This Securities Update summarizes changes affecting foreign private issuers’ annual reports on Form 20-F and sets forth certain considerations in connection with the preparation of the 2009 Form 20-F.

Changes in the 2009 Form 20-F

In September 2008, the U.S. Securities and Exchange Commission (the “SEC”) adopted certain changes to Form 20-F’s reporting obligations that are being phased in over a five-year period.1 The amendments discussed immediately below are applicable to the 2009 Form 20-F. The remaining amendments are discussed further below.

Disclosure about ADR Fees and Payments.

Foreign private issuers are now required to disclose specified information about the fees and charges paid, either directly or indirectly, by holders of American Depositary Receipts (ADRs). The Form 20-F requires disclosure of the type of service, the amount of any fees or charges and to whom such fees or charges are paid. Specifically, issuers are required to disclose information about any fees or charges in connection with:

  • Depositing or substituting the underlying shares;
  • Receiving or distributing dividends;
  • Selling or exercising rights;
  • Withdrawing an underlying security;
  • Transferring, splitting or grouping receipts; and
  • General depositary services, particularly those charged on an annual basis.

The Form 20-F also includes new requirements that foreign private issuers disclose information about the ADR depositary’s right, if any, to collect fees and charges by offsetting them against dividends received and deposited securities. The Form 20-F must also describe all fees and other direct and indirect payments made by the ADR depositary to the issuer of the deposited securities.

Changes in Registrant’s Certifying Accountant.

Foreign private issuers are now required to disclose any changes in or disagreements with their certifying accountant. In particular, Form 20-F requires disclosure of, among other things, the following:

  • Whether, during the registrant’s two most recent fiscal years or any subsequent interim period, an independent accountant that was previously engaged as the principal accountant to audit the issuer’s financial statements, or those of a significant subsidiary and on which the principal accountant expressed reliance in its report, has resigned, declined to stand for re-election or was dismissed, and if it has, certain specified disclosures must be provided;
  • Any disagreements or reportable events that occurred within the issuer’s latest two fiscal years and any interim period preceding the change of accountant; and
  • Whether, during the fiscal year in which the change of accountants took place or during the subsequent year, the issuer had similar, material transactions to those which led to the disagreements with the former accountants, and, if so, whether such transactions were accounted for or disclosed in a manner different from that which the former accountants would have concluded was required. If so, the issuer must also disclose the effect on the financial statements if the method that would have been required by the former accountants had been followed.

Foreign private issuers are required to allow the former accountant to review the issuer’s disclosures in response to the foregoing requirements, and the issuer is required to file, as an exhibit to the Form 20-F, a letter furnished by the former accountant in response to the issuer’s statements in connection with this new disclosure requirement. These disclosure requirements are the same as those applicable to U.S. companies.

Segment Data Disclosure.

The amendments to Form 20-F eliminate the narrow accommodation that previously permitted foreign private issuers that present financial statements otherwise fully in compliance with U.S. generally accepted accounting principles (U.S. GAAP) to omit segment data from their financial statements.

Other SEC-Related Changes Affecting the 2009 Form 20-F

Interactive Data for Financial Reporting. In December 2008, the SEC issued a rule requiring companies that file financial statements prepared in accordance with U.S. GAAP or International Financial Reporting Standards to also provide their financial statements in interactive data format using the eXtensible Business Reporting Language (XBRL). The SEC is phasing in the interactive financial data requirements over three years.

The first group of foreign private issuers required to file interactive financial data in their 2009 Form 20-F is composed of those issuers that are “large accelerated filers,”2 that prepare their financial statements in accordance with U.S. GAAP and that have a worldwide public float of their common equity above $5 billion as of the end of the second fiscal quarter of their most recently completed fiscal year.3 For next year’s Form 20-F, this requirement will apply to all foreign private issuers that are large accelerated filers that prepare their financial statements in accordance with U.S. GAAP.

New Oil and Gas Company Reporting Requirements. Also in December 2008, the SEC adopted new rules governing the reporting of a company’s oil and gas reserves in SEC filings. These requirements apply to the 2009 Form 20-F.4

Expiration of Transitional Provision for IAS 39 E.U. Carve-out. The SEC has permitted foreign private issuers incorporated in a European Union (E.U.) member state to file financial statements for their first two financial years that end after November 15, 2007, without a reconciliation to U.S. GAAP if the issuers prepared financial statements that complied with the E.U. carve-out from International Accounting Standard 39 (Financial Instruments: Recognition and Measurement). This accommodation has expired, and foreign private issuers that continue to use the E.U. carve-out will be required to provide a reconciliation of their financial statements to U.S. GAAP in their 2009 Form 20-F.

New York Stock Exchange Corporate Governance Changes. In their Form 20-F, foreign private issuers with securities listed on a national securities exchange in the United States are required to provide a concise summary of any significant ways in which their corporate governance practices differ from those followed by domestic companies under the listing standards of that exchange. In November 2009, the New York Stock Exchange (the “NYSE”) made certain revisions to its corporate governance listing standards. Accordingly, foreign private issuers should compare the revised NYSE standards to their corporate governance practices and determine whether additional disclosure would be required in the Form 20-F.5

Changes Affecting Future Form 20-Fs

The final set of amendments to Form 20-F that were adopted by the SEC in September 2008 will apply to foreign private issuers’ Form 20-Fs beginning with the first fiscal year ending on or after December 15, 2011 (i.e., the 2011 Form 20-F for calendar year-end companies). These include:

Accelerated Filing Deadline. All foreign private issuers will be required to file their annual reports on Form 20-F within four months after their fiscal year end. The SEC has noted that it intends to continue to monitor market developments to determine whether it would be appropriate to further accelerate the filing deadline.

Elimination of Limited U.S. GAAP Reconciliation. The amendments will eliminate the limited U.S. GAAP reconciliation option that is currently contained in Item 17 of Form 20-F and will instead require foreign private issuers to comply with the more extensive requirements contained in Item 18 of Form 20-F. This requirement will only apply to foreign private issuers that are not otherwise exempt from the U.S. GAAP reconciliation requirement.