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2405 Required Separate Financial Statements of Equity Method Investees [S-X 3-09]
us SEC - Financial Reporting Manual
2405.1 Applicability of S-X 3-09 to Smaller Reporting Company Registrants - S-X 3-09 does not apply to smaller reporting company registrants [as defined in S-K 10(f)]. However, S-X 8-03 contains requirements for smaller reporting company registrants to provide summarized financial data of equity method investees. See Section 2420.
2405.2 " Subsidiaries not consolidated" - Separate Financial Statements
S-X 3-09 requires that if any of the conditions set forth in S-X 1-02(w) exceed 20 percent, separate annual financial statements for each subsidiary not consolidated should be provided. Since the issuance of S-X 3-09 and S-X 4-08(g), U.S. GAAP has been revised to require consolidation by a parent of a "subsidiary." Therefore, the requirement in S-X 3-09 related to "subsidiaries not consolidated" no longer has practical application. The remaining discussion in this Section 2400 "Equity Method Investments, including Fair Value Option" relates to "50% or less-owned persons," which are discussed in Section 2405.3.
NOTES to SECTION 2405.2
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2405.3 "50% or less-owned persons" - Separate Financial Statements of Equity Investments Accounted for using the Equity Method
(Last updated: 6/30/2013)
- The staff interprets "50% or less-owned persons" to refer to an investment accounted for using the equity method (even if voting ownership exceeds 50%).
- S-X 3-09 requires the registrant to file separate annual financial statements for each significant equity method investee for which either the income or the investment test set forth in S-X 1-02(w) exceeds 20 percent for any of the registrant's fiscal years required to be presented in the filing. See Section 2410 for implementation points on measuring significance.
- If significance is met for any fiscal year presented, the registrant should file the investee's separate annual financial statements for the same periods that would be required under S-X 3-01 and 3-02 if the investee were a registrant, except as noted in Section 2405.4, which relates to the effect of commencing or ceasing use of the equity method, and Section 10220.5, which relates to registrants that are EGCs. The investee's separate annual financial statements must be audited for those periods where either the income or the investment test in S-X 1-02(w) exceeds 20 percent. Other periods presented may be unaudited. For example, if the highest significance of an equity method investment was 15% in 2020, 30% in 2021, and 19% in 2022, the investee's financial statements must be audited for 2021, but may be unaudited for 2020 and 2022 (assuming that the two exceptions noted above do not apply such that three years of the investee's financial statements are required).
- S-X 3-09 does not require separate interim financial statements. Instead, S-X 10-01(b)(1) requires certain summarized interim statement of comprehensive income information of the investee if it is significant. See Section 2420.
NOTES to SECTION 2405.3
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2405.4 Effect of Commencing or Ceasing Use of Equity Method on S-X 3-09 Financial Statements
(Last updated: 6/30/2010)
For purposes of S-X 3-09, the investee's separate annual financial statements should only depict the period of the fiscal year in which it was accounted for by the equity method. However, CF-OCA will, upon a written request, consider accepting the investee's financial statements for the whole year, if the registrant demonstrates that it is an undue hardship to obtain investee's financial statements through the date it ceases to be accounted for under the equity method.
NOTE to SECTION 2405.4
As noted in Section 2010.3, the acquisition of an investment accounted for using the equity method represents the acquisition of a business for reporting purposes. Consequently, the acquisition is subject to S-X 3-05. Under S-X 3-05, the investee's financial statements would be required for periods prior to the acquisition if S-X 3-05 significance is met. (Last updated: 6/30/2010)
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2405.5 Change from Cost Method to Equity Method - If a registrant's financial statements are retroactively adjusted in accordance with ASC 323-10-35-33 to reflect equity method accounting for an investment previously accounted for under the cost method, S-X 3-09 financial statements, or summarized financial information required by S-X 4-08(g), S-X 8-03, or S-X 10-01(b)(1), may be required for periods in which the cost method was previously used if the significance tests are met.
2405.6 Lower Tier Investees - S-X 3-09 applies to an investee accounted for by the equity method by an investee of the registrant. To determine whether separate financial statements of an investee accounted for by the equity method by an investee of the registrant are required, the significance test should be computed based on the materiality of the lower tier investee to the registrant consolidated. [SAB Topic 6K.4.a.]
2405.7 S-X 3-09 Financial Statement Due Date - Annual Reports - General The filing date for S-X 3-09 financial statements differs depending primarily on four factors:
- whether the registrant is a domestic issuer or a foreign private issuer;
- the investee's fiscal year end;
- both the investee's and the registrant's filing status (e.g., non-accelerated filer, accelerated filer or large accelerated filer), and
- whether or not the investee is a foreign business. See definition in S-X 1-02(l).
2405.8 S-X 3-09 Financial Statement Due Date - Annual Reports — Domestic Issuer AND Domestic Investee
The financial statements required by S-X 3-09 must be filed within the following number of days after the investee's fiscal year-end:
- 60 days if the investee is a large accelerated filer
- 75 days if the investee is an accelerated filer; or
- 90 days for all other investees.
However, if the number of days after the investee's fiscal year-end is before the due date of the registrant's Form 10-K, then the S-X 3-09 financial statements need not be filed prior to the due date of the registrant's Form 10-K. Also, if the investee's financial statements are due after the registrant's Form 10-K is required to be filed (e.g., registrant is an accelerated filer, but investee is non-accelerated and both have the same year end), the financial statements required by S-X 3-09 should be filed in an amendment to the registrant's Form 10-K.
NOTE to SECTION 2405.8
Exchange Act Rule 12b-25(f) indicates that the 15 calendar day extension provided for the registrant to file its Form 10-K is not applicable to S-X 3-09 financial statements to be filed by amendment to a Form 10-K. See the Division of Corporation Finance's C&DIs for Exchange Act Rules, Question 135.01.
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2405.9 S-X 3-09 Financial Statement Due Date - Annual Reports — Foreign Private Issuer AND Domestic Investee
Financial statements required by S-X 3-09 may be filed in an amendment to the Form 20-F within the following number of days after the investee's fiscal year end: [S-X 3-09(b)(2)]
- 60 days if the investee is a large accelerated filer
- 75 days if the investee is an accelerated filer; or
- 90 days for all other investees.
However, if the number of days after the investee's year-end noted above is before the due date of the Form 20-F, then the S-X 3-09 financial statements need not be filed prior to the due date of the Form 20-F.
2405.10 S-X 3-09 Financial Statement Due Date - Annual Reports — Investee is a Foreign Business
(Last updated: 3/31/2009)
S-X 3-09 financial statements of a foreign business must be filed within six months after the investee's year-end, but in no event earlier than the due date of the registrant's annual report (i.e., Form 10-K or 20-F). [S-X 3-09(b)(1) and (b)(2)] If the investee's financial statements are due after the registrant's annual report is required to be filed, the financial statements required by S-X 3-09 should be filed in an amendment to the registrant's annual report.
NOTES to SECTION 2405.10
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2405.11 Updating S-X 3-09 Financial Statements - Registration or Proxy Statement If the investee is a foreign business, S-X 3-09 financial statements may not be older than 15 months. [S-X 3-12(f) references Item 8.A.4. Form 20-F] If the investee is not a foreign business, S-X 3-09 financial statements must be updated within the following number of days after the investee's fiscal year end: [S-X 3-09(b) references S-X 3-01 and S-X 3-02]
- 60 days if the investee is a large accelerated filer
- 75 days if the investee is an accelerated filer; or
- 90 days for all other investees.
NOTES to SECTION 2405.11
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