding U.S.
GAAP requirements do not contain such bright line thresholds above
which disclosures would be required.
---------------------------------------------------------------------------

Request for Comment
    8. For each of the disclosures subject to Bright Line Disclosure
Threshold Considerations discussed below, should there continue to be a
bright line below which the disclosures would not be required? Should
the Commission modify the threshold? Why or why not?
    a. Are there any aspects to these disclosures that warrant bright
line disclosure thresholds, as compared to other disclosures?
    b. Does the bright line disclosure threshold help to ensure
disclosure at an appropriate level of detail for investors?
Alternatively, does the bright line disclosure threshold result in too
much or too little detail for investors? Why or why not?
    c. Are there alternative disclosure thresholds, in lieu of bright
lines, that we should consider? Would the alternative disclosure
threshold change the level of information provided to investors and the
burdens and costs associated with the preparation of these disclosures
for issuers?

C. Overlapping Requirements--Proposed Deletions

    This section discusses Commission disclosure requirements that we
believe: (1) Require disclosures that convey reasonably similar
information to or are encompassed by the disclosures that result from
compliance with the overlapping U.S. GAAP, IFRS, or Commission
disclosure requirements or (2) require disclosures incremental to the
overlapping U.S. GAAP, IFRS, or Commission disclosure requirements and
may no longer be useful to investors. In these cases, we propose to
delete the specified Commission disclosure requirement.
1. REIT Disclosures \115\
---------------------------------------------------------------------------

    \115\ Please refer to the related discussions in sections
III.E.1 and V.B.3.
---------------------------------------------------------------------------

a. Undistributed Gains or Losses on the Sale of Properties
    Regulation S-X \116\ and U.S. GAAP \117\ both set forth
requirements for the presentation of components of stockholders' equity
on the face of the financial statements. Regulation S-X incrementally
requires REITs to present undistributed gains or losses on the sale of
properties separately from other distributable earnings on their
balance sheet.\118\ This amount is presented on a book basis,\119\
which we do not believe is useful to investors because of the unique
tax status of REITs, as discussed below.
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    \116\ See, e.g., Rule 3-15(a)(2) [17 CFR 210.3-15(a)(2)] and
Rule 5-02.30 [17 CFR 210.5-02.30] of Regulation S-X.
    \117\ See, e.g., ASC 505-10-45.
    \118\ See Rule 3-15(a)(2) of Regulation S-X.
    \119\ Amounts presented on a ``book'' basis refer to amounts
determined in accordance with accounting for financial reporting
purposes (e.g., U.S. GAAP or IFRS), rather than amounts determined
in accordance with federal statutory tax law.
---------------------------------------------------------------------------

    Specifically, REITs are not subject to entity-level taxation on the
amounts

distributed to their investors. Rather, their investors are liable for
taxes on these distributions, depending on the character of the
dividends (i.e., ordinary income, capital gains, or return of capital)
the REIT distributes to them. Because the amount of undistributed gains
or losses required by Rule 3-15(a)(2) of Regulation S-X is not
presented on a tax basis, this disclosure does not provide investors
with insight into the tax implications of the REIT's distributions.
Instead, the disclosures required by Rule 3-15(c) of Regulation S-X of
the tax status of distributions provide this insight.\120\
---------------------------------------------------------------------------

    \120\ 17 CFR 210.3-15(c).
---------------------------------------------------------------------------

    In addition, the Commission staff has observed that, in practice,
because REITs are required to distribute 90 percent of their taxable
income in order to maintain their REIT status and often distribute
more, REITs generally do not have undistributed amounts to disclose
under this requirement.
    Based on the foregoing, we propose to delete Rule 3-15(a)(2).
Request for Comment
    9. Has the requirement to provide incremental disclosure about
undistributed gains or losses on the sale of properties on a book basis
resulted in the disclosure of useful information?
    What would the impact to investors and issuers be of a deletion of
this requirement?
b. Status as a REIT
    Regulation S-K and Regulation S-X both require certain disclosures
about an issuer's status as a REIT. Regulation S-K requires disclosure
of the issuer's form of organization,\121\ significant risk factors
\122\ and a description of known uncertainties that are reasonably
expected to have a material effect on income.\123\ Regulation S-X
similarly requires disclosure in the notes to the financial statements
of the issuer's status as a REIT.\124\
---------------------------------------------------------------------------

    \121\ Item 101(a)(1) of Regulation S-K [17 CFR 229.101(a)(1)].
    \122\ Item 503(c) of Regulation S-K [17 CFR 229.503(c)].
    \123\ Item 303(a)(3)(ii) of Regulation S-K [17 CFR
229.303(a)(3)(ii)].
    \124\ Rule 3-15(b) of Regulation S-X [17 CFR 210.3-15(b)].
---------------------------------------------------------------------------

    Regulation S-X also requires REITs to disclose in the notes to the
financial statements their assumptions in making or not making federal
income tax provisions.\125\ As stated above, REITs are not subject to
entity-level taxation on the amounts distributed to their investors, so
long as they maintain their REIT status. As such, for REITs, the
primary assumption in making or not making federal income tax
provisions is the issuer's continued REIT status and its consideration
of the risks affecting its continued REIT status. We believe that the
disclosure provided in response to the requirement in Regulation S-X to
disclose assumptions in making or not making federal income tax
provisions is encompassed by the disclosures provided to comply with
Regulation S-K's requirement to disclose significant risk factors and a
description of known uncertainties that are reasonably expected to have
a material effect on income. In fact, because of the overlap, issuers
often repeat or expand on the note disclosures in their risk factor
disclosures, by discussing matters such as the applicable tax
regulations and the consequence of a loss in REIT status.
---------------------------------------------------------------------------

    \125\ Rule 3-15(b) of Regulation S-X.
---------------------------------------------------------------------------

    Based on the foregoing, we propose to delete Rule 3-15(b) of
Regulation S-X. We note that because disclosures under Regulation S-K,
unlike those required by Regulation S-X, may be provided outside of the
audited financial statements, the proposed amendments give rise to
Disclosure Location--Financial Statement Considerations.
Request for Comment
    10. Does Rule 3-15(b) require disclosures that are encompassed by
disclosures that result from compliance with the overlapping
provisions, as discussed above? Why or why not?
    11. Would deletion of Rule 3-15(b) as described above affect, in
any material respect, the usefulness of information that investors
receive? If so, how?
2. Consolidation 126
---------------------------------------------------------------------------

    \126\ Please refer to the related discussions in sections
II.B.2, III.E.2, and V.B.4.
---------------------------------------------------------------------------

a. Difference in Fiscal Periods
    Regulation S-X \127\ and U.S. GAAP \128\ both set forth
requirements about the presentation of consolidated financial
statements when the issuer and its subsidiaries have different fiscal
periods. Regulation S-X incrementally requires disclosure of the
subsidiary's fiscal year closing date and an explanation of the
necessity for using different closing dates. However, when there is a
difference in the fiscal periods of the issuer and its subsidiaries,
U.S. GAAP also requires, as stated in section II.B.2, recognition by
disclosure or otherwise of the effect of intervening events that
materially affect the financial position or results of operations.\129\
Because this U.S. GAAP requirement effectively eliminates the effect of
differences in the fiscal periods of the issuer and its subsidiaries,
we believe that disclosure of the subsidiary's fiscal year closing date
and an explanation of the necessity for using different closing dates
is no longer useful for investors. We, therefore, propose to delete
Rule 3A-02(b)(1) of Regulation S-X.
---------------------------------------------------------------------------

    \127\ See Rule 3A-02(b)(1) of Regulation S-X.
    \128\ See ASC 810-10-45-12.
    \129\ See ASC 810-10-45-12.
---------------------------------------------------------------------------

Request for Comment
    12. Do disclosures of the subsidiary's fiscal year closing date and
the explanation of the necessity for using different closing dates
provide useful information to investors? What would the impact to
investors and issuers be of a deletion of this requirement?
b. Changes in Fiscal Periods
    Regulation S-X requires disclosure in the notes to the financial
statements of: (1) Material changes in the fiscal periods of an
issuer's subsidiaries and (2) the manner in which the material changes
are reflected in the financial statements.\130\ The corresponding
requirements in U.S. GAAP are narrower than Regulation S-X in three
respects.
---------------------------------------------------------------------------

    \130\ See Rule 3A-03(b) of Regulation S-X [17 CFR 210.3A-03(b)].
---------------------------------------------------------------------------

    First, U.S. GAAP limits changes in the difference between an issuer
and its subsidiary's fiscal periods to situations where the change is
preferable.\131\ Second, U.S. GAAP only sets forth requirements related
to a change or elimination of a previously existing difference in
fiscal periods, for example, when an issuer is able to obtain financial
information of a subsidiary with fiscal periods that are more
consistent with, or the same as, that of the issuer.\132\ Regulation S-
X is broader than U.S. GAAP in that it refers to all changes in fiscal
periods, rather than only changes to pre-existing differences in fiscal
periods. Third, U.S. GAAP, unlike Regulation S-X, specifies the manner
of treatment of a change in fiscal period by requiring that the change
be reflected in the financial statements on a retrospective basis, if
practicable.\133\ We believe that U.S. GAAP, in limiting potential
changes, provides for more consistency in issuer financial statements
and results in better

financial reporting. Thus, we propose to delete the last sentence of
Rule 3A-03(b) of Regulation S-X.
---------------------------------------------------------------------------

    \131\ ASC 810-10-45-13 states that a change in a difference in
fiscal periods is a change in accounting policy, which requires that
the issuer and its auditor assert that the new accounting policy is
preferable to the old one. See ASC 250-10-45-12, Rule 8-03(b)(5) of
Regulation S-X for SRCs and Regulation A issuers in a Tier 2
offering that report under U.S. GAAP, Rule 10-01(b)(6) of Regulation
S-X for non-SRCs, and Item 601(b)(16) of Regulation S-K.
    \132\ See ASC 810-10-45-13.
    \133\ See ASC 810-10-45-13.
---------------------------------------------------------------------------

Request for Comment
    13. Do issuers rely on the broader language in Rule 3A-03(b) as a
basis to change their subsidiaries' fiscal periods where differences
did not previously exist? Are issuers and their auditors able to assert
preferability of these changes?
    14. Does the broader language in Rule 3A-03(b) affect, in any
material respect, the usefulness of information that investors receive?
If so, how?
3. Repurchase and Reverse Repurchase Agreements 134
---------------------------------------------------------------------------

    \134\ Please refer to the related discussion in section III.E.9.
---------------------------------------------------------------------------

    The requirements in Regulation S-X governing repurchase and reverse
repurchase agreements were adopted in 1986, following developments at
that time in the government securities market.\135\ Their primary
objective was to require disclosure about the nature and extent of
registrants' repurchase and reverse repurchase agreements and the
degree of risk involved in these transactions.\136\ The FASB has more
recently considered requirements in this area in response to
constituent concerns in the wake of the global financial crisis. Most
recently, in 2014, the FASB issued amendments to the accounting and
disclosures for repurchase agreements and similar transactions.\137\
These revisions to U.S. GAAP have resulted in overlapping disclosure
requirements, as discussed further below.
---------------------------------------------------------------------------

    \135\ See Disclosure Amendments to Regulation S-X Regarding
Repurchase and Reverse Repurchase Agreements, Release No. 33-6621
(Jan. 30, 1986) [51 FR 3765].
    \136\ Id.
    \137\ See also Accounting Standards Update (``ASU'') No. 2014-
11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity
Transactions, Repurchase Financings, and Disclosures.
---------------------------------------------------------------------------

a. Balance Sheet Presentation
    Regulation S-X \138\ and U.S. GAAP \139\ both require separate
presentation of repurchase liabilities associated with repurchase
agreements on the face of the balance sheet.\140\ However, because
Regulation S-X, unlike U.S. GAAP, sets forth a 10 percent threshold for
separate presentation,\141\ the proposed amendments give rise to Bright
Line Disclosure Threshold Considerations. We propose to delete the
requirement for separate presentation in Rule 4-08(m)(1)(i) and the
related 10 percent threshold. We would retain the requirement to
include accrued interest payables in the separately presented liability
amounts.\142\
---------------------------------------------------------------------------

    \138\ See Rule 4-08(m)(1)(i) of Regulation S-X [17 CFR 210.4-
08(m)(1)(i)].
    \139\ See ASC 860-30-45-2.
    \140\ Regulation S-X requires separate presentation of
repurchase liabilities incurred pursuant to repurchase agreements.
U.S. GAAP is broader in that it includes other transactions with
similar characteristics--specifically, ``transactions in which cash
is obtained in exchange for financial assets with an obligation for
an opposite exchange later,'' such as dollar rolls and securities
lending transactions. See ASC 860-30-15-3.
    \141\ Specifically, Regulation S-X requires separate
presentation if the carrying amount (or market value, if higher than
the carrying amount or if there is no carrying amount) of the
securities or other assets sold under repurchase agreements, in the
aggregate, exceeds 10 percent of total assets.
    \142\ Please refer to the additional discussion of this
requirement to include accrued interest payables in the separately
presented liability in section III.E.9 below.
---------------------------------------------------------------------------

b. Disaggregated Disclosures
    While Regulation S-X \143\ and U.S. GAAP \144\ both require
disaggregated disclosures about repurchase agreements, they differ in
the form and content of the disaggregated disclosures. First,
Regulation S-X and U.S. GAAP both require disaggregated disclosures of
repurchase liabilities by class of collateral and maturity interval.
Regulation S-X provides a few illustrative examples of classes, where
U.S. GAAP requires an entity to determine the appropriate level of
disaggregation and classes to be presented on the basis of the nature,
characteristics, and risks of the collateral pledged. Regulation S-X
also specifies maturity intervals (e.g., overnight, up to 30 days),
whereas U.S. GAAP permits judgment to determine an appropriate range of
maturity intervals. Further, Regulation S-X requires the disaggregated
disclosure by class of collateral and maturity interval to be combined
in the form of a single table. Although U.S. GAAP is silent about the
form of disclosure, the sole example it includes of an approach to
comply with its requirements is in the form of a table that includes
both classes of collateral as well as maturity intervals similar to
those required by Regulation S-X.\145\
---------------------------------------------------------------------------

    \143\ See Rule 4-08(m)(1)(ii) of Regulation S-X [17 CFR 210.4-
08(m)(1)(ii)].
    \144\ See ASC 860-30-50-7.
    \145\ See ASC 860-30-55-4.
---------------------------------------------------------------------------

    Second, Regulation S-X specifies tabular disclosure of the carrying
amount of associated assets sold under repurchase agreements
disaggregated by class of asset sold and maturity interval (e.g.,
overnight, up to 30 days) of the repurchase agreement.\146\ Instead of
a tabular format, U.S. GAAP requires separate presentation on the
transferor's balance sheet of the carrying amount of assets that the
transferee has the right to sell or repledge.\147\ U.S. GAAP also
requires disclosure in the notes to the financial statements of the
carrying amount and balance sheet classification of both assets pledged
as collateral that the transferee does not have the right to sell or
repledge and the associated liabilities along with quantitative
information about the relationship(s) between them.\148\
---------------------------------------------------------------------------

    \146\ See Rules 4-08(m)(1)(ii)(A)(i) [17 CFR 210.4-
08(m)(1)(ii)(A)(i)] and 4-08(m)(1)(ii)(B) [17 CFR 210.4-
08(m)(1)(ii)(B)] of Regulation S-X.
    \147\ See ASC 860-30-25-5a.
    \148\ See ASC 860-30-50-1A.b.1 and 2.
---------------------------------------------------------------------------

    Despite some differences in form and content, we believe that
disclosures required by Regulation S-X convey reasonably similar
information as the disclosures that result from compliance with the
U.S. GAAP provisions discussed above, along with their accompanying
disclosure objectives and aggregation principles.\149\
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    \149\ U.S. GAAP requires that its minimum disclosure
requirements about transactions such as repurchase agreements be
supplemented as necessary to meet certain disclosures objectives
(e.g., providing investors with an understanding of how transfers of
financial assets affect an issuer's financial statements) and
aggregation principles (e.g., presentation in a manner that clearly
and fully explains the transferor's risk exposure related to the
transferred financial assets and any restrictions on the assets of
the entity). See ASC 860-10-50.
---------------------------------------------------------------------------

    Third, Regulation S-X requires disaggregated disclosures of the
market value of assets sold under repurchase agreements for which
unrealized changes in market value are reported in income.\150\
Although the FASB deliberated adding a requirement to disclose the
market value of these assets to U.S. GAAP, it ultimately decided
against doing so due to operability concerns.\151\
---------------------------------------------------------------------------

    \150\ See Rules 4-08(m)(1)(ii)(A)(i) and 4-08(m)(1)(ii)(B) of
Regulation S-X. These rules, however, do not require disclosure of
the carrying amount and market value of securities and other assets
for which unrealized changes in market value are reported in current
income or which have been obtained under reverse repurchase
agreements. This scope is narrower than that for the U.S. GAAP
requirement to separately present carrying amounts, which applies to
all assets sold under repurchase agreements.
    \151\ See Minutes from FASB Board Meeting (Mar. 12, 2014),
available at: http://www.fasb.org/jsp/FASB/Document_C/DocumentPage&cid=1176163899372. See also Accounting Standards Update
(``ASU'') No. 2014-11, Transfers and Servicing (Topic 860):
Repurchase-to-Maturity Transactions, Repurchase Financings, and
Disclosures.
---------------------------------------------------------------------------

    Based on the foregoing, we propose to delete Rule 4-08(m)(1)(ii),
with the exception of the requirement in Rule 4-08(m)(1)(ii)(A)(ii) to
disclose the interest rate on repurchase liabilities, which we would
retain. We note that, because Regulation S-X, unlike U.S. GAAP, sets
forth a 10 percent threshold for the

disaggregated disclosures,\152\ the proposed amendments give rise to
Bright Line Disclosure Threshold Considerations.
---------------------------------------------------------------------------

    \152\ Specifically, Regulation S-X requires the tabular
disclosures if the carrying amount (or market value, if higher than
the carrying amount) of the securities or other assets sold under
repurchase agreements, other than securities or other assets for
which for which unrealized changes in market value are reported in
current income or have been obtained under reverse repurchase
agreements, in the aggregate, exceeds 10 percent of total assets.
---------------------------------------------------------------------------

Request for Comment
    15. Do disclosures required by Rule 4-08(m) convey reasonably
similar information as the disclosures that result from compliance with
the overlapping provisions discussed above? Why or why not?
    16. As described above, the form and content of the disclosures
required under U.S. GAAP differ in certain respects from Rule 4-08(m).
Should we refer any of the disclosure requirements in Rule 4-08(m) to
the FASB for potential incorporation into U.S. GAAP? If so, which ones
and why?
    17. Would revision of Rule 4-08(m) as described above affect, in
any material respect, the usefulness of information that investors
receive? If so, how?
c. Collateral Policy
    Regulation S-X \153\ requires disclosure of the issuer's policy
with regard to taking possession of assets purchased under reverse
repurchase agreements. U.S. GAAP requires disclosure of the issuer's
policy for requiring collateral or other security.\154\ Although U.S.
GAAP is not as specific as Regulation S-X about taking possession of
collateral, we believe Regulation S-X requires disclosures that are
encompassed by the disclosures that result from compliance with U.S.
GAAP. Accordingly, we propose to delete this requirement in Rule 4-
08(m)(2)(i)(B)(1).
---------------------------------------------------------------------------

    \153\ See Rule 4-08(m)(2)(i)(B)(1) of Regulation S-X [17 CFR
210.4-08(m)(2)(i)(B)(1)].
    \154\ See ASC 860-30-50-1Aa.
---------------------------------------------------------------------------

    Regulation S-X, unlike U.S. GAAP, requires these disclosures when
the aggregate carrying amount of reverse repurchase agreements exceeds
10 percent of total assets. As such, these differences also give rise
to Bright Line Disclosure Threshold Considerations.
Request for Comment
    18. Does Rule 4-08(m)(2)(i)(B)(1) require disclosures that are
encompassed by disclosures that result from compliance with the
overlapping provisions discussed above? Why or why not?
    19. As described above, U.S. GAAP is not as specific as Regulation
S-X about taking possession of collateral. Would elimination of Rule 4-
08(m)(2)(i)(B)(1) affect, in any material respect, the usefulness of
information that investors receive? If so, how?
4. Derivative Accounting Policies
    Regulation S-X \155\ and U.S. GAAP \156\ both require disclosure in
the notes to the financial statements of accounting policies for
certain derivative instruments. Regulation S-X applies to: (1)
Derivative financial instruments, as defined under U.S. GAAP, and (2)
derivative commodity instruments such as commodity futures, swaps, and
options that are permitted to be settled in cash or with another
financial instrument, to the extent such instruments are not within the
definition of derivative financial instruments. For both types of
instruments, Regulation S-X requires, where material, disclosure of the
accounting policies; the criteria required to be met for each
accounting method used; the accounting method used if those criteria
are not met; the method used to account for terminations of derivatives
designated as hedges or derivatives used to affect the terms, fair
values, or cash flows of a designated item; the method used to account
for derivatives when the designated item matures, is sold, is
extinguished, or is terminated; and how the derivative instruments are
reported in the financial statements.
---------------------------------------------------------------------------

    \155\ See Rule 4-08(n) of Regulation S-X [17 CFR 210.4-08(n)]
and Note 2(b) to Rule 8-01 of Regulation S-X [17 CFR 210.8-01]. Rule
4-08(n) applies to non-SRCs and Note 2(b) to Rule 8-01 applies to
SRCs and Regulation A issuers in a Tier 2 offering that report under
U.S. GAAP.
    \156\ See ASC 815-10-50.
---------------------------------------------------------------------------

    U.S. GAAP requires disclosure of accounting principles and methods
that materially affect the financial statements, including those
involving a selection from existing acceptable alternatives, and
important judgments about the appropriateness of the principles.\157\
We believe that these U.S. GAAP principles call for reasonably similar
information as the corresponding requirements in Regulation S-X, as
they require disclosure of the accounting method applied to each aspect
of a material derivative transaction from inception to termination.
---------------------------------------------------------------------------

    \157\ See ASC 235-10-50-1 and ASC 235-10-50-3.
---------------------------------------------------------------------------

    In addition, for derivative financial instruments, as defined under
U.S. GAAP, U.S. GAAP requires disclosure of how and why the issuer uses
derivative instruments, how the derivative instruments and related
hedged items are accounted for, and how they affect the financial
statements.\158\ Although Regulation S-X is more detailed than U.S.
GAAP, the specificity in Regulation S-X stemmed, in part, from the
absence of a comprehensive accounting model for derivatives when the
Commission adopted these disclosure requirements.\159\ Since that time,
the FASB has adopted an accounting model for derivative financial
instruments, as defined under U.S. GAAP.\160\ Because U.S. GAAP limits
the options for accounting for derivatives, we believe that the
additional specific disclosure requirements in Rule 4-08(n) are no
longer applicable.
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    \158\ See ASC 815-10-50.
    \159\ See Disclosure of Accounting Policies for Derivative
Financial Instruments and Derivative Commodity Instruments, and
Disclosure of Quantitative and Qualitative Information about Market
Risk Inherent in Derivative Financial Instruments, Other Financial
Instruments and Derivative Commodity Instruments, Release No. 33-
7386, Financial Reporting Release No. 48, (Jan. 31, 1997).
    In this adopting release, the Commission stated that in the
absence of comprehensive accounting literature, registrants have
developed accounting practices for options and complex derivatives
by analogy to the limited amount of literature that does exist. The
Commission also noted that those analogies are complicated because
under existing accounting literature, there are at least three
distinctively different methods of accounting for derivatives (e.g.
fair value accounting, deferral accounting and accrual accounting).
The Commission further observed that the underlying concepts and
criteria used in determining the applicability of those accounting
methods is not consistent.
    \160\ See SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, codified in ASC 815.
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    Based on the foregoing, we propose to delete Rule 4-08(n) and Note
2(b) to Rule 8-01.
Request for Comment
    20. Is the U.S. GAAP requirement to disclose accounting principles
and methods that materially affect the financial statements reasonably
similar to the corresponding requirements in Regulation S-X?
    21. Are the specific disclosure requirements in Rule 4-08(n)
applicable or necessary in light of the U.S. GAAP requirement? If so,
which ones and why?
    22. Would deletion of Rule 4-08(n) affect, in any material respect,
the usefulness of information that investors receive about derivative
financial instruments, as defined under U.S. GAAP? If so, how?
    23. Would deletion of Rule 4-08(n) affect, in any material respect,
the usefulness of information that investors receive about derivative
commodity instruments that are not within the

definition of derivative financial instruments? If so, how?
    24. Are the requirements in Rule 4-08(n) used by analogy for
contracts that derive their value from an underlying price, index,
rate, condition, or event, but do not meet the FASB ASC Master Glossary
definition of ``derivative financial instrument?'' Would deletion of
Rule 4-08(n) affect, in any material respect, the usefulness of
information that investors receive about accounting policy disclosures
for these instruments? If so, how?
5. Distributable Earnings for Registered Investment Companies
    Regulation S-X \161\ and U.S. GAAP \162\ both require registered
investment companies to present certain components of capital on their
balance sheet. Regulation S-X incrementally specifies that, as part of
this presentation, three components of distributable earnings must be
separately presented on the balance sheet: (1) Net investment income,
(2) net realized gains (losses) on investment transactions, and (3) net
unrealized appreciation (depreciation) in value of investments.\163\
Regulation S-X requires these amounts to be presented on a book basis,
which we do not believe is useful to investors of registered investment
companies. Similar to REITs, as discussed in section III.C.1,
registered investment companies are generally structured such that they
are not subject to entity-level taxation on the amounts distributed to
their investors. As such, the book basis amounts required to be
presented under Regulation S-X do not provide investors with insight
into the tax implications of registered investment company
distributions. Rather, the requirement in U.S. GAAP to disclose the
components of distributable earnings on a tax basis in the notes to the
financial statements \164\ provides this insight.
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    \161\ See Rule 6-04.17 of Regulation S-X [17 CFR 210.6-04.17].
    \162\ See ASC 946-20-50-11.
    \163\ See Rule 6-04.17 of Regulation S-X.
    \164\ See ASC 946-20-50-11.
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    Based on the foregoing, we propose to amend Rule 6-04.17 to require
presentation of the total, rather than the components, of distributable
earnings on the balance sheet. We also propose to delete the
requirement in Rule 6-09.7 for parenthetical disclosure of
undistributed net investment income, one of the components of
distributable earnings, on a book basis, on the statement of changes in
net assets.\165\
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    \165\ See Rule 6-09.7 of Regulation S-X [17 CFR 210.6-09.7].
---------------------------------------------------------------------------

Request for Comment
    25. Do investors use the information about the three components
(net investment income, net realized gains (losses) on investment
transactions, and net unrealized appreciation (depreciation) in value
of investments) of distributable earnings separately presented on
registered investment company balance sheets? If so, how?
    26. Would amendment of Rule 6-04.17 to require presentation of the
total, rather than the components, of distributable earnings on the
balance sheet affect, in any material respect, the usefulness of
information that investors receive? If so, how?
    27. Would deletion of the requirement in Rule 6-09.7 for
parenthetical disclosure of undistributed net investment income on the
statement of changes in net assets affect, in any material respect, the
usefulness of information that investors receive? If so, how?
6. Insurance Companies \166\
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    \166\ Please refer to the related discussions in sections II.B.9
and V.B.8.
---------------------------------------------------------------------------

a. Liability Assumptions
    Regulation S-X \167\ and U.S. GAAP \168\ both require disclosure in
the notes to the financial statements of assumptions for insurance
liabilities stated at present value. Regulation S-X, unlike U.S. GAAP,
specifically identifies three assumptions (interest rates, mortality,
and withdrawals) for disclosure about the liability for future policy
benefits. U.S. GAAP, however, does not limit its disclosures to these
three assumptions but, rather, provides additional examples of
assumptions.\169\ Accordingly, we propose to delete Rule 7-
03(a)(13)(b).
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    \167\ See Rule 7-03(a)(13)(b) of Regulation S-X [17 CFR 210.7-
03(a)(13)(b)].
    \168\ See ASC 944-40-50.
    \169\ See ASC 944-40-30-7 for examples of assumptions made in
estimating the liability.
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Request for Comment
    28. Would deletion of the requirement in Rule 7-03(a)(13)(b) for
disclosures of the above three assumptions affect, in any material
respect, the usefulness of information that investors receive? If so,
how?
b. Reinsurance Transactions
    Regulation S-X \170\ and U.S. GAAP \171\ both require disclosures
in the notes to the financial statements about the nature of
reinsurance contracts. Regulation S-X specifically requires disclosure
of the nature and effect of material nonrecurring reinsurance
transactions.\172\ We believe this provision requires disclosures that
are encompassed by the disclosures that result from compliance U.S.
GAAP and Regulation S-K. Specifically, although U.S. GAAP does not
explicitly refer to nonrecurring reinsurance transactions, it requires
disclosure of all reinsurance transactions, meaning that nonrecurring
and recurring transactions would be included in the disclosures. In
addition, Item 303(a)(3)(i) of Regulation S-K requires disclosure of
any unusual or infrequent events or changes, which may include the
nature and effect of material nonrecurring reinsurance transactions.
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    \170\ See Rule 7-03(a)(13)(c) of Regulation S-X [17 CFR 210.7-
03(a)(13)(c)].
    \171\ See ASC 944-20-50-3 and ASC 944-20-50-4.
    \172\ See Rule 7-03(a)(13)(c)(2) [17 CFR 210.7-03(a)(13)(c)(2)].
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    Based on the foregoing, we propose to delete Rule 7-03(a)(13)(c).
We note that because disclosures required by Item 303(a)(3)(i), unlike
those required by Regulation S-X, may be provided outside of the
audited financial statements, the proposed amendments give rise to
Disclosure Location--Financial Statement Considerations.
Request for Comment
    29. Does Rule 7-03(a)(13)(c) require disclosures that are
encompassed by disclosures that result from compliance with the
overlapping provisions discussed above? Why or why not?
    30. Would deletion of the requirement in Rule 7-03(a)(13)(c)
affect, in any material respect, the usefulness of information that
investors receive? If so, how?
    31. As stated above, U.S. GAAP does not require separate disclosure
of nonrecurring transactions. Should we refer disclosure requirements
specifically about the nature and effect of material nonrecurring
reinsurance to the FASB for potential incorporation into U.S. GAAP?
7. Interim Financial Statements--Material Events Subsequent to the End
of the Most Recent Fiscal Year
    Regulation S-X requires disclosure, in interim financial
statements, of material events subsequent to the end of the most recent
fiscal year.\173\ As discussed below, we believe that these provisions
require disclosures that are encompassed by the disclosures that result
from compliance with U.S. GAAP and Item 303(b) of Regulation S-K (or

Item 9 of Form 1-A and Item 1 of Form 1-SA for Regulation A issuers),
in combination.
---------------------------------------------------------------------------

    \173\ See Rule 8-03(b)(2) [17 CFR 210.8-03(b)(2)] and Rule 10-
01(a)(5) [17 CFR 210.10-01(a)(5)] of Regulation S-X. Rule 8-03(b)(2)
applies to SRCs and Regulation A issuers in a Tier 2 offering that
report under U.S. GAAP and Rule 10-01(a)(5) applies to non-SRCs.
---------------------------------------------------------------------------

    Specifically, U.S. GAAP requires disclosure of a number of items
occurring in the interim periods after the end of the most recent
fiscal periods, including changes in accounting principles, changes in
estimates, disposals, business combinations, and disclosures about
segments, fair value, and pensions.\174\ Item 303(b) of Regulation S-K
(or Item 9 of Form 1-A and Item 1 of Form 1-SA for Regulation A
issuers) require disclosure of: (1) Material changes in the issuer's
financial condition and results of operations, (2) unusual or
infrequent events that materially affect income and any other
significant components of revenues or expenses that, in the issuer's
judgment, should be described in order to understand its interim
results of operations, and (3) known trends that are reasonably
expected to have a material effect on the financial statements.\175\
---------------------------------------------------------------------------

    \174\ See ASC 270-10-50-1 and 7.
    \175\ Item 303(b) of Regulation S-K explicitly requires interim
disclosure of changes in financial condition and results of
operations and, through its reference to Item 303(a), requires
disclosure of unusual and infrequent events and trends.
---------------------------------------------------------------------------

    Rule 10-01(a)(5) incrementally requires disclosure of the status of
long-term contracts and changes in capitalization, including
significant new borrowings or modification of existing financing
arrangements. Although Regulation S-K does not specify these two items,
they would be required under Item 303(b) of Regulation S-K (or Item 9
of Form 1-A and Item 1 of Form 1-SA for Regulation A issuers), if
material, as discussed above.
    Based on the foregoing, we propose to delete the requirements to
disclose material events subsequent to the end of the most recent
fiscal year in Rule 8-03(b)(2) and Rule 10-01(a)(5). We note that
because disclosures required by Item 303(b) (or Item 9 of Form 1-A and
Item 1 of Form 1-SA for Regulation A issuers), unlike those required by
Regulation S-X, may be provided outside of the interim financial
statements, the proposed amendments give rise to Disclosure Location--
Financial Statement Considerations.
Request for Comment
    32. Do the provisions in Rule 8-03(b)(2) and Rule 10-01(a)(5) to
disclose material events subsequent to the end of the most recent
fiscal year require disclosures that are encompassed by disclosures
that result from compliance with the overlapping provisions discussed
above? Why or why not?
    33. Rule 10-01(a)(5) specifies disclosure of the status of long-
term contracts and changes in capitalization subsequent to the most
recent fiscal year. Would deletion of this requirement affect, in any
material respect, the usefulness of information that investors receive?
If so, how?
8. Interim Financial Statements--Changes in Accounting Principles \176\
---------------------------------------------------------------------------

    \176\ Please refer to the related discussions in section II.B.11
and V.B.14.
---------------------------------------------------------------------------

    Regulation S-X requires disclosure in the notes to the interim
financial statements of the date of any material accounting
change.\177\ We believe this information is unnecessary because U.S.
GAAP requires disclosure of the accounting change in the period of the
change.\178\ We, therefore, propose to delete these requirements in
Rule 8-03(b)(5) and Rule 10-01(b)(6).
---------------------------------------------------------------------------

    \177\ See Rule 8-03(b)(5) and Rule 10-01(b)(6) [17 CFR 210.10-
01(b)(6)] of Regulation S-X. Rule 8-03(b)(5) specifically applies to
SRCs and Regulation A issuers in a Tier 2 offering that report under
U.S. GAAP, while 10-01(b)(6) applies to non-SRCs.
    \178\ See ASC 250-10-50-1 and ASC 270-10-50-1g.
---------------------------------------------------------------------------

Request for Comment
    34. Is disclosure of the date of any material accounting change
unnecessary in light of the U.S. GAAP requirements discussed above? Why
or why not?
9. Interim Financial Statements--Pro Forma Business Combination
Information \179\
---------------------------------------------------------------------------

    \179\ Please refer to the related discussion in section V.B.6.
---------------------------------------------------------------------------

    Regulation S-X \180\ and U.S. GAAP \181\ both require supplemental
pro forma information about business combinations in the notes to
interim financial statements. These disclosure requirements differ in
two ways: (1) Scope and (2) the line items required to be disclosed.
Notwithstanding these differences, we believe that U.S. GAAP and Item
9.01 of Form 8-K result in reasonably similar disclosures as the
corresponding requirements in Regulation S-X.
---------------------------------------------------------------------------

    \180\ See Rule 8-03(b)(4) [17 CFR 210.8-03(b)(4)] and Rule 10-
01(b)(4) [17 CFR 210.10-01(b)(4)] of Regulation S-X. Rule 8-03(b)(4)
specifically applies to SRCs and Regulation A issuers in a Tier 2
offering that report under U.S. GAAP, while 10-01(b)(4) applies to
non-SRCs.
    \181\ See ASC 270-10-50-7, which refers to ASC 805-10-50-2h.3
for purposes of interim disclosures.
---------------------------------------------------------------------------

    First, with respect to scope, Regulation S-X requires disclosure of
pro forma information for significant business combinations for SRCs
and Regulation A issuers in a Tier 2 offering that report under U.S.
GAAP and material business combinations for non-SRCs. U.S. GAAP, on the
other hand, does not qualify the size of the business combinations to
which pro forma information requirements apply. Accordingly, the
requirements in U.S. GAAP would apply to the same or a greater number
of business combinations and, thus, subsume the scope of the
corresponding requirements in Regulation S-X.
    Second, with respect to the line items required to be disclosed,
Regulation S-X requires disclosure of pro forma revenue, net income,
net income attributable to the issuer, and net income per share.
Regulation S-X also requires SRCs and Regulation A issuers in a Tier 2
offering that report under U.S. GAAP to disclose pro forma income from
continuing operations. U.S. GAAP only requires disclosure of pro forma
revenue and earnings. This difference resulted from changes to U.S.
GAAP for which Regulation S-X was not conformed, as discussed below.
    The Commission originally adopted Rule 8-03(b)(4) and Rule 10-
01(b)(4) to require in interim financial statements the same pro forma
business combination disclosures provided in annual financial
statements under Accounting Principles Board (``APB'') Opinion No. 16,
Business Combinations.\182\ In 2001, the FASB issued Statement of
Financial Accounting Standards (``SFAS'') No. 141, Business
Combinations (``SFAS No. 141''), which required these pro forma
disclosures in interim financial statements and superseded APB Opinion
No. 16; however, Regulation S-X was not updated at that time to
eliminate the duplication with U.S. GAAP. In 2007, the FASB issued SFAS
No. 141R (revised 2007), Business Combinations (``SFAS No. 141R''),
which required fewer pro forma line items--namely, only revenue and
earnings--than previously required under SFAS No. 141, in part to
converge with IFRS.\183\
---------------------------------------------------------------------------

    \182\ In the proposing release, the Commission noted that the
proposed rule would require disclosure of pro forma data in
connection with business combinations accounted for on a purchase
basis similar to that required in annual statements by APB No. 16.
See Interim Financial Data Proposals to Increase Disclosure, Release
No. 33-5549 (Dec. 19, 1974) [40 FR 1079].
    \183\ SFAS No. 141R, paragraph B426.
---------------------------------------------------------------------------

    As a result of these changes, issuers are required to disclose more
pro forma information about business combinations in interim periods
than in annual periods,\184\ even though Regulation S-X generally
imposes fewer obligations with regard to interim

financial statements.\185\ Moreover, Rule 8-03(b)(4) requires SRCs and
Regulation A issuers in a Tier 2 offering that report under U.S. GAAP
to present more line items than the corresponding requirement in Rule
10-01(b)(4) for non-SRCs, even though Commission disclosure
requirements, as a general matter, provide certain accommodations for
SRCs \186\ and Regulation A issuers.
---------------------------------------------------------------------------

    \184\ See ASC 805-10-50-2h.3.
    \185\ For example, Article 8 and Article 10 of Regulation S-X
permit the presentation of condensed financial statements, do not
require audits of interim financial statements, allow issuers to
assume that a user has read the preceding year's audited financial
statements, permit omission of details of accounts that have not
changed significantly since the audited balance sheet date, and
permit omission of the disclosures required by Rule 4-08 of
Regulation S-X.
    \186\ For example, SRCs are required to present only two, rather
than three, years of financial statements and are not required to
present selected financial data in accordance with Item 301 of
Regulation S-K [17 CFR 229.301].
---------------------------------------------------------------------------

    In addition, we believe Item 9.01 of Form 8-K mitigates at least in
part the absence of a U.S. GAAP requirement to present pro forma
earnings per share, as it requires SRCs and non-SRCs to file, within
approximately 75 days after the transaction, pro forma financial
information for significant acquisitions, including earnings per share,
through the issuer's most recently filed balance sheet. We note,
however, this pro forma financial information would not cover the same
periods as the pro forma information required under Rule 8-03(b)(4) and
Rule 10-01(b)(4).\187\
---------------------------------------------------------------------------

    \187\ For example, for a significant acquisition that occurs on
September 1, 2015, the Form 8-K would contain pro forma financial
information for the year ended December 31, 2014 and the six months
ended June 30, 2015 and 2014. Under Rule 8-03(b)(4) and Rule 10-
01(b)(4), however, the Form 10-Q for the nine months ended September
30, 2015 would be required to include pro forma disclosures for the
nine months ended September 30, 2015 and 2014.
---------------------------------------------------------------------------

    Based on the foregoing, we propose to delete the requirements for
pro forma financial information in interim filings for business
combinations in Rule 8-03(b)(4) and Rule 10-01(b)(4).
Request for Comment
    35. Would elimination of the specific requirements discussed above
to disclose the line items pro forma income from continuing operations,
net income attributable to the issuer, and net income per share affect,
in any material respect, the usefulness of information that investors
receive? If so, how? Do the pro forma disclosures in Form 8-K
sufficiently substitute for the loss of these specific line items,
despite the differences in timing discussed above?
10. Interim Financial Statements--Dispositions \188\
---------------------------------------------------------------------------

    \188\ Please refer to the related discussion in section II.B.14.
---------------------------------------------------------------------------

    For significant dispositions, Regulation S-X requires SRCs and
Regulation A issuers in a Tier 2 offering that report under U.S. GAAP
to disclose in the notes to the financial statements pro forma revenue,
income from continuing operations, net income, net income attributable
to the issuer, and net income per share for all interim periods
presented, as though the disposition occurred at the beginning of the
periods.\189\ There are two types of dispositions: (1) those that meet
the definition of discontinued operations and (2) all others (hereafter
referred to as ``other dispositions'').
---------------------------------------------------------------------------

    \189\ See Rule 8-03(b)(4) of Regulation S-X.
---------------------------------------------------------------------------

    U.S. GAAP requires that the effects of discontinued operations be
isolated and separately presented on the income statement on a
retrospective basis,\190\ thereby obviating the need for pro forma
information for discontinued operations in the notes to the financial
statements.
---------------------------------------------------------------------------

    \190\ See ASC 205-20-45.
---------------------------------------------------------------------------

    For other dispositions, we believe that the disclosures required by
U.S. GAAP and Item 9.01 of Form 8-K results in reasonably similar
disclosures as the pro forma disclosures mandated by Rule 8-03(b)(4).
Specifically, U.S. GAAP requires disclosure of pre-tax profit and pre-
tax profit attributable to the parent for individually significant
dispositions for all interim periods presented.\191\ However, U.S. GAAP
does not contain an equivalent to the requirement in Rule 8-03(b)(4) to
disclose pro forma revenues as if the other disposal occurred at the
beginning of the periods presented.
---------------------------------------------------------------------------

    \191\ See ASC 270-10-50-7, which refers to ASC 360-10-50-3A for
purposes of interim disclosures. ASC 360-10-50-3A is effective for
public business entities on a prospective basis to: (1) All
disposals (or classifications as held for sale) of components of an
entity that occur within annual periods beginning on or after
December 15, 2014, and interim periods within those years and (2)
all businesses that, on acquisition, are classified as held for sale
that occur within annual periods beginning on or after December 15,
2014, and interim periods within those years. Early adoption is
permitted, but only for disposals (or classifications as held for
sale) that have not been reported in financial statements previously
issued or available for issuance.
---------------------------------------------------------------------------

    We believe Item 9.01 of Form 8-K provides some mitigation, as it
requires SRCs to file within four business days after a significant
disposition, pro forma financial information, including revenue, income
from continuing operations, and income per share, through the most
recently filed balance sheet date. We note, however, this pro forma
financial information would not cover the same periods as the separate
results required under Rule 8-03(b)(4).\192\
---------------------------------------------------------------------------

    \192\ For example, for a significant disposal that occurs on
August 3, 2015, the Form 8-K filed by August 7, 2015, would contain
pro forma financial information for the year ended December 31, 2014
and the three months ended March 31, 2015 and 2014, as if the
disposal had occurred on January 1, 2014. In contrast, Rule 8-
03(b)(4) would require pro forma disclosures in the September 30,
2015 interim financial statements, filed on Form 10-Q by November
16, 2015, for the nine months ended September 30, 2015 and 2014, as
if the disposal had occurred at the beginning of each period
presented.
---------------------------------------------------------------------------

    In addition, Rule 8-03(b)(4) requires SRCs and Regulation A issuers
in a Tier 2 offering that report under U.S. GAAP to disclose more
information about dispositions in interim periods than in annual
periods,\193\ even though Regulation S-X, as noted above, generally
imposes fewer obligations with regard to interim financial statements.
Moreover, Rule 8-03(b)(4) requires SRCs and Regulation A issuers in a
Tier 2 offering that report under U.S. GAAP to disclose more extensive
information about other dispositions than is required of non-SRCs,\194\
even though Commission disclosure requirements, as a general matter,