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Highlights of the November 3, 2021 virtual joint meeting of the IPTF and SEC Staff
us SEC - IPTF Committee
Joint Meeting with SEC Staff
Held Virtually on November 3, 2021
Held Virtually on November 3, 2021
NOTICE:
The Center for Audit Quality (CAQ) SEC Regulations Committee and its International Practices Task Force (the Task Force or IPTF) meet periodically with the staff of the SEC (the SEC staff or staff) to discuss emerging financial reporting issues relating to SEC rules and regulations. The purpose of the following highlights is to summarize the issues discussed at the meetings. These highlights have not been considered or acted on by senior technical committees of the AICPA and do not represent an official position of the AICPA or the CAQ. As with all other documents issued by the CAQ, these highlights are not authoritative and users are urged to refer directly to applicable authoritative pronouncements for the text of the technical literature. These highlights do not purport to be applicable or sufficient to the circumstances of any work performed by practitioners. They are not intended to be a substitute for professional judgment applied by practitioners
These highlights were prepared by a representative of the CAQ who attended the meeting and do not purport to be a transcript of the matters discussed. The views attributed to the SEC staff are informal views of one or more of the staff members present, do not constitute an official statement of the views of the Commission or of the staff of the Commission and should not be relied upon as authoritative. Users are urged to refer directly to applicable authoritative pronouncements for the text of the technical literature.
As available on this website, highlights of Joint Meetings of the SEC Regulations Committee and its International Practices Task Force and the SEC staff are not updated for the subsequent issuance of technical pronouncements or positions taken by the SEC staff, nor are they deleted when they are superseded by the issuance of subsequent highlights or authoritative accounting or auditing literature. As a result, the information, commentary or guidance contained herein may not be current or accurate and the CAQ is under no obligation to update such information. Readers are therefore urged to refer to current authoritative or source material.
These highlights were prepared by a representative of the CAQ who attended the meeting and do not purport to be a transcript of the matters discussed. The views attributed to the SEC staff are informal views of one or more of the staff members present, do not constitute an official statement of the views of the Commission or of the staff of the Commission and should not be relied upon as authoritative. Users are urged to refer directly to applicable authoritative pronouncements for the text of the technical literature.
As available on this website, highlights of Joint Meetings of the SEC Regulations Committee and its International Practices Task Force and the SEC staff are not updated for the subsequent issuance of technical pronouncements or positions taken by the SEC staff, nor are they deleted when they are superseded by the issuance of subsequent highlights or authoritative accounting or auditing literature. As a result, the information, commentary or guidance contained herein may not be current or accurate and the CAQ is under no obligation to update such information. Readers are therefore urged to refer to current authoritative or source material.
I. Attendance
Task Force Members | Observers | Guests |
Timothy Brown, Chair (KPMG)
Scott Ruggiero, Vice-Chair (GT)
Renaud Cambet (KPMG)
Wayne Carnall (PwC)
Rich Davisson (RSM-US)
Steven Jacobs (EY)
Grace Li (BDO)
Kathleen Malone (Deloitte)
Paul Manos (KPMG)
Alan Millings (EY)
Ignacio Perez Zaldivar (Deloitte)
Guilaine Saroul (PwC)
Julie Valpey (BDO)
| SEC staff from the Division of Corporation Finance and Office of the Chief Accountant
Annette Schumacher Barr (CAQ staff)
Carolyn Hall (CAQ staff)
| Cindy Williams (GT)
|
II. Considerations when a registrant provides interim financial information in a registration statement solely to comply with Form 20- F Item 8.A.5
In previous meetings, the Task Force discussed a number of reporting scenarios in which a company includes interim financial statements or financial information for a period more current than required to meet the age of financial statements requirements in Form 20-F Item 8.A.5 (“more current financial information”).
The Task Force asked the staff whether it would be appropriate to apply a principle that the requirements of Item 8.A.5 of Form 20-F are not deemed to trigger any SEC requirements to update other disclosures included or incorporated into the registration statement beyond the more current financial information. The Task Force and staff discussed a scenario in which a registrant provides interim financial information in a registration statement solely to comply with the Form 20-F Item 8.A.5 requirement to provide more current published financial information and such published financial information is prepared in accordance with the same accounting standards as the annual audited financial statements filed (or being filed) with the SEC. The Task Force asked the staff whether it would be appropriate to conclude that in such a scenario, and as a general concept, other SEC disclosure requirements (e.g., MD&A and pro forma financial information) do not require updating when complying with the Form 20-F Item 8.A.5 requirements.
The staff indicated that registrants with fact patterns different from those addressed in prior meetings should consult with the staff. The staff also noted that there have been a few recent fact patterns of this scenario. In those fact patterns, the inclusion of financial information more current than the required interim financial information requirement did not trigger an update of MD&A and/or pro forma financial information. However, the staff notes this may not be the conclusion in all fact patterns.
III. The requirements for disclosure of changes in a registrant’s certifying accountant in an IPO or SPAC merger where only a statutory audit has historically been performed (perhaps under a different basis of accounting and/or different auditing standards were used)
Item 4 of Form F-1 and Item 14 of Form F-4 require the new registrant to disclose the information required by Item 16F of Form 20-F. Item 16F requires the registrant to provide disclosures if there has been a change in the registrant’s certifying accountant during the most recent two years and subsequent interim period. In many cases, the registrant may have historically engaged an accountant (that may or may not be registered with the PCAOB) to audit local statutory accounts, typically under different auditing standards and possibly prepared using a different accounting framework. The new registrant may then engage a different firm to conduct the PCAOB audit of the financial statements to be included in the Forms F-1/F-4. The audit firm engaged to audit the statutory accounts may or may not then be dismissed.
The Task Force and staff discussed the following scenarios, among others:
- Whether the registrant, upon dismissal of the statutory audit firm, must provide the disclosures required by Item 16F to report the dismissal or resignation of the statutory auditor and engagement of the firm for purposes of the SEC filing.
- Whether the registrant would be required to consider the disclosure requirements of Item 16F in its entirety or only Item 16F(a)(2) if the statutory auditor continues to perform its statutory audit in parallel with the audit of the financial statements to be included in the Form F-1/F-4 by the newly engaged firm.
- Whether the conclusions regarding required change in auditor disclosures by a new registrant would be impacted by 1) the registration status of the statutory auditor, 2) its ability to report on the GAAP used in the statutory financial statements or 3) its ability to use the GAAS required for the statutory audit report. The group also discussed whether the same concepts would apply to an existing registrant filing a new registration statement or a Form 20-F.
The staff indicated it had not received these questions in recent years from registrants; however, affected issuers may contact CF-OCA to discuss their particular fact pattern.
IV. SEC staff observations re comment letters on China-based registrants
The Task Force and staff discussed various issues regarding China-based entities. Subsequent to the meeting, on December 20, 2021, the Staff issued a sample letter to China-based companies. This guidance clarified and modified a number of the issues that were discussed at the IPTF meeting, including the columns and level of detail used in the preparation of the consolidating schedules and the presentation of intercompany activity.
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