33-7118. Auditors may be permitted or required by home-country regulations to render reports on the fairness or adequacy of consideration in an audit clients planned merger or non-monetary transaction. 6110.1Foreign Issuer [Regulation C, Rule 405 and Exchange Act Rule 3b-4]: An issuer which is a foreign government, a foreign national or a corporation or other organization that is incorporated or organized under the laws of any foreign country. Title I of the JOBS Act, which was effective as of April 5, 2012, created a new category of issuers called emerging growth companies, whose financial reporting and disclosure requirements in certain areas differ from other categories of issuers. An unsponsored facility is set up without the cooperation of the foreign private issuer and may be initiated by a broker-dealer wishing to establish a trading market. See ASC 830 for further guidance. In other words, registrants that apply price-level accounting are not required to quantify and remove the effects of inflation as part of the reconciliation to U.S. GAAP. Later of four months after either the end of the transition period or the date the issuer elected to change its fiscal year-end. Financial statements required to be presented under the SAB for two years must be reconciled to U.S. GAAP for both years. Additionally, if the issuer is not able to obtain information about the record holders accounts after reasonable inquiry, the issuer may rely on the presumption that such accounts are held in the brokers, dealers, banks, or nominees principal place of business. First, the foreign private issuer must have filed or furnished all reports required under the Exchange Act, including at least one Exchange Act annual report. This means, for example, that the financial statements must remain current throughout the entire time that an exchange offer is outstanding. 6820.7If the report includes reference to another accountant, the separate audit report of that accountant must be included. The staff recommends that the report of the independent accountant refer explicitly to the reconciliation, but the absence of that reference does not relieve the auditor of its responsibility to examine the reconciliation. Information about Foreign Issuers - Division of Corporation Finance 33-8959], Non-issuers using Item 17 that are required to provide MD&A (e.g., target companies in Forms S-4, F-4 and proxy statements) should consider the need to provide certain additional information in the MD&A to assist the U.S. investor in understanding the financial statements. There are two tests to determine whether a foreign company qualifies as a foreign private issuer: the first relates to the relative degree of its U.S. share ownership, and the second relates to the level of its U.S. business contacts. 33-6902] However, if financial statements of an MJDS filer are included in a non-MJDS form, such as Rule 3-05 financial statements in a domestic registrant's Form 8-K or a foreign private issuer's Form F-3, then the audit must be conducted, at a minimum, in accordance with, and the audit report must refer to, applicable professional standards for non-issuers. It is the only type of facility that may be unsponsored and, as a result, may be quoted only on the over-the-counter market. the number of its U.S. resident holders is 300 or more. If the registrant subsequently decides to present IFRS as issued by the IASB financial statements in its SEC filings, it is not required to present the reconciliation from previous GAAP specified by IFRS 1 because it is no longer a first-time adopter subject to IFRS 1. [S-X 4-01(a)(2)] In both cases the filings should prominently disclose that the company meets the foreign private issuer definition but is voluntarily filing on domestic forms. IAS 21 requires that amounts in the financial statements of the hyperinflationary operation be restated for the effects of changing prices in accordance with IAS 29. Dollar equivalent or convenience translations are generally not permitted, except that a convenience translation may be presented only for the most recent fiscal year and any subsequent interim period. However, a foreign-domiciled registrant that does not meet the foreign private issuer definition, General financial statement requirements for foreign private issuers, Periods for which Financial Statements are Required [Item 8 of Form 20-F]. Additionally, securities may be offered and sold outside the United States pursuant to Regulation S at the same time as those offered and sold pursuant to Regulation D. In such cases, the number of purchasers and the total proceeds raised pursuant to Regulation S are not included in calculating the limits set forth in Regulation D. The structure of Regulation S consists of General Conditions applicable to any offshore transaction, followed by an Issuer Safe Harbor and a Resale Safe Harbor. Occasionally, the interim information that is publicly distributed in the issuers home country will be prepared using accounting standards that are different from those used in the U.S. registration statement. 33-8959] For example, if a calendar fiscal year registrant determines on June 30, 2009 that it is no longer a foreign private issuer, it would become subject to domestic reporting requirements on January 1, 2010. The citizenship and residency of each of the foreign companys executive officers and directors must be analyzed separately. Reports filed or furnished during the remainder of the fiscal year in which the registrant ceased to meet the definition may continue to be made using forms and requirements applicable to foreign private issuers. ADRs trade in U.S. dollars and clear through U.S. settlement systems, allowing ADR holders to avoid effecting transactions in a foreign currency. In certain limited circumstances, if the affiliate as a separate registrant would not qualify as a foreign private issuer, the affiliate could file home-country GAAP financial statements reconciled to U.S. GAAP in accordance with Item 18 of Form 20-F, based upon footnote 31 to Release No. S-X 2-01 permits a foreign auditor, solely for purposes of a foreign private issuer's initial registration statement, to be independent under SEC and PCAOB rules for at least the most recent audited fiscal year, provided that auditor is independent under local standards for all periods presented. Form 20-F provides two levels of reconciliation to U.S. GAAP - Item 17 and Item 18. After a foreign private issuer has completed an offering registered under the Securities Act or registered as a class of securities under the Exchange Act, it is required to file reports with the Commission on an ongoing basis. A reconciliation is required for each annual and interim period required to be included in a registration statement or annual report. In the discussion that follows, this overview outlines several considerations for foreign companies wishing to raise capital or establish a presence for their securities in the United States, specifically with reference to foreign private issuers. Most companies elect to present this information in the form of a reconciliation of shareholder' equity, but they may also provide restated balances of individual balance sheet line items, or describe, in numerical terms, how balance sheet line items would specifically change under U.S. GAAP. 6810.2Auditors licensed outside the U.S. must comply with all requirements of S-X 2-01, including SEC and PCAOB rules on auditor independence. Although specific exemptions exist with respect to both the type of security and type of transaction at issue, those most often relevant to foreign private issuers include offerings made on a limited basis (either not to the general public or outside the United States). Under the rule, a registration statement of a foreign private issuer may become effective with audited financial statements as old as 15 months, with the most recent interim statements as old as nine months. 33-8879], Interim Financial Statements Presented by IFRS Filers, For pre-effective registration statements and post-effective amendments with annual financial statements less than nine months old, published interim information need not be reconciled to U.S. GAAP if the basis of the annual financial statements and published interim information is IFRS as issued by the IASB. A foreign private issuer is not ordinarily required to provide U.S. GAAP information in its home jurisdiction. In other words, registrants that apply price-level accounting are not required to quantify and remove the effects of inflation as part of the reconciliation to U.S. GAAP. The JOBS Act provides modified disclosure requirements for emerging growth companies, including, among other things, two years of audited financial data in the Securities Act registration statement for an initial public offering of common equity securities and no requirement for Sarbanes-Oxley Act Section 404(b) auditor attestations of internal control over financial reporting. 6420.2A non-EGC's selected data for the earliest two years of the five-year period may be omitted if the registrant represents that the information cannot be provided without unreasonable effort or expense, and states the reasons for the omission in the filing. 6320.2Reconciliation to IFRS as issued by the IASB in lieu of full compliance with IFRS as issued by the IASB is not permitted. 6120.5With respect to Canadian registrants, IFRS has been incorporated into Canadian GAAP for publicly accountable enterprises for fiscal years beginning on or after January 1, 2011. For offerings in this category, there are no requirements other than the Regulation S General Conditions. Financial information for all periods presented in the filing should be recast into the new reporting currency using a methodology consistent with ASC 830 (IAS 21 for IFRS filers). 33-7119], 6820.5The correction of a material misstatement in a previously filed U.S. GAAP reconciliation should be recognized in the auditor's report through the addition of an explanatory paragraph. In addition to raising the asset and record holder thresholds, the JOBS Act made certain changes to the definition of held of record that may be considered by issuers in determining whether Section 12(g) registration is required. The translation effects of exchange rate changes are included as a separate component of equity. Therefore, the information disclosed pursuant to Item 8.A.5 would need to be supplemented with a description and quantification of differences in accounting principles. 6530.3In certain countries, equity components under home-country GAAP are included in retained earnings and are not separately tracked. [Instruction to General Instruction G.(f)(2) to Form 20-F] The first-time adopter should develop an approach specific to its facts and circumstances that provides a bridge between the annual previous GAAP financial information reconciled to U.S. GAAP and the IFRS financial information. Item 18 requires the same information as Item 17 plus all of the disclosures required by U.S. GAAP and Regulation S-X. 6220.2The 15-month period for audited statements is extended to 18 months, and the nine month period for interim statements is extended to 12 months, for the following offerings: 6220.3Special Rule for Foreign Private Issuer IPOs - Audited financial statements in initial public offerings must be no more than 12 months old at the time of filing and upon the effectiveness of the registration statement. In this situation, the transaction, including financial statements of the other party to the transaction, must be reported on a Form 20-F within four business days of the completion of the transaction. All periods must be restated to U.S. GAAP and U.S. dollars. Upon registration, a foreign company would determine its status on an annual basis, as of the end of its second fiscal quarter. If the foreign private issuer shell company engages in a transaction that causes it to lose its status as a foreign private issuer at the same time it ceases to be a shell company, reports filed or furnished during the remainder of the fiscal year may continue to be made using forms and requirements applicable to foreign private issuers. Reconciliations of pro forma information to U.S. GAAP are required even if the historical financial statements of the acquired business are not required to be reconciled. If differences between home-country and U.S. GAAP have such a pervasive impact on the financial statements that they render a normal reconciliation (as described above) confusing to investors, full or condensed financial statements prepared in accordance with U.S. GAAP may be necessary in order for the reader to fully understand the impact of the differences in accounting. An issuer filing a registration statement on Form F-3 that incorporates financial statements previously filed on Form 20-F does not need to amend or otherwise modify these statements to reflect a more current exchange rate in presenting the convenience translation. [SAB Topic 1D]. While they are sometimes followed voluntarily by MJDS . See Section 6220.8 for guidance concerning age of pro forma information. However, the staff may consider requests for relief in circumstances where this would result in the need to provide financial statements of other entities more current than those that would be provided by a similarly-situated domestic registrant. In the discussion that follows, we present a general outline of various U.S. federal securities law issues applicable to Foreign Private Issuers, as well as additional matters these issuers may wish to take into account when considering having their securities trade in the U.S. capital markets. 6120.9Deregistration rules differ for foreign private issuers versus domestic issuers. The balance sheet should be translated using the applicable period end exchange rate. Final Rule: Certification of Disclosure in Companies' Quarterly and Even though the significance level of an acquisition may require the presentation of three years of audited financial statements in a registration statement or other transactional filing, if the acquiree or investee's financial statements have not previously been required in a SEC filing, the U.S. GAAP reconciliation only needs to be provided for the most recent two years and any required interim period. 3 years of previous GAAP financial statements, including reconciliations to U.S. GAAP, IFRS interim statements for the current and comparable prior period, and U.S. GAAP condensed information for the most recent year, current interim period, and the comparable prior interim period. The representation must be filed as an exhibit to the registration statement. The Division of Corporation Finance has published informal, non-authoritative guidance on financial reporting matters in its. However, in certain circumstance, investors may be deemed underwritiers if they act as links in a public distribution of securities. Foreign private issuers that qualify as emerging growth companies may take advantage of applicable provisions of the JOBS Act to the same extent as U.S. companies. Certain GAAPs do not require the restatement of previously issued financial statements upon discovery of an error that relates to prior periods. A foreign private issuer's most recently audited financial statements cannot exceed the age specified by Item 8 of Form 20-F (generally 15 months) at the registration statement's date of effectiveness. If a company updates a registration statement to include interim financial information, the prior annual financial information must be recast in equivalent purchasing power units. For equity securities, there are two alternatives for deregistration. IFRS Filers S-X Article 11 Pro Forma Information. Before clicking on a link, please remember the name or number of the rule or regulation that you seek. See exceptions to this general rule in Section 6220. The exemption provided by Rule 12g3-2(b) is self-executing; it does not require foreign private issuers to make a formal application to the Commission for the exemption or submit materials to the Commission to maintain the exemption. [Item 3.A of Form 20-F and Instruction 2 to Item 3.A] See Section 10220.2 for guidance regarding selected financial data disclosure for EGCs. The Commission has adopted specific rules applicable to foreign private issuers that are designed to recognize international and home jurisdiction standards. The objective of this procedure is to present financial statements as if the issuer had always used the new reporting currency. The test for compliance with the foreign private issuer definition is required to be performed as of the last business day of the registrants most recently completed second fiscal quarter (the determination date). Foreign private issuers filing a registration statement after electing to change their fiscal year end may need to provide more current audited financial statements than are required under the Exchange Act transition reporting rules in order to comply with the age of financial statement requirements in the registration statement. The resale safe harbor under Regulation S is available for any securities of an issuer, not simply those initially acquired in a Regulation S transaction. In contrast, a company that is incorporated in a state, territory, or possession of the United States can never qualify as a foreign private issuer, regardless of the location of its shareholders, assets, or management. substantive affirmative disclosure requirements (or "form calls") for a Canadian prospectus need be complied with. means the requirements to which a foreign issuer is subject concerning disclosure made to the public, to securityholders of the issuer or to a foreign regulatory authority. The U.S. capital markets have long been a favored destination for foreign companies wishing to raise capital or establish a trading presence for their securities. Reporting Currency for Domestic Registrants and Non-Foreign Private Issuers, PRICE-LEVEL ADJUSTED FINANCIAL STATEMENTS AND EFFECTS OF HYPERINFLATIONARY ENVIRONMENTS, An issuer in a hyperinflationary economy must either comprehensively include the effects of price-level changes in the primary statements or, alternatively, present supplemental information to quantify the effects of changing prices using the historical cost/constant currency or current cost/replacement cost approach. [Release No. Some registrants have presented financial statements in more than one GAAP prior to their first-time adoption of IFRS as issued by the IASB; for example, in home-country GAAP in their local market and in U.S. GAAP in their SEC filings.