to simplify and streamline the financial disclosures required by Rules 3-10 and 3-16 of Regulation S-X in registered debt offerings and periodic reports thereafter. The final rules retain many aspects of the
from July 2018.
The amendments are effective on January 4, 2021. However, registrants may voluntarily apply the amendments to registration statements and periodic reports before that date.
(applicable to guarantors and issuers of guaranteed securities) is partly relocated to new S-X Rule 13-01. The amendments continue to allow issuers to omit separate financial statements of subsidiary issuers and guarantors when certain conditions are met, and:
(applicable to affiliates whose securities collateralize a registrant’s securities) is replaced with the requirements in new S-X Rule 13-02. The amendments:
The amendments to Rules 3-10, 13-01, 3-16 and 13-02 of Regulation S-X are also applicable to financial statements for a subsidiary of a smaller reporting company (SRC) that issues securities guaranteed by that SRC or if an SRC’s securities that are registered or being registered are collateralized by the securities of the SRC’s affiliates. The amended requirements under Rule 3-10 and new 13-01 of Regulation S-X also apply to asset-backed securities under Regulation S-K.
for a comparison of the current and amended requirements under Rules 3-10 and 3-16.
The following table compares the current requirements under Rules 3-10 and 3-16 to the new requirements:
1 Refer to our BDO Alert for a summary of the proposal and background on S-X Rule 3-10 and 3-16.
2 The required summarized financial information is defined in S-X Rule 1-02(bb).
3 When financial statements of parent are required to be filed, substitution of the financial statements of an entity that is not an issuer or guarantor of the registered security are not permitted
4 In all instances except a finance subsidiary issuer of securities guaranteed by its parent, the notes to parent financial statements include condensed consolidating financial information for the same period presented by the parent and include separate columns for the parent, subsidiary issuer, any other subsidiaries of parent on a combined basis, consolidating adjustments and the total consolidated amounts. Brief narrative permitted instead, under certain conditions.
5 If not, disclose term and conditions as per Rule 13-01(a)(2) of Regulation S-X
6 Subsidiary issuer/guarantor that may omit separate financial statements are also exempt from Exchange Act reporting under Rule 12h-5
7 Parent must continue to provide alternative disclosures for as long as guaranteed securities are outstanding, even if subsidiary issuer/guarantor could have suspended their reporting obligations under Exchange Act Rule 12h-3 or Section 15(d) of the Exchange Act
8 Based on Rule 3-01 and 3-02 of Regulation S-X
9 Regardless of whether guarantor is parent or subsidiary
10 Based on the criteria in Rule 3-10(i) of Regulation S-X
11 Characteristics include issuer has contractual obligation to pay a fixed amount at a fixed time and where obligation to make payment is cumulative, a set amount of interest must be paid
12 Parent may cease to provide revised alternative disclosures if subsidiary issuer/guarantor’s reporting obligations under Exchange Act Rule 15(d) is suspended automatically under Exchange Act Rule 15(d)(1) or compliance with Exchange Act rule 12h-3
13 Describe factors that impact payments to holders of guaranteed securities such as rights of non-controlling interest holder
14 In accordance with Rule 1-02(bb)(1) of Regulation S-X. Summarized financial information if certain conditions in 13-01(a)(4)(vi) apply, unless separate disclosure of summarized financial information is applicable to one or more, but not all, issuers/guarantors as noted above
15 Separate disclosure of financial information of non-guarantor subsidiaries no longer required
16 Issuer/guarantor investment in subsidiary that is not issuer/guarantor must not be presented
17 Narrative disclosure may be provided rather than summarized financial information if certain conditions apply
18 If revised alternative disclosures are not provided in MD&A, required to be provided following “Risk Factors” or if none, following pricing information in Item 105 of Regulation S-X
19 See Rule 13-01(a)(4) of Regulation S-X
20 See Rule 1-02(w) of Regulation S-X, substituting 20 percent for 10 percent based on a comparison of the most recent annual financial statements of the acquired business and parent
21 Defined in Rule 1-02(b) of Regulation S-X
22Financial statements required would be those as if affiliate were a separate registrant
23 When applicable to one or more but not all affiliates, separate disclosure applicable to those affiliates required
24 Balance sheet and income statement line items and accompanying notes that describe basis of presentation in accordance with Rule 1-02(bb)(1) of Regulation S-X and additional line items to comply with Rules 13-02(a)(6) and (7) of Regulation S-X as of and for the most recently ended fiscal year and year-to-date interim period included in parent’s consolidated financial statements
25 See Item 601(b)(22) of Regulation S-K
26 If revised alternative disclosures are not provided in MD&A, required to be provided following “Risk Factors” or if none, following pricing information in Item 105 of Regulation S-X
27 Rule 13-02(a)(6) of Regulation S-X
28 Rule 13-02(a)(7) of Regulation S-X
29 Based on Rule 11-01(d) of Regulation S-X