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S-X 10-01(b)(1) requires reporting entities to include in their interim financial statements separate summarized income statement information for each equity method investee for which (1) separate financial statements of the investee would be required for annual periods, and (2) the investee would be required to file quarterly financial information in Form 10-Q if the investee were a registrant (e.g., the investee would not be a foreign private issuer if it were a registrant).
As discussed in SEC FRM 2420, reporting entities should use the investment and income tests in S-X 1-02(w) (see FSP 10.6.1), substituting 20% for 10%, to determine whether "separate financial statements would otherwise be required for annual periods." The investment tests would be based on the two balance sheets included in the Form 10-Q and the income tests would be based on the year-to-date income statements included in the Form 10-Q.
The minimum disclosures below must be included for each significant investee and may be aggregated with similar minimum disclosures for other significant investees. The information must be presented for both the current and prior comparative year-to-date periods included in the interim financial statements:
  • Net sales or gross revenues
  • Gross profit (or, alternatively, costs and expenses applicable to net sales or gross revenues)
  • Income or loss from continuing operations
  • Net income or loss, and
  • Net income or loss attributable to the entity
S-X 10-01(b)(1) requires disclosure of income statement information in the interim financial statements, whereas the annual requirements under S-X 4-08(g) require summarized financial information for both the balance sheet and income statement. Additionally, interim disclosures are only required for the investees that meet the significance tests, whereas on an annual basis a reporting entity must disclose summarized financial information for all equity method investees once the significance test is triggered. As discussed in FRM 2420, registrants should omit income averaging when implementing the income test for interim financial statements.
There are distinct requirements for a reporting entity when assessing the significance of equity method investments and unconsolidated investments for interim periods under S-X 10-01(b)(1) and annual periods under S-X 4-08(g) and S-X 3-09. For example, a reporting entity may be required to include S-X 10-01(b)(1) disclosures for an interim period and not be required to provide financial statements of the investee under S-X 3-09 for the annual periods if significance changes by year end given that significance tests include different information (e.g., year-to-date income statement for the interim period as compared to the income statement for the full annual period).

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