[Title 17 CFR 228.310]
[Code of Federal Regulations (annual edition) - April 1, 2007 Edition]
[Title 17 - COMMODITY AND SECURITIES EXCHANGES]
[Chapter II - SECURITIES AND EXCHANGE COMMISSION]
[Part 228 - INTEGRATED DISCLOSURE SYSTEM FOR SMALL]
[Subpart A - Regulation S-B]
[Sec. 228.310 - (Item 310) Financial Statements.]
[From the U.S. Government Printing Office]
17COMMODITY AND SECURITIES EXCHANGES22007-04-012007-04-01false(Item 310) Financial Statements.228.310Sec. 228.310COMMODITY AND SECURITIES EXCHANGESSECURITIES AND EXCHANGE COMMISSIONINTEGRATED DISCLOSURE SYSTEM FOR SMALLRegulation S-B
Sec. 228.310 (Item 310) Financial Statements.
Notes: 1. Financial statements of a small business issuer, its
predecessors or any businesses to which the small business issuer is a
successor shall be prepared in accordance with generally accepted
accounting principles in the United States.
2. Regulation S-X (17 CFR 210.1 through 210.12) Form and Content of
and Requirements for Financial Statements shall not apply to the
preparation of such financial statements, except that the report and
qualifications of the independent accountant shall comply with the
requirements of Article 2 of Regulation S-X (17 CFR 210.2), Item 8.A of
Form 20-F (17 CFR 249.220f) and Article 3-20 of Regulation S-X (17 CFR
210.3-20) shall apply to financial statements of foreign private
issuers, the description of accounting policies shall comply with
Article 4-08(n) of Regulation S-X (17 CFR 210.4-08(n)), and small
business issuers engaged in oil and gas producing activities shall
follow the financial accounting and reporting standards specified in
Article 4-10 of Regulation S-X (17 CFR 210.4-10) with respect to such
activities. To the extent that Article 11-01 [17 CFR 210.11-01] (Pro
Forma Presentation Requirements) offers enhanced guidelines for the
preparation, presentation and disclosure of
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pro forma financial information, small business issuers may wish to
consider these items. Financial statements of foreign private issuers
shall be prepared and presented in accordance with the requirements of
Item 18 of Form 20-F except that Item 17 may be followed for financial
statements included in filings other than registration statements for
offerings of securities unless the only securities being offered are:
(a) upon the exercise of outstanding rights granted by the issuer of the
securities to be offered, if such rights are granted by the issuer of
the securities to be offered, if such rights are granted on a pro rata
basis to all existing securities holders of the class of securities to
which the rights attach and there is no standby underwriting in the
United States or similar arrangement; or (b) pursuant to a dividend or
interest reinvestment plan; or (c) upon the conversion of outstanding
convertible securities or upon the exercise of outstanding transferrable
warrants issued by the issuer of the securities being offered, or by an
affiliate of such issuer.
3. Financial statements for a subsidiary of a small business issuer
that issues securities guaranteed by the small business issuer or
guarantees securities issued by the small business issuer must be
presented as required by Rule 3-10 of Regulation S-X (17 CFR 210.3-10),
except that the periods presented are those required by paragraph (a) of
this item.
4. Financial statements for a small business issuer's affiliates
whose securities constitute a substantial portion of the collateral for
any class of securities registered or being registered must be presented
as required by Rule 3-16 of Regulation S-X (17 CFR 210.3-16), except
that the periods presented are those required by paragraph (a) of this
item.
5. The Commission, where consistent with the protection of
investors, may permit the omission of one or more of the financial
statements or the substitution of appropriate statements of comparable
character. The Commission by informal written notice may require the
filing of other financial statements where necessary or appropriate.
6. Rule 4-01(a)(3) of Regulation S-X, 17 CFR 210.4-01(a)(3), shall
apply to the preparation of financial statements of small business
issuers.
(a) Annual Financial Statements. Small business issuers shall file
an audited balance sheet as of the end of the most recent fiscal year,
or as of a date within 135 days if the issuers existed for a period less
than one fiscal year, and audited statements of income, cash flows and
changes in stockholders' equity for each of the two fiscal years
preceding the date of such audited balance sheet (or such shorter period
as the registrant has been in business).
(b) Interim Financial Statements. Interim financial statements may
be unaudited; however, prior to filing, interim financial statements
included in quarterly reports on Form 10-QSB (17 CFR 249.308b) must be
reviewed by an independent public accountant using professional
standards and procedures for conducting such reviews, as established by
generally accepted auditing standards, as may be modified or
supplemented by the Commission. If, in any filing, the issuer states
that interim financial statements have been reviewed by an independent
public accountant, a report of the accountant on the review must be
filed with the interim financial statements. Interim financial
statements shall include a balance sheet as of the end of the issuer's
most recent fiscal quarter and income statements and statements of cash
flows for the interim period up to the date of such balance sheet and
the comparable period of the preceding fiscal year.
Instructions to Item 310(b): 1. Where Item 310 is applicable to a Form
10-QSB (Sec. 249.308b) and the interim period is more than one quarter,
income statements must also be provided for the most recent interim
quarter and the comparable quarter of the preceding fiscal year.
2. Interim financial statements must include all adjustments which
in the opinion of management are necessary in order to make the
financial statements not misleading. An affirmative statement that the
financial statements have been so adjusted must be included with the
interim financial statements.
(1) Condensed Format. Interim financial statements may be condensed
as follows:
(i) Balance sheets should include separate captions for each balance
sheet component presented in the annual financial statements which
represents 10% or more of total assets. Cash and retained earnings
should be presented regardless of relative significance to total assets.
Registrants which present a classified balance sheet in their annual
financial statements should present totals for current assets and
current liabilities.
(ii) Income statements should include net sales or gross revenue,
each cost and expense category presented in the annual financial
statements which
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exceeds 20% of sales or gross revenues, provision for income taxes,
discontinued operations, extraordinary items and cumulative effects of
changes in accounting principles or practices. (Financial institutions
should substitute net interest income for sales for purposes of
determining items to be disclosed.) Dividends per share should be
presented.
(iii) Cash flow statements should include cash flows from operating,
investing and financing activities as well as cash at the beginning and
end of each period and the increase or decrease in such balance.
(iv) Additional line items may be presented to facilitate the
usefulness of the interim financial statements including their
comparability with annual financial statements.
(2) Disclosure required and additional instructions as to Content.--
(i) Footnotes. Footnote and other disclosures should be provided as
needed for fair presentation and to ensure that the financial statements
are not misleading.
(ii) Material Subsequent Events and Contingencies. Disclosure must
be provided of material subsequent events and material contingencies
notwithstanding disclosure in the annual financial statements.
(iii) Significant Equity Investees. Sales, gross profit, net income
(loss) from continuing operations and net income must be disclosed for
equity investees which constitute 20% or more of a registrant's
consolidated assets, equity or income from continuing operations.
(iv) Significant Dispositions and Purchase Business Combinations. If
a significant disposition or purchase business combination has occurred
during the most recent interim period and the transaction required the
filing of a Form 8-K (Sec. 249.308 of this chapter), pro forma data
must be presented which reflects revenue, income from continuing
operations, net income and income per share for the current interim
period and the corresponding interim period of the preceding fiscal year
as though the transaction occurred at the beginning of the periods.
(v) Material Accounting Changes. Disclosure must be provided of the
date and reasons for any material accounting change. The registrant's
independent accountant must provide a letter in the first Form 10-QSB
(Sec. 249.308b of this chapter) filed subsequent to the change
indicating whether or not the change is to a preferable method.
Disclosure must be provided of any retroactive change to prior period
financial statements, including the effect of any such change on income
and income per share.
(vi) Development Stage Companies. A registrant in the development
stage must provide cumulative from inception financial information.
(c) Financial Statements of Businesses Acquired or to be Acquired.
(1) If a business combination accounted for as a ``purchase'' has
occurred or is probable, or if a business combination accounted for as a
``pooling of interest'' is probable, financial statements of the
business acquired or to be acquired shall be furnished for the periods
specified in paragraph (c)(3) of this Item.
(i) The term ``purchase'' encompasses the purchase of an interest in
a business accounted for by the equity method.
(ii) Acquisitions of a group of related businesses that are probable
or that have occurred subsequent to the latest fiscal year-end for which
audited financial statements of the issuer have been filed shall be
treated as if they are a single business combination for purposes of
this section. The required financial statements of related businesses
may be presented on a combined basis for any periods they are under
common control or management. A group of businesses are deemed to be
related if:
(A) They are under common control or management;
(B) The acquisition of one business is conditional on the
acquisition of each other business; or
(C) Each acquisition is conditioned on a single common event.
(iii) Annual financial statements required by this paragraph (c)
shall be audited. The form and content of the financial statements shall
be in accordance with paragraphs (a) and (b) of this Item.
(2) The periods for which financial statements are to be presented
are determined by comparison of the most recent annual financial
statements of the
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business acquired or to be acquired and the small business issuer's most
recent annual financial statements filed at or prior to the date of
acquisition to evaluate each of the following conditions:
(i) Compare the small business issuer's investments in and advances
to the acquiree to the total consolidated assets of the small business
issuer as of the end of the most recently completed fiscal year. For a
proposed business combination to be accounted for as a pooling of
interests, also compare the number of common shares exchanged or to be
exchanged by the small business issuer to its total common shares
outstanding at the date the combination is initiated.
(ii) Compare the small business issuer's proportionate share of the
total assets (after intercompany eliminations) of the acquiree to the
total consolidated assets of the small business issuer as of the end of
the most recently completed fiscal year.
(iii) Compare the small business issuer's equity in the income from
continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principles of the acquiree
to such consolidated income of the small business issuer for the most
recently completed fiscal year.
Computational note to paragraph (c)(2): For purposes of making the
prescribed income test the following guidance should be applied: If
income of the small business issuer and its subsidiaries consolidated
for the most recent fiscal year is at least 10 percent lower than the
average of the income for the last five fiscal years, such average
income should be substituted for purposes of the computation. Any loss
years should be omitted for purposes of computing average income.
(3)(i) If none of the conditions specified in paragraph (c)(2) of
this Item exceeds 20%, financial statements are not required. If any of
the conditions exceed 20%, but none exceeds 40%, financial statements
shall be furnished for the most recent fiscal year and any interim
periods specified in paragraph (b) of this item. If any of the
conditions exceed 40%, financial statements shall be furnished for the
two most recent fiscal years and any interim periods specified in
paragraph (b) of this item.
(ii) The separate audited balance sheet of the acquired business is
not required when the small business issuer's most recent audited
balance sheet filed is for a date after the acquisition was consummated.
(iii) If the aggregate impact of individually insignificant
businesses acquired since the date of the most recent audited balance
sheet filed for the registrant exceeds 50%, financial statements
covering at least the substantial majority of the businesses acquired
shall be furnished. Such financial statements shall be for the most
recent fiscal year and any interim periods specified in paragraph (b) of
this Item.
(iv) Registration statements not subject to the provisions of Sec.
230.419 of this chapter (Regulation C) and proxy statements need not
include separate financial statements of the acquired or to be acquired
business if it does not meet or exceed any of the conditions specified
in paragraph (c)(2) of this Item at the 50 percent level, and either:
(A) The consummation of the acquisition has not yet occurred; or
(B) The effective date of the registration statement, or mailing
date in the case of a proxy statement, is no more than 74 days after
consummation of the business combination, and the financial statements
have not been filed previously by the registrant.
(v) An issuer that omits from its initial registration statement
financial statements of a recently consummated business combination
pursuant to paragraph (c)(3)(iv) of this section shall furnish those
financial statements and any pro forma information specified by
paragraph (d) of this Item under cover of Form 8-K (Sec. 249.308 of
this chapter) no later than 75 days after consummation of the
acquisition.
(4) If the small business issuer made a significant business
acquisition subsequent to the latest fiscal year end and filed a report
on Form 8-K which included audited financial statements of such acquired
business for the periods required by paragraph (c)(3) of this Item and
the pro forma financial information required by paragraph (d) of this
Item, the determination of significance may be made by using pro forma
amounts for the latest fiscal year in the report on Form 8-K rather than
by
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using the historical amounts of the registrant. The tests may not be
made by ``annualizing'' data.
(d) Pro Forma Financial Information. (1) Pro forma information
showing the effects of the acquisition shall be furnished if financial
statements of a business acquired or to be acquired are presented.
(2) Pro forma statements should be condensed, in columnar form
showing pro forma adjustments and results and should include the
following:
(i) If the transaction was consummated during the most recent fiscal
year or subsequent interim period, pro forma statements of income
reflecting the combined operations of the entities for the latest fiscal
year and interim period, if any, or;
(ii) If consummation of the transaction has occurred or is probable
after the date of the most recent balance sheet required by paragraph
(a) or (b) of this Item, a pro forma balance sheet giving effect to the
combination as of the date of the most recent balance sheet. For a
purchase, pro forma statements of income reflecting the combined
operations of the entities for the latest fiscal year and interim
period, if any, and for a pooling of interests, pro forma statements of
income for all periods for which income statements of the small business
issuer are required.
(e) Real Estate Operations Acquired or to be Acquired. If, during
the period for which income statements are required, the small business
issuer has acquired one or more properties which in the aggregate are
significant, or since the date of the latest balance sheet required by
paragraph (a) or (b) of this Item, has acquired or proposes to acquire
one or more properties which in the aggregate are significant, the
following shall be furnished with respect to such properties:
(1) Audited income statements (not including earnings per unit) for
the two most recent years, which shall exclude items not comparable to
the proposed future operations of the property such as mortgage
interest, leasehold rental, depreciation, corporate expenses and federal
and state income taxes; Provided, however, That such audited statements
need be presented for only the most recent fiscal year if:
(i) the property is not acquired from a related party;
(ii) material factors considered by the small business issuer in
assessing the property are described with specificity in the
registration statement with regard to the property, including source of
revenue (including, but not limited to, competition in the rental
market, comparative rents, occupancy rates) and expenses (including but
not limited to, utilities, ad valorem tax rates, maintenance expenses,
capital improvements anticipated); and
(iii) the small business issuer indicates that, after reasonable
inquiry, it is not aware of any material factors relating to the
specific property other than those discussed in response to paragraph
(e)(1)(ii) of this Item that would cause the reported financial
information not to be necessarily indicative of future operating
results.
(2) If the property will be operated by the small business issuer, a
statement shall be furnished showing the estimated taxable operating
results of the small business issuer based on the most recent twelve-
month period including such adjustments as can be factually supported.
If the property will be acquired subject to a net lease, the estimated
taxable operating results shall be based on the rent to be paid for the
first year of the lease. In either case, the estimated amount of cash to
be made available by operations shall be shown. Disclosure must be
provided of the principal assumptions which have been made in preparing
the statements of estimated taxable operating results and cash to be
made available by operations.
(3) If appropriate under the circumstances, a table should be
provided which shows, for a limited number of years, the estimated cash
distribution per unit indicating the portion reportable as taxable
income and the portion representing a return of capital with an
explanation of annual variations, if any. If taxable net income per unit
will be greater than the cash available for distribution per unit, that
fact and approximate year of occurrence shall be stated, if significant.
(f) Limited Partnerships. (1) Small business issuers which are
limited partnerships must provide the balance
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sheets of the general partners as described in paragraphs (f)(2) through
(f)(4) of this Item.
(2) Where a general partner is a corporation, the audited balance
sheet of the corporation as of the end of its most recently completed
fiscal year must be filed. Receivables, other than trade receivables,
from affiliates of the general partner should be deducted from
shareholders' equity of the general partner. Where an affiliate has
committed itself to increase or maintain the general partner's capital,
the audited balance sheet of such affiliate must also be presented.
(3) Where a general partner is a partnership, there shall be filed
an audited balance sheet of such partnership as of the end of its most
recently completed fiscal year.
(4) Where the general partner is a natural person, there shall be
filed, as supplemental information, a balance sheet of such natural
person as of a recent date. Such balance sheet need not be audited. The
assets and liabilities should be carried at estimated fair market value,
with provisions for estimated income taxes on unrealized gains. The net
worth of such general partner(s), based on such balance sheet(s), singly
or in the aggregate, shall be disclosed in the registration statement.
(g) Age of Financial Statements. At the date of filing, financial
statements included in filings other than filings on Form 10-KSB must be
not less current than financial statements which would be required in
Forms 10-KSB and 10-QSB if such reports were required to be filed. If
required financial statements are as of a date 135 days or more prior to
the date a registration statement becomes effective or proxy material is
expected to be mailed, the financial statements shall be updated to
include financial statements for an interim period ending within 135
days of the effective or expected mailing date. Interim financial
statements should be prepared and presented in accordance with paragraph
(b) of this Item:
(1) When the anticipated effective or mailing date falls within 45
days after the end of the fiscal year, the filing may include financial
statements only as current as the end of the third fiscal quarter;
Provided, however, That if the audited financial statements for the
recently completed fiscal year are available or become available prior
to effectiveness or mailing, they must be included in the filing;
(2) If the effective date or anticipated mailing date falls after 45
days but within 90 days of the end of the small business issuer's fiscal
year, the small business issuer is not required to provide the audited
financial statements for such year end provided that the following
conditions are met:
(i) If the small business issuer is a reporting company, all reports
due must have been filed;
(ii) For the most recent fiscal year for which audited financial
statements are not yet available, the small business issuer reasonably
and in good faith expects to report income from continuing operations
before taxes; and
(iii) For at least one of the two fiscal years immediately preceding
the most recent fiscal year the small business issuer reported income
from continuing operations before taxes.
[57 FR 36449, Aug. 13, 1992, as amended at 58 FR 26514, May 4, 1993; 61
FR 54515, Oct. 18, 1996; 62 FR 6064, Feb. 10, 1997; 64 FR 53909, Oct. 5,
1999; 64 FR 73401, Dec. 30, 1999; 65 FR 51710, Aug. 24, 2000; 70 FR
20719, Apr. 21, 2005]