SEC 6010 NONFINANCIAL STATEMENT DISCLOSURES SEC REGULATION S-K .1 General .2 Regulation S-K disclosures common to SEC filings and annual shareholder reports .1 GENERAL Since its initial adoption, Regulation S-K (reprinted at SEC 6900) has evolved to become a complete compendium of non-financial statement disclosure requirements applicable to Securities Act and Exchange Act filings. In general, Regulation S-K is not self-executed: inclusion of the information specified in S-K is required only to the extent that a form or schedule governing a document specifically directs inclusion of the information prescribed by an item of S-K. There are two exceptions to this general rule. The SEC policies in the General section of S-K with respect to projections and securities ratings are applicable to all disclosure documents, without direct reference in the schedule or form to the specific provision of S-K setting forth such policies, and whether or not the schedule or form incorporates any item of S-K. Likewise, the Industry Guides (reprinted at SEC 6940) listed in S-K are applicable to the disclosure documents indicated in the list, whether or not the applicable form or schedule refers to S-K or to the Industry Guide. In the early 1980s, SEC implemented the "Integrated Disclosure" process. The first step in this process principally consisted of the adoption of the "Basic Information Package", i.e., those financial statements and related nonfinancial statement disclosures common to 1933 and 1934 Act filings and reports. Nonfinancial statement disclosures dealing with Selected Financial Data, Management's Discussion and Analysis (MDA) and Supplementary Financial Information (S-K Items 301, 303 and 302) became a part of the package and S-K Items 301 and 303 were concurrently adopted in their present form. FRR 36 issued in 1989 provides additional interpretive guidance as to the preparation of MDA (SEC 4930.501). In 1996, based on recommendations of the Task Force on Disclosure Simplification, the SEC amended various disclosure provisions of Regulation S-K. In 1997 the SEC adopted Item 305 of Regulation S-K which requires disclosure of certain quantitative and qualitative information about market risk exposures. In 1998, the SEC adopted Plain English disclosure rules which revised S-K Items 101, 501, 502, 503 and 508. In 1999, the SEC adopted Item 306 of Regulation S-K which requires the inclusion of an audit committee report in all proxy and information statements relating to votes of shareholders. In 1999, the SEC also adopted a new subpart of Regulation S-K, the 1000 series ("Regulation M- A"), which contains the disclosure requirements for issuer and third-party tender offers, tender offer recommendation statements and going-private transactions. When it was initially adopted in 1977, Regulation S-K was intended to be a repository of standard issuer-related disclosure requirements that would be used in multiple forms to be filed under both the Securities Act and the Exchange Act. The Regulation evolved into a centralized source of all content requirements for periodic reports and registration statements. Thus S-K serves as the central tool of integration through its application of standardized issuer-related disclosure provisions to both Securities Act and Exchange Act documents. S-K disclosures are organized into three broad categories: (1) Registrant-oriented, (2) Transaction-oriented and (3) General or Technically-oriented. These broad categories can be further divided into eleven categories: S-K Description Item # REGISTRANT ORIENTED Business Information S-K 101 Description of business S-K 102 Description of property S-K 103 Legal proceedings Specialized Operations S-K 801 Securities Act industry guides S-K 802 Exchange Act industry guides Financial Information S-K 301 Selected financial data S-K 302 Supplementary financial information S-K 303 Management's discussion and analysis of financial condition and results of operations S-K 304 Changes in and disagreements with accountants on accounting and financial disclosure S-K 305 Quantitative and qualitative disclosures about market risk S-K 306 Audit committee report Management and Certain Security Holders S-K 401 Directors, executive officers, promoters and control persons S-K 402 Executive compensation S-K 403 Security ownership of certain beneficial owners and management S-K 404 Certain relationships and related transactions S-K 405 Compliance with Section 16(a) of the Exchange Act Securities of Registrant S-K 201 Market price of and dividends on the registrant's common equity and related stockholder matters TRANSACTION ORIENTED Securities of Registrant S-K 202 Description of registrant's securities Registration Statement and Prospectus Provisions S-K 501 Forepart of registration statement and outside front page of prospectus S-K 502 Inside front and outside back cover pages of prospectus S-K 503 Prospectus summary, risk factors and ratio of earnings to fixed charges S-K 504 Use of proceeds S-K 505 Determination of offering price S-K 506 Dilution S-K 507 Selling security holders S-K 508 Plan of distribution S-K 509 Interests of named experts and counsel S-K 510 Disclosure of Commission position on indemnification for Securities Act liabilities S-K 511 Other expenses of issuance and distribution S-K 512 Undertakings Roll-up Transactions S-K 901 Definitions S-K 902 Individual partnership supplements S-K 903 Summary S-K 904 Risk factors and other considerations S-K 905 Comparative information S-K 906 Allocation of roll-up consideration S-K 907 Background of the roll-up transaction S-K 908 Reasons for and alternatives to the roll-up transaction S-K 909 Conflicts of interest S-K 910 Fairness of the transaction S-K 911 Reports, opinions and appraisals S-K 912 Source and amount of funds and transactional expenses S-K 913 Other provisions of the transaction S-K 914 Pro forma financial statements; selected financial data S-K 915 Federal income tax consequences TECHNICALLY ORIENTED General Non-disclosure oriented - Instructions expresses the Commission position on projections and forward looking information and the voluntary disclosure of security ratings. Miscellaneous S-K 601 Exhibits S-K 701 Recent sales of unregistered securities; use of proceeds from registered securities S-K 702 Indemnification of directors and officers Mergers and Acquisitions (Regulation M-A) S-K Definitions 1000 S-K Summary term sheet 1001 S-K Subject company 1002 information S-K Identity and background of 1003 filing person S-K Terms of the transaction 1004 S-K Past contacts, transactions, 1005 negotiations and agreements S-K Purpose of the transaction 1006 and plans or proposals S-K Source and amount of 1007 funds or other consideration S-K Interest in securities of the 1008 subject company S-K Persons/assets, retained, 1009 employed, compensated or used S-K Financial statements 1010 S-K Additional information 1011 S-K The solicitation or 1012 recommendation S-K Purposes, alternatives, 1013 reasons and effects in a going-private transaction S-K Fairness of the going- 1014 private transaction S-K Reports, opinions, 1015 appraisals and negotiations S-K Exhibits 1016 The organization of S-K complements the 1933 Act registration Forms S-1, S-2 and S-3 which recognize that registrants should include in the prospectus (other than by incorporation) differing levels of information when registering securities because of variations in the periods of time they have been subject to 1934 Act reporting and the extent to which their securities are "followed" in the marketplace by analysts and others. Under Integrated Disclosure, Regulation S-K also governs certain annual shareholder report disclosures. One Integrated Disclosure objective is to facilitate the use of annual shareholder reports in SEC filings. For example, the SEC encourages the incorporation by reference of all, or any portion, of the disclosures required by Parts I and II of Form 10-K from the shareholder report. Since Integrated Disclosure requires both the shareholder report and Form 10-K to contain identical disclosures prescribed by Part II of Form 10-K, use of the incorporation by reference technique would facilitate preparation of the Form 10-K. Certain Regulation S-K disclosure items are discussed in SEC 6010.2 below in terms of their applicability to annual shareholder reports. It must be understood that these S-K disclosures are the same as those required in 1933 and 1934 Act filings. Refer to SEC 5300 for a discussion of auditor involvement with nonfinancial statement disclosures. Regulation S-K should be read in conjunction with Regulation S-T, which governs the preparation and submission of documents in electronic format (see SEC 6960). Regulation S-K is reprinted in full at SEC 6900. .2 REGULATION S-K DISCLOSURES COMMON TO SEC FILINGS AND ANNUAL SHAREHOLDER REPORTS Regulation 14A of the 1934 Act contains rules with respect to registrants which solicit proxies (Rule 14a-3) or furnish information statements equivalent in disclosure content to proxy statements (Rule 14c-3). These rules also apply to annual shareholder reports for specified disclosures. (Rule 14a-3 is reprinted at SEC 7200; Rule 14c-3 is substantially equivalent.) Rules 14a-3 and 14c-3 require shareholder reports to include the disclosures required by the following Regulation S-K items: .21 S-K Item 201 - Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters. Item 201 requires disclosure of: 1. The principal trading market or markets for a registrant's common stock and the quarterly market prices during the past two years and any subsequent interim period for which financial statements are included. 2. The approximate number of common stockholders as of the most recent practicable date. 3. The frequency and amount of any dividends declared during the past two years and any subsequent interim period for which financial statements are required to be presented. 4. Any restriction on a registrant's present or future ability to pay dividends. 5. For foreign registrants, any governmental restrictions on the export or import of capital, currency or dividend remittance restrictions, taxation of dividends to U.S. holders, and information as to ADR holdings and arrangements. .22 S-K Item 301 - Selected Financial Data This item requires in comparative columnar form a Five-Year Summary of Selected Financial Data which will highlight significant trends in a registrant's financial condition and results of operations. This information is required on a consolidated basis only. The minimum disclosures under Item 301 are: 1. Net sales or operating revenues 2. Income (loss) from continuing operations 3. Income (loss) per common share from continuing operations 4. Total assets 5. Long-term obligations, including long-term debt, capital leases and redeemable preferred stock as defined in S-X Rule 5-02.28. 6. Cash dividends declared per common share Any additional data necessary to highlight trends should be given. At its option, a registrant may furnish any additional tabular data it considers significant. .23 S-K Item 303 - Management's Discussion and Analysis of Financial Condition and Results of Operations In 1980, the SEC adopted an entirely restructured Management's Discussion and Analysis as part of Integrated Disclosure. See FRP Section 501 (SEC 4930.501) for discussion of SEC interpretive views on MDA presentations including FRR 36 issued in 1989. Details are discussed at SEC 6200. In summary, S-K Item 303 requires a registrant to: 1. Discuss financial condition, changes in financial condition and results of operations for the most recent three fiscal years. 2. Provide information with respect to liquidity, capital resources and results of operations by identifying capital needs, commitments, trends, uncertainties, material changes and effects of inflation. 3. Discuss, on an optional basis, forward-looking information. .231 Regulation S-K Item 303 - Effects of Inflation In 1987 the SEC adopted final rules governing the disclosure of the effects of inflation and other changes in prices. These rule amendments were made as a result of the FASB's issuance of FAS 89: "Financial Reporting and Changing Prices," which made voluntary the previous FAS 33 requirement that certain publicly traded companies disclose supplemental information of the effects of inflation and other changes in prices. These rule amendments delete references to the previous FASB requirements, while continuing to encourage registrants to voluntarily present quantified supplemental disclosures on the effects of inflation and other price changes. However, Regulation S-K continues to require registrants to discuss, where material, the impact of inflation and changing prices on their financial statements in Management's Discussion and Analysis. These rules provide management with considerable flexibility in developing disclosure that is most appropriate for their particular circumstances. .24 S-K Item 302 - Supplementary Financial Information The disclosure requirements comprising S-K Item 302 are: 1. Quarterly Financial Data - All registrants, except small business issuers and foreign private issuers, that have securities registered pursuant to sections 12(b) (other than mutual life insurance companies) or 12(g) of the Exchange Act must provide the selected quarterly financial data. See SEC 4300.1 for Firm policy regarding association with S-K Item 302, Supplementary Financial Information. 2. Information about oil and gas producing activities specified in FAS 69 (paragraphs 9-34), where such activities are "significant" as defined under paragraph 8 of that standard. .241 Quarterly Financial Data Required by Regulation S-K Item 302(a) All registrants, except small business issuers and foreign private issuers, that have securities registered pursuant to sections 12(b) (other than mutual life insurance companies) or 12(g) of the Exchange Act must provide the selected quarterly financial data required by Regulation S-K Item 302(a). Quarterly data is required only for the two latest fiscal years in shareholder reports and Form 10-K. For 1933 Act filings, any subsequent quarterly periods must be presented. The quarterly data disclosure includes net sales, gross profit (defined as net sales less costs and expenses associated directly with or allocated to products sold or services rendered), income (loss) before extraordinary items and cumulative effect of a change in accounting, per share data based on such income (loss), and net income (loss) for each full quarter within the two most recent fiscal years and any subsequent interim period for which income statements are presented. As an administrative practice, the SEC also requires that net income per share be disclosed. When the data varies from amounts previously reported on Form 10-Q, a reconciliation to amounts previously reported is required along with a description of the reason for the difference. However, if a company filed a Form 10-Q/A amending a previously filed Form 10-Q, no reconciliation is required if the company also published quarterly reports to shareholders and previously made detailed disclosure to shareholders in such reports of the change reported on Form 10-Q/A (see SAB Topic 6-G.1a, Question 7 at SEC 4940). The registrant must describe the effect of any disposal of segments of a business and extraordinary, unusual, or infrequently occurring items recognized in each quarter as well as the aggregate effect of, and the nature of, year-end or other adjustments which are material to the results of a quarter. .2411 Auditor Involvement with Quarterly Financial Data In December 1999 the SEC amended Rule 10-01(d) of Regulation S-X and Item 310(b) of Regulation S-B to require that a company's interim financial statements be reviewed by an independent public accountant prior to the Company's filing its Form 10-Q or 10-QSB with the SEC. Regulation S-K Item 302 states, in effect, that if the primary financial statements to which the quarterly information relates have been reported on by an accountant, appropriate professional standards and procedures, as enumerated in the Statements of Auditing Standards issued by the Auditing Standards Board of the American Institute of Certified Public Accountants, shall be followed by the reporting accountant with regard to the quarterly data. SAS 71/AU 722, "Interim Financial Information," and PwC Audit database 10.2, "Reviews of interim financial information," set forth appropriate professional standards and procedures and Firm policy to be followed for interim financial information disclosed in SEC and shareholder reports. (See also SEC 5300.3 and SEC 2300.97.) .25 Regulation S-K Item 304 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Whenever the principal accountant (or an independent accountant engaged to audit a significant subsidiary and on whom the principal accountant expressed reliance in its report) of an SEC registrant has resigned (or indicated it has declined to stand for re-election) or was dismissed, the registrant is required to disclose information required by S-K Item 304(a). Typically, the disclosure required by S-K Item 304(a) is provided on Form 8-K (see SEC 3150.6 for a detailed discussion of such disclosure requirements). The disclosure required by Item 304(a) need not be repeated in subsequent filings, except that it must be provided (notwithstanding prior disclosure) if required pursuant to Item 9 of Schedule 14A, "Independent Public Accountants," under the proxy rules. Disclosure under S-K Item 304(b) may be required in either 1933 or 1934 Act filings. S-K Item 304(b) generally states that if during the fiscal year in which the change in accountants took place or during the subsequent fiscal year, there have been transactions or events similar to those which involved a disagreement or reportable event and such transactions or events were material and were accounted for or disclosed in a manner different from that which the former accountant would have concluded was required, the registrant shall state the existence and nature of the disagreement or reportable event and also state the effect on the financial statements if reported in the manner required by the former accountant. Disclosure is not required, however, if the method asserted by the former accountant ceased to be generally accepted because of subsequently issued authoritative standards or interpretations. It should be noted that compliance with S-K Item 304 is required for initial public offerings on Form S-1. .26 Regulation S-K Item 305 - Quantitative and Qualitative Disclosures About Market Risk In 1997 the SEC adopted new rules that require disclosures of certain quantitative and qualitative information about market risk exposures. The SEC staff also published a release that contains frequently asked questions and answers about the new rules. See SEC 6200.53-54 and SEC 6900.
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