Item 11(b) of Form S-3 requires the inclusion of restated financial statements when there has been a change in accounting principles that requires a material retroactive restatement of financial statements. The SEC Staff has recently shared with the SEC Regulations Committee its views regarding how the first quarter adoption of the following recent accounting pronouncements should be considered when filing a registration statement on Form S-3 (including any amendments) that incorporates the most recent annual report on Form 10-K in addition to financial statements for an interim period that includes the date of adoption:
- FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51, changes the way noncontrolling interests (previously referred to as minority interests) are presented throughout the financial statements. The SEC staff has indicated that once a company has adopted Statement No. 160 and has filed interim financial statements for a period that includes the date of adoption, Item 11(b) of Form S-3 would require a registrant to recast its prior-period annual financial statements that are incorporated by reference into a registration statement to reflect a material retrospective application of Statement No. 160.
- FASB Staff Position (FSP) No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled upon Conversion (Including partial Cash Settlement), addresses the accounting for convertible debt instruments that, by their terms, may be settled in cash or other assets upon conversion, including partial cash settlement. The SEC staff has indicated that once a company has adopted FSP No. APB 14-1 and has filed interim financial statements for a period that includes the date of adoption, Item 11(b) of Form S-3 would require a registrant to recast its prior period annual financial statements that are incorporated by reference into a registration statement to reflect a material retrospective application of FSP No. APB 14-1.
- FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and must be included in the computation of earnings per share (EPS) pursuant to the two-class method described in Statement No. 128, Earnings per Share. With respect to registration statements after the registrant has filed interim financial statements for a period that includes the date of adoption of the FSP, the SEC staff will allow a registrant to follow what it calls the “accommodation approach”, as is allowed for certain other subsequent events, such as stock splits. Under the accommodation approach, if the registrant and its registered independent public accounting firm conclude that the financial statements being incorporated by reference do not require revision as a result of the application of FSP No. EITF 03-6-1, and the independent auditor consents to the use of its report without such revision, the registrant may disclose EPS as revised for FSP No. EITF 03-6-1 in the selected financial data included in the registration statement, or in a Form 10-Q or Form 8-K incorporated by reference.
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