[Federal Register Volume 59, Number 243 (Tuesday, December 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31035]


[[Page Unknown]]

[Federal Register: December 20, 1994]


_______________________________________________________________________

Part IV





Securities and Exchange Commission





_______________________________________________________________________



17 CFR Part 210 et al.




Selection of Reporting Currency for Financial Statements of Foreign 
Private Issuers, et al.; Final Rules and Proposed Rule
SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 210 and 249

[Release Nos. 33-7117; 34-35093; FR43; International Series Release No. 
757; File No. S7-11-94]
RIN 3235-AD70

 
Selection of Reporting Currency for Financial Statements of 
Foreign Private Issuers and Reconciliation to U.S. GAAP for Foreign 
Private Issuers With Operations in a Hyperinflationary Economy

AGENCY: Securities and Exchange Commission.

ACTION: Final rules.

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SUMMARY: The Commission is announcing the adoption of amendments to 
Regulation S-X and Form 20-F to facilitate registration and reporting 
by foreign private issuers. The amendments allow foreign issuers 
flexibility in the selection of the reporting currency used in filings 
with the Commission, and streamline financial statement reconciliation 
requirements for foreign private issuers with operations in countries 
with hyperinflationary economies.

EFFECTIVE DATE: December 20, 1994.

FOR FURTHER INFORMATION CONTACT:
Wayne E. Carnall, Deputy Chief Accountant, Division of Corporation 
Finance at (202) 942-2960, Mail Stop 3-13, U.S. Securities and Exchange 
Commission, 450 Fifth Street NW., Washington, DC 20549.

SUPPLEMENTARY INFORMATION: As described in detail below, the Commission 
is adopting amendments to Rule 3-20\1\ of Regulation S-X\2\ and Form 
20-F\3\ under the Securities Exchange Act of 1934.\4\
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    \1\17 CFR 210.3-20.
    \2\17 CFR 210.
    \3\17 CFR 249.220f.
    \4\15 U.S.C. 78a et seq.
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I. Introduction

    The Commission is adopting amendments to facilitate registration 
and reporting by foreign private issuers by allowing flexibility in the 
selection of the reporting currency used in filings with the Commission 
and by streamlining financial statement reconciliation requirements for 
foreign private issuers with operations in countries with 
hyperinflationary economies. Under the amended rules, a foreign private 
issuer can state amounts in its financial statements in any currency 
which it deems appropriate. In addition, a foreign private issuer that 
accounts in its primary financial statements for its operations in a 
hyperinflationary economy in accordance with International Accounting 
Standards No. 21, ``The Effects of Changes in Foreign Exchange Rates,'' 
as amended in 1993 (``IAS 21''), using the historical cost/constant 
currency method would not need to reconcile the differences that would 
result from application of the U.S. standard, Statement of Financial 
Accounting Standards No. 52, ``Foreign Currency Translation'' (``SFAS 
52''). The amendments adopted today were proposed by the Commission on 
April 19, 1994.\5\
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    \5\See Securities Act Release No. 7054 (April 19, 1994) (59 FR 
21644) (the ``Proposing Release'').
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    Most of the comment letters received regarding the proposals were 
supportive of the Commission's efforts to increase flexibility in the 
selection of the reporting currency and to streamline the 
reconciliation process for foreign private issuers.\6\ The Commission 
believes that this flexibility can be provided to foreign private 
issuers with no loss of material information that is necessary for a 
U.S. investor to make an informed investment decision. The amendments 
are being adopted largely as proposed, with certain modifications and 
clarifications in response to public comments.
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    \6\Fourteen comment letters on the proposal were received. Those 
letters and a summary of the comments are available for public 
inspection and copying in File No. S7-11-94 at the Commission's 
Public Reference Room in Washington, DC.
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II. Reporting Currency of Foreign Private Issuers

A. Selection of a Reporting Currency

    The amendments adopted today permit a foreign private issuer to 
state the amounts in its primary financial statements using any 
currency which it deems appropriate. The proposed requirement that the 
reporting currency also be used to report to a majority of the issuer's 
nonaffiliated securityholders has been deleted in response to comments, 
as discussed below.
    Commenters generally agreed with the Proposing Release on the need 
to increase flexibility in the selection of the reporting currency. 
Commenters agreed that rules regarding reporting currency have been 
troublesome for some foreign issuers that operate in various 
currencies. Compliance with the rule previously governing selection of 
the reporting currency was problematic for some issuers because no 
primary economic environment could be identified, and the country of 
incorporation had minimal significance to operations. In addition, 
several commenters cited the preference of U.S. investors for financial 
statements prepared using the U.S. dollar as the reporting currency.
    A number of commenters expressed the view that, as proposed, the 
rule was overly restrictive in requiring that the reporting currency 
used in filings with the Commission also be used in financial 
statements that are distributed to the majority of the issuer's 
nonaffiliated shareholders. Commenters believed that requirement would 
force some foreign issuers to distribute an additional set of financial 
statements, stated in the currency used for reporting to the 
Commission, to securityholders outside the U.S. who would find the 
additional material of no interest or benefit. Mandating delivery of 
financial statements in foreign countries is not appropriate or 
necessary for the protection of U.S. investors. Accordingly, the 
restriction has been deleted from the rule as adopted.
    Several commenters favored increased flexibility but suggested 
various limiting criteria for determining the appropriate currency. A 
few commenters indicated a view that an issuer should use the same 
reporting currency for all external reporting. One commenter suggested 
that the Commission ask the Financial Accounting Standards Board 
(``FASB'') to undertake a project on the selection of reporting 
currency. The Commission does not believe that a need for new 
restrictions on a registrant's choice of reporting currency has been 
demonstrated, and does not believe reporting currency is an issue that 
needs to be addressed by the FASB. Moreover, restricting an issuer that 
chooses to sell its securities in U.S. public markets to a single 
reporting currency in all external reports in any jurisdiction is not 
practical or necessarily helpful to U.S. investors. Foreign law or 
custom may require an issuer to publicly distribute financial 
statements in a currency that is not as meaningful and relevant to U.S. 
investors as another currency. The Commission believes management and 
its advisors should be free to select the reporting currency that is 
most useful for U.S. markets. Of course, reporting practices will 
continue to be monitored to assess the practiced application of today's 
amendments.
    One commenter that generally supported increased flexibility in the 
selection of the reporting currency indicated that issuers should not 
be permitted to report in U.S. dollars if the currency of its primary 
economic environment or the currency in which dividends are paid is a 
currency of a hyperinflationary economy or is subject to material 
exchange restrictions. That suggestion has not been followed. Domestic 
issuers that conduct substantial operations in countries whose currency 
is hyperinflationary consolidate those operations and present them in 
U.S. dollars. While translation from a currency of a hyperinflationary 
environment into a more stable currency presents some practical 
problems, the accounting profession has addressed these situations. 
SFAS 52 provides guidance on the translation of operations in 
hyperinflationary economies under U.S. GAAP, and IAS 21, as discussed 
in a separate section of this release, also prescribes a method of 
translation.
    The rule has not been revised, as suggested by one commenter, to 
address material foreign exchange restrictions and controls because the 
resolution of such issues typically is dependent on the particular 
facts and circumstances. Registrants are encouraged to discuss unique 
issues regarding exchange restrictions or controls involving the 
registrant and its subsidiaries and other affiliates with the 
Commission's staff prior to filing.
    The amended rule requires, as was proposed, specific disclosure in 
a note to the financial statements if the currency in which the issuer 
expects to declare dividends is different from the reporting currency, 
or there are material exchange restrictions affecting the reporting 
currency or the currency in which dividends are paid. Registrants are 
reminded that to the extent that depicted trends and reported results 
are affected by exchange rate fluctuations, explanatory disclosure 
should be provided in filings with the Commission as part of the 
explanation of the material changes from year to year required by 
management's discussion and analysis in Regulation S-K\7\ as well as 
the comparable sections presented in Item 9 of Form 20-F.\8\
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    \7\17 CFR 229.303.
    \8\17 CFR 249.220f.
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    The adopted rule applies to financial statements of the registrant. 
Financial statements furnished with respect to equity investees or 
acquired businesses may be prepared using the same reporting currency 
as the registrant's primary financial statements or the currency in 
which that entity normally prepares its financial statements. If the 
currency selected for the separate financial statements of acquisitions 
and investees differs from that of the registrant, pro forma 
information and condensed financial data of an investee should be 
prepared using the reporting currency of the registrant.\9\
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    \9\In circumstances where a registrant furnishes separate 
financial statements of an equity investee pursuant to Rule 3-09 of 
Regulation S-X, the staff has not required the registrant to also 
furnish summarized financial data of the investee pursuant to Rule 
4-08(g) of Regulation S-X (17 CFR 210.4-08(g)) (See Staff Accounting 
Bulletin No. 44, Topic 6:K (March 3, 1983) (47 FR 10789). However, 
if the separate financial statements of an equity investee are not 
prepared in the same reporting currency as the issuer, the 
summarized financial data pursuant to Rule 4-08(g) of Regulation S-X 
should be provided in the primary financial statements.
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B. Measurement

    The Proposing Release requested comment on two alternative 
approaches to measuring transactions that would then be translated into 
the reporting currency. Commenters, with one exception, supported the 
method described as Approach A. Under that approach, the issuer would 
measure separately its own transactions, and those of each of its 
material operations (for example, branch, division, subsidiary, or 
joint venture) that are included in the issuer's consolidated financial 
statements and located in a non-hyperinflationary environment, using 
the particular currency of the primary economic environment in which 
the issuer or the operation conducts its business.\10\ Financial 
statement amounts so determined would be translated to the reporting 
currency using the methodology that is prescribed by SFAS 52 for 
translation of financial statements from a functional currency to a 
reporting currency. Under that method, (a) all assets and liabilities 
are translated into the reporting currency at the exchange rate at the 
balance sheet date, (b) all revenues, expenses, gains, and losses are 
translated at the exchange rate existing at the time of the transaction 
or, if appropriate, a weighted average of the exchange rates during the 
period or year, and (c) all the translation effects of exchange rate 
changes are included as a separate component (``cumulative translation 
adjustment'') of shareholders' equity.
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    \10\An issuer with a material operation in a hyperinflationary 
environment would measure the transactions of the operation in the 
reporting currency pursuant to SFAS 52, except that no 
reconciliation to that method will be required in the circumstances 
discussed in Section III of this release.
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    Commenters generally objected to Approach B because measurement of 
reported results of operations and financial position would be 
dependent on the issuer's particular reporting currency, rather than 
the economic environment in which the business operated. Pursuant to 
Approach B, all transactions of the issuer and its subsidiaries would 
be measured (or remeasured if not so measured initially) using 
reporting currency, except that transactions of each of its material 
foreign operations (for example, branch, division, subsidiary, or joint 
venture) included in the consolidated financial statements and located 
in a non-hyperinflationary environment would be measured using the 
particular currency of the primary economic environment in which the 
foreign operation conducts its business. Financial statement amounts 
determined for the material foreign operations of the issuer would be 
translated using the methodology prescribed by SFAS 52 for translation 
of financial statements from a functional currency to a reporting 
currency, as described above. Commenters also opposed Approach B 
because it could not be readily implemented by foreign issuers that 
report in several currencies due to the significant data and 
computational requirements of the remeasurement process. While the 
Commission has determined not to adopt Approach B in the amendment, 
issuers that have historically presented results using that method are 
encouraged to discuss with the staff possible resolutions of any 
particular problems that may be encountered by the issuer as a result 
of the Commission's adoption of Approach A.

C. Changes of Reporting Currency

    As was proposed, the final amendments provide that changes in the 
reporting currency require the financial statements of periods prior to 
the change be comprehensively recast as if the new reporting currency 
had been used.\11\ To comprehensively recast prior financial 
statements, a methodology consistent with SFAS 52 should be applied. 
That is, the income statement and statement of cash flows should be 
translated into the new reporting currency using an appropriately 
weighted average exchange rate for the applicable period, and assets 
and liabilities should be translated using the exchange rate at the end 
of the applicable period. Registrants that encounter unusual or complex 
problems in the implementation of a change in reporting are encouraged 
to discuss those issues with the staff prior to filing.
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    \11\A change in the reporting currency may or may not be 
coincidental with a change in the currency of the primary economic 
environment in which the operations exist. The U.S. accounting 
guidance applicable to a change in an entity's functional currency 
appears in paragraph 9 of SFAS 52. The effects of differences 
between the method of accounting in the primary financial statements 
for a change in functional currency and the method of accounting 
prescribed by U.S. GAAP should be explained and quantified where 
reconciliation is required pursuant to Item 17 or Item 18 of Form 
P20-F.
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    While the number of periods for which retroactive recasting of 
results is computed generally does not affect relationships among 
balance sheet or income statement amounts, it may affect the allocation 
of amounts between the cumulative translation adjustment and other 
stockholder equity accounts. As proposed, the adopted rule specifies 
that financial statements of prior periods need be comprehensively 
recast as if the new reporting currency had been used only since the 
earliest period presented in the filing that initially reflects the 
change in reporting currency.
    In response to requests for views regarding the need to disclose 
the reasons for a registrant's change in its reporting currency, 
several commenters questioned the need for the disclosure or doubted 
that the information would be useful. Comments of financial analysts 
supported such a disclosure. The Commission agrees with those 
commenters that indicated that disclosure of the reason for the change 
would be informative, and accordingly, the adopted rule requires that 
disclosure.

III. Foreign Issuer Operations in a Hyperinflationary Economy

    As adopted, the rules eliminate the requirement that a foreign 
private issuer quantify the effects of a translation methodology for 
operations in a hyperinflationary environment which differs from SFAS 
52 so long as the method used in the financial statements conforms with 
IAS 21, provided that the method is used consistently for all periods. 
IAS 21, as amended in 1993, requires that amounts in the financial 
statements of the hyperinflationary operations be restated for the 
effects of changing prices using a methodology permitted by 
International Accounting Standard No. 29, ``Financial Reporting in 
Hyperinflationary Economies'' (``IAS 29''), and then translated to the 
reporting currency. The adopted rule differs from the proposal in that 
it limits the permissible method for restating for effects of changing 
prices to the historical cost/constant dollar method, as discussed 
below.
    Commenters supporting the Commission's proposal cited various 
reasons including the high cost of reconciliation for differences in 
accounting for hyperinflationary operations, support for harmonization 
of international accounting standards, and the view that IAS 21 is 
theoretically superior to SFAS 52. In addition, commenters observed 
that acceptance of IAS 21 without reconciliation is consistent with the 
Commission's existing rule that does not require the elimination of the 
effects of inflation in price level adjusted financial statements in 
the reconciliation to U.S. GAAP. One commenter opposed the proposal, 
suggesting that the Commission was abandoning the objective of 
providing the market with comparable information about issuers. The 
Commission's acceptance of IAS 21 for purposes of foreign issuers is 
based, in part, on the recognition that financial information reported 
about the hyperinflationary operations of a foreign issuer will not 
necessarily be comparable to a U.S. issuer or to another foreign issuer 
if that information is determined on a basis consistent with SFAS 52. 
Since SFAS 52 requires the use of the reporting currency as the 
currency of measurement for hyperinflationary operations, reported 
results are dependent on the reporting currency under SFAS 52. IAS 29 
addresses that problem by adjusting measurements in the local currency 
for inflation before translation to the reporting currency.
    IAS 29 permits two methods of adjusting for the effects of changing 
prices: (a) Restatement of historical cost amounts into units of 
currency that have the same general purchasing power (historical cost/
constant currency method), or (b) measurement as current cost, with 
amounts for prior periods restated for changes in the general level of 
prices (current cost method). In response to a request for comments 
concerning the appropriateness of accepting either method under IAS 29, 
two commenters indicated that the flexibility permitted by IAS 29 would 
not promote consistency or an understanding of the financial 
statements. In recognition of this concern, the adopted rule does not 
allow the use of the current cost approach. The Commission believes 
that the historical cost/constant currency method is the preferable 
choice of the two because it is more likely to facilitate comparison 
among similarly situated companies. Under the historical cost/constant 
currency method, amounts in the financial statements of the 
hyperinflationary operation are restated for the effects of changing 
prices, and then translated to the reporting currency.
    The elimination of the alternative of using the current cost method 
is not expected to have a significant effect on many registrants. 
Issuers from several countries currently prepare financial statements 
filed with the Commission that are adjusted for inflation. With the 
exception of Mexico, it is the predominant practice in most of these 
countries to use a method consistent with the historical cost/constant 
currency method in IAS 29.\12\ The elimination of the availability of 
using the current cost method does not apply to situations in which the 
issuer's reporting currency comprehensively includes the effects of 
price level changes. Such entities can continue to use the current cost 
method. That is, the current cost method is eliminated only for those 
issuers whose reporting currency is not adjusted for inflation (stable 
reporting currency), but have operations in a hyperinflationary 
economy. Issuers that use the current cost method for operations in a 
hyperinflationary economy should discuss their particular circumstances 
with the staff.
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    \12\The Commission has been advised that the Mexican Institute 
of Public Accountants recently approved an amendment to eliminate 
the use of the current cost method.
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    As proposed, a hyperinflationary environment is defined in the 
adopted rule as one experiencing cumulative inflation of approximately 
100% or more over the most recent three year period, as measured using 
an appropriate inflation index which measures general price levels in 
the country. This definition is consistent with that used to define a 
hyperinflationary entity under SFAS 52.\13\ Accordingly, foreign 
private issuers may omit reconciliation of accounting differences 
arising from the use of IAS 21 for hyperinflationary operations only 
when they would have been required to comply with the comparable 
provisions of SFAS 52.
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    \13\See paragraph 11 of SFAS 52.
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    Consistent with the rule prior to amendment, foreign private 
issuers that prepare their financial statements in a reporting currency 
that comprehensively includes the effects of price level changes are 
not required to eliminate such effects in the reconciliation to US 
GAAP. Item 17(c)(2)(iv)(A) and Item 18(c)(2)(iv)(A) of Form 20-F does 
not require that the entity operate in a hyperinflationary environment.
    One commenter questioned whether the proposed rule only applies to 
a subsidiary that operates in a hyperinflationary environment, or if it 
would apply equally to a parent company that operated in a 
hyperinflationary environment.
    The adopted rules would apply equally to the parent company. It 
would also be acceptable for a parent company to apply the 
remeasurement principles of SFAS 52. The legal structure of an entity 
should not affect the financial statements.

IV. Cost-Benefit Analysis

    No specific data were provided in response to the Commission's 
request regarding the costs and benefits of the amendment being adopted 
today. Several issuers did indicate, however, that if the Commission 
adopted the method to measure transactions described as Approach B in 
the Proposing Release that significant additional recordkeeping would 
be required. In addition, commenters supporting the proposal with 
respect to hyperinflationary accounting noted that the current 
reconciliation requirements did not meet the cost benefit test because 
of the complexities of preparation. The Commission believes that the 
amendments will reduce costs and that the adoption of these rules will 
be beneficial to U.S. investors, as it will encourage more foreign 
companies to list their securities and raise capital in the United 
States and will be consistent with investor protection.

V. Regulatory Flexibility Act Certification

    Pursuant to the Regulatory Flexibility Act (5 U.S.C. 605(b)), the 
Chairman of the Commission has certified that the revisions to rules 
and forms will not have a significant impact on a substantial number of 
small entities. Members of the public who wish to obtain a copy of the 
Regulatory Flexibility Certification should contact Wayne E. Carnall, 
(202) 942-2960, Deputy Chief Accountant, Division of Corporation 
Finance, Mail Stop 3-13, Securities and Exchange Commission, 450 Fifth 
Street NW., Washington, DC 20549.

VI. Statutory Bases

    The Commission's rules and forms are amended pursuant to section 19 
of the Securities Act of 1933 and sections 3(b), 4A, 12, 13, 14, 15, 
16, and 23 of the Securities Exchange Act of 1934.

VII. Effective Date

    The final rule and amendments to the Commission's rules and forms 
shall be effective immediately upon publication in the Federal 
Register, in accordance with the Administrative Procedure Act, which 
allows effectiveness in less than 30 days after publications for, inter 
alia, ``a substantive rule which grants or recognizes an exemption or 
relieves a restriction.'' 5 U.S.C. 553(d)(1).

List of Subjects in 17 CFR Parts 210 and 249

    Accounting, Reporting and recordkeeping requirements, Securities.

Text of Rule and Form Amendments

    In accordance with the foregoing, Title 17, Chapter II of the Code 
of Federal Regulations is amended as follows:

PART 210--FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL 
STATEMENTS, SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 
1934, PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, INVESTMENT 
COMPANY ACT OF 1940, AND ENERGY POLICY AND CONSERVATION ACT OF 
1975.

    1. The authority citation for part 210 is revised to read as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77aa(25), 
77aa(26), 78l, 78m, 78n, 78o(d), 78w(a), 78ll(d), 79e(b), 79j(a), 
79n, 79t(a), 80a-8, 80a-20, 80a-29, 80a-30, 80a-37a, unless 
otherwise noted.

    2. By revising Sec. 210.3-20 to read as follows:


Sec. 210.3-20  Currency for financial statements of foreign private 
issuers.

    (a) A foreign private issuer, as defined in Sec. 230.405 of this 
chapter, shall state amounts in its primary financial statements in the 
currency which it deems appropriate.
    (b) The currency in which amounts in the financial statements are 
stated shall be disclosed prominently on the face of the financial 
statements. If dividends on publicly-held equity securities will be 
declared in a currency other than the reporting currency, a note to the 
financial statements shall identify that currency. If there are 
material exchange restrictions or controls relating to the issuer's 
reporting currency, the currency of the issuer's domicile, or the 
currency in which the issuer will pay dividends, prominent disclosure 
of this fact shall be made in the financial statements. If the 
reporting currency is not the U.S. dollar, dollar-equivalent financial 
statements or convenience translations shall not be presented, except a 
translation may be presented of the most recent fiscal year and any 
subsequent interim period presented using the exchange rate as of the 
most recent balance sheet included in the filing, except that a rate as 
of the most recent practicable date shall be used if materially 
different.
    (c) If the financial statements of a foreign private issuer are 
stated in a currency of a country that has experienced cumulative 
inflationary effects exceeding a total of 100 percent over the most 
recent three year period, and have not been recast or otherwise 
supplemented to include information on a historical cost/constant 
currency or current cost basis prescribed or permitted by appropriate 
authoritative standards, the issuer shall present supplementary 
information to quantify the effects of changing prices upon its 
financial position and results of operations.
    (d) Notwithstanding the currency selected for reporting purposes, 
the issuer shall measure separately its own transactions, and those of 
each of its material operations (e.g., branches, divisions, 
subsidiaries, joint ventures, and similar entities) that is included in 
the issuer's consolidated financial statements and not located in a 
hyperinflationary environment, using the particular currency of the 
primary economic environment in which the issuer or the operation 
conducts its business. Assets and liabilities so determined shall be 
translated into the reporting currency at the exchange rate at the 
balance sheet date; all revenues, expenses, gains, and losses shall be 
translated at the exchange rate existing at the time of the transaction 
or, if appropriate, a weighted average of the exchange rates during the 
period; and all translation effects of exchange rate changes shall be 
included as a separate component (``cumulative translation 
adjustment'') of shareholder's equity. For purposes of this paragraph, 
the currency of an operation's primary economic environment is normally 
the currency in which cash is primarily generated and expended; a 
hyperinflationary environment is one that has cumulative inflation of 
approximately 100% or more over the most recent three year period. 
Departures from the methodology presented in this paragraph shall be 
quantified pursuant to Items 17(c)(2) or 18(c)(2) of Form 20-F 
(Sec. 249.220f of this chapter).
    (e) The issuer shall state its primary financial statements in the 
same currency for all periods for which financial information is 
presented. If the financial statements are stated in a currency that is 
different from that used in financial statements previously filed with 
the Commission, the issuer shall recast its financial statements as if 
the newly adopted currency had been used since at least the earliest 
period presented in the filing. The decision to change and the reason 
for the change in the reporting currency shall be disclosed in a note 
to the financial statements in the period in which the change occurs.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

    3. The authority citation for part 249 continues to read in part as 
follows:

    Authority: 15 U.S.C. 78a, et seq., unless otherwise noted;
* * * * *


Sec. 249.220f  [Amended]

    4. By amending Form 20-F (referenced in Sec. 249.220f) by revising 
paragraph (c)(2)(iv) of Item 17 and adding Instruction (5) to Item 17, 
by revising paragraph (c)(2)(iv) of Item 18 and adding Instruction (4) 
of Item 18 to read as follows:

    Note: The form 20-F does not and the amendments will not appear 
in the Code of Federal Regulations.

Form 20-F

* * * * *

Item 17. Financial Statements

* * * * *
    (c) * * *
    (2) * * *
    (iv) (A) Issuers that prepare their financial statements on a 
basis of accounting other than U.S. generally accepted accounting 
principles in a reporting currency that comprehensively includes the 
effects of price level changes in its primary financial statements 
using the historical cost/constant currency or current cost 
approach, may omit the disclosures specified by paragraphs 
(c)(2)(i), (c)(2)(ii), and (c)(2)(iii) of this item relating to 
affects of price level changes. The financial statements should 
describe the basis of presentation, and that such effects have not 
been included in the reconciliation.
    (B) Issuers that prepare their financial statements on a basis 
of accounting other than U.S. generally accepted accounting 
principles that translates amounts in financial statements stated in 
a currency of a hyperinflationary economy into the issuer's 
reporting currency in accordance with International Accounting 
Standards No. 21, ``The Effects of Changes in Foreign Exchange 
Rates,'' as amended in 1993, using the historical cost/constant 
currency approach, may omit the disclosures specified by paragraphs 
(c)(2)(i), (c)(2)(ii), and (c)(2)(iii) of this Item relating to the 
effects of the different method of accounting for an entity in a 
hyperinflationary environment.
    (C) If the method of accounting for an operation in a 
hyperinflationary economy complies with IAS 21, a statement to that 
effect must be included in the financial statements. The 
reconciliation shall state that such amounts presented comply with 
Item 17 of Form 20-F and are different from that required by U.S. 
GAAP.
* * * * *

Instructions

* * * * *
    (5) For purposes of this Item, a hyperinflationary economy is 
one that has cumulative inflation of approximately 100% or more over 
the most recent three year period.
* * * * *

Item 18. Financial Statements

* * * * *
    (c) * * *
    (2) * * *
    (iv) (A) Issuers that prepare their financial statements on a 
basis of accounting other than U.S. generally accepted accounting 
principles in a reporting currency that comprehensively includes the 
effects of price level changes in its primary financial statements 
using the historical cost/constant currency or current cost 
approach, may omit the disclosures specified by paragraphs 
(c)(2)(i), (c)(2)(ii), and (c)(2)(iii) of this item relating to 
effects of price level changes. The financial statements should 
describe the basis of presentation, and that such effects have not 
been included in the reconciliation.
    (B) Issuers that prepare their financial statements on a basis 
of accounting other than U.S. generally accepted accounting 
principles that translates amounts in financial statements stated in 
a currency of a hyperinflationary economy into the issuer's 
reporting currency in accordance with International Accounting 
Standards No. 21, ``The Effects of Changes in Foreign Exchange 
Rates,'' as amended in 1993, using the historical cost/constant 
currency approach, may omit the disclosures specified by paragraphs 
(c)(2)(i), (c)(2)(ii), and (c)(2)(iii) of this Item relating to the 
effects of the different method of accounting for an entity in a 
hyperinflationary environment.
    (C) If the method of accounting for an operation in a 
hyperinflationary economy complies with IAS 21, a statement to that 
effect must be included in the financial statements. The 
reconciliation shall state that such amounts presented comply with 
Item 18 of Form 20-F and are different from that required by U.S. 
GAAP.
* * * * *

Instructions

* * * * *
    (4) For purposes of this Item, a hyperinflationary economy is 
one that has cumulative inflation of approximately 100% or more over 
the most recent three year period.
* * * * *
    By the Commission.

    Dated: December 13, 1994.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-31035 Filed 12-19-94; 8:45 am]
BILLING CODE 8010-01-P