On 17 March 2015, the SEC’s Division of Corporation Finance revised its Financial Reporting Manual in three main aspects:
- First, the revised version includes updated guidance on testing significance of equity method investments.
- Second, topic 10 on “Emerging Growth Companies” (“EGCs”) has been updated to reflect the requirements of the Fixing America’s Surface Transportation Act (the “FAST Act”), including paragraphs on: (i) an EGC’s ongoing treatment as an EGC even if such status is lost during the review of its registration statement; and (ii) financial reporting accommodations regarding (a) the omission of financial information for historical periods, (b) the number of periods covered in Management’s Discussion and Analysis and (c) the permitted omission of financial statements required by either Rule 3-05 or Rule 3-09 of Regulation S-X if the issuer reasonably believes those financial statements will not be required at the time of the offering.
- Third, topic 11 on “Reporting Issues Related to Adoption of New Revenue Recognition Standard” has been revised to include a summary of the implementation guidance in Accounting Standards Update No. 2014-09 on Revenue from Contracts with Customers, as amended by Accounting Standards Update No. 2015-14, and IFRS 15 Revenue from Contracts with Customers. The revisions also add a Q&A section addressing the effects of implementation on (i) selected financial data, (ii) supplementary quarterly financial data for an EGC, (iii) the ratio of earnings to fixed charges and (iv) financial statements of other entities and significance.
The revised Financial Reporting Manual is available at: https://www.sec.gov/divisions/corpfin/cffinancialreportingmanual.shtml