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SEC rules provide significance thresholds for determining whether an SEC registrant is required to provide summarized financial information under S-X 4-08 and/or full separate financial statements under S-X 3-09 relating to an unconsolidated subsidiary or equity method investee. The rules are regarded by the SEC as an interpretation of ASC 323-10-50-3, which states that summarized financial information or separate statements may be required for equity investees if the investments are material in relation to the investor’s financial position or results of operations.
S-X 4-08(g) requires reporting entities to disclose summarized financial information of unconsolidated subsidiaries and equity method investees for all periods presented if any one of the three significant subsidiary tests outlined in S-X 1-02(w) exceeds 10% on an individual basis or on an aggregated basis for any combination of unconsolidated subsidiaries or equity method investees for any of the periods presented.
In accordance with FRM 2420.5, if separate financial statements of significant investees are included in an annual report to shareholders or a Form 10-K (as required by S-X 3-09), the summarized data required by S-X 4-08(g) is not required for those entities. In some cases, the financial statements required by S-X 3-09 are not filed concurrent with the Form 10-K, but rather are filed by amendment at a later date. In such cases, the SEC registrant may not omit the summarized financial information for the significant investees from the financial statements in its initial Form 10-K filing.
If required, the summarized financial information disclosures must include, at a minimum, the following financial statement captions:
  • Current assets
  • Noncurrent assets
  • Current liabilities
  • Noncurrent liabilities
  • Redeemable preferred stock
  • Noncontrolling interest
  • Net sales or gross revenue
  • Gross profit (or alternatively, costs and expenses applicable to net sales or gross revenues)
  • Income or loss from continuing operations
  • Net income or loss
  • Net income or loss attributable to the entity
If the balance sheet is not classified, information should be provided that indicates the nature and amount of major components of assets and liabilities. In addition, for specialized industries, other information may be substituted for sales and related costs if they are more meaningful.
Once the significance test is triggered, summarized financial information for all equity investees must be disclosed in the aggregate or individually (not just those that are significant individually). In other words, there is not a materiality threshold for individual entities that would exempt an investee from being included in the disclosures. In limited circumstances, the exclusion of such data may be appropriate for certain entities where it is impractical to gather the information and such information is de minimis. Although aggregation is generally permitted, the SEC staff has, in certain circumstances, issued comments that it believes aggregation is misleading or suppresses important information. In those cases, the SEC staff has requested that certain investees be presented separately. Separate information may be requested for individual investees that are significant quantitatively or qualitatively. The SEC staff has indicated that the disclosure requirements of S-X 4-08(g) and S-X 3-09 also apply to investments accounted for using the fair value option if the investment would otherwise have been accounted for using the equity method.
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