[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