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12.13 Guarantees of a reporting entity’s debt by others
Publication date: 31 May 2022
us Financial statement presentation guide
Guarantees of debt are subject to the same disclosures as other guarantees in ASC 460, Guarantees. Guarantees are addressed in FSP 23.
Guarantees of a reporting entity's debt by its principal stockholders or other related parties require incremental disclosure as related party transactions under ASC 850-10-50. Presentation and disclosure requirements associated with related party transactions are addressed in FSP 26. Although not in the scope of ASC 460, we believe a reporting entity should consider disclosing guarantees obtained by the reporting entity (as opposed to those made by it), as such arrangements may indicate that the reporting entity is not able to obtain financing without the guarantees of others.
12.13.1 Issuers of guaranteed securities
SEC registrants may issue registered debt that is guaranteed by one or more subsidiaries, or SEC registrant-parent companies may serve as a guarantor for securities issued by one or more subsidiaries. Under the US securities laws, guarantees of securities are also considered securities, and therefore may be subject to the SEC's registration and reporting requirements.
Regulation S-X Rule 13-01 generally requires a registrant to make specified disclosures for each guaranteed security that is (i) subject to Section 13(a) or 15(d) of the Securities Exchange Act or (ii) being registered under the Securities Act, for which the registrant is the parent company (as defined in Regulation S-X Rule 3-10(b)(1)) of one or more subsidiaries that issue or guarantee the guaranteed security.
Regulation S-X Rule 13-01 generally requires every issuer of a registered security that is guaranteed and every guarantor of a registered security to file the financial statements required for a registrant. However, Regulation S-X Rule 13-01 provides relief that may result in significantly reduced reporting obligations (i.e., condensed consolidating financial information or narrative disclosure) if certain criteria are met.
The disclosure requirements of Regulation S-X Rule 13-01 are set forth in Regulation S-X Rule 13-01(a) and include both non-financial disclosures (Regulation S-X Rule 13-01(a)(1)-(3)) and financial disclosures (Regulation S-X Rule 13-01(a)(4) and Regulation S-X Rule 13-01(a)(5)). The parent company may elect to provide the disclosures in a footnote to its consolidated financial statements or in MD&A.
12.13.2 Non-financial disclosures required by S-X 13-01(a)(1)-(3)
The non-financial disclosures include a description of (i) the issuers and guarantors, (ii) the terms and conditions of the guarantees, and (iii) how the structure of the guarantees and other factors may affect payment. Additionally, each subsidiary issuer/guarantor is required to be identified in an exhibit to the applicable filing (see Regulation S-K Item 601(b)(22)).
12.13.2.1 Financial disclosures required by S-X 13-01(a)(4)
Financial disclosures include summarized financial information described in Regulation S-X Rule 1-02(bb)(1) of each issuer and guarantor of the guaranteed security with an accompanying note that briefly describes the basis of presentation. The summarized financial information required by Regulation S-X Rule 13-01(a)(4) must exclude subsidiaries that are not issuers or guarantors, even if an issuer or guarantor would otherwise consolidate such non-issuer/non-guarantor subsidiaries.
In addition to the line items specified by Regulation S-X Rule 1-02(bb)(1), Regulation S-X Rule 13-01(a)(4)(iii) requires separate line items for an issuer’s or guarantor’s amounts due from, amounts due to, and transactions with (i) subsidiaries that are not issuers or guarantors and (ii) related parties.
The summarized financial information of each issuer and guarantor that is consolidated in the parent company’s financial statements may generally be presented on a combined basis with summarized financial information of the parent company with appropriate eliminations.
12.13.2.2 Financial disclosures required by S-X 13-01(a)(5)
Disclosure of pre-acquisition summarized financial information is required in a Securities Act registration statement filed in connection with the offer and sale of a guaranteed security if:
- the parent company acquired a significant business after the date of the parent company’s most recent balance sheet include in its consolidated financial statements, and
- the acquired business, one or more of the acquired business’s subsidiaries, or the acquired business and one or more of its subsidiaries are issuers or guarantors of the guaranteed securities.
If the pre-acquisition summarized financial information is required, it would follow the form, content, and periods specified in Regulation S-X Rule 13-01(a)(4).
Archive- 12.13.2.3 Periods for which summarized financial information is required
Summarized financial information is required as of and for the most recently ended fiscal year and year-to-date interim period included in the parent company’s consolidated financial statements. Figure FSP 12-2 illustrates information that is required in a filing for a domestic calendar year-end SEC registrant parent company that is required to include the Regulation S-X Rule 13-01 disclosure in its filings.
Figure FSP 12-2
Required S-X 13-01 disclosure for a domestic calendar year-end SEC registrant
Required S-X 13-01 disclosure for a domestic calendar year-end SEC registrant
Filing |
Required summarized financial information |
Form 10-K for the year-ended December 31, 20X1
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As of and for the year ended December 31, 20X1
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Form 10-Q for the nine-month period ended September 30, 20X2
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As of December 31, 20X1 and as of and for the nine-month period ended September 30, 20X2
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Form S-3 filed to register the offer and sale of the securities subject to Regulation S-X Rule 13-01 by a calendar year-end parent company on September 15, 20X2
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As of and for the year ended December 31, 20X1 and as of and for the six-month period ended June 30, 20X2
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