John May introduced the following new Committee members: Tim Brown, Jason Cuomo and Rich Davisson.

On February 25, 2016, the FASB issued ASU 2016-02 (Leases, Topic 842). For public business entities, ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The transition guidance requires a modified retrospective approach for both lessees and lessors. Lessees will apply the new standard to capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in thefinancial statements (the date of initial application). Similarly for lessors, the new standard will apply to sales-type, direct financing, and operating leases existing at, or entered into after, the date of initial application. The modified retrospective approach does not require any transition accounting for leases that expired before the date of initial application.

The Committee and staff addressed the following transition questions related to the impact of the new standard’s implementation on the selected financial data table required by Item 301 of Regulation S-K:

As an example, consider a calendar year-end, SEC registrant that is neither an emerging growth company (EGC) nor a smaller reporting company (SRC). That registrant’s Form 10-K for the year ending December 31, 2019 will include financial statements for each of the three years in the period ending December 31, 2019 and selected financial data for each of the five years in the period ending December 31, 2019. In this example, January 1, 2017 would be the date of initial application since that date is the beginning of the earliest comparative period presented in the financial statements. Accordingly, the registrant would only apply the new standard to 2019, 2018 and 2017 in the selected financial data table. The selected financial data for 2016 and 2015 are not considered comparative financial statements and therefore do not change the date of initial application of the new leasing standard for purposes of GAAP. The 2016 and 2015 information included in the selected financial data table will be prepared using the pre-ASU 2016-02 lease accounting model. Consistent with Instruction 2 to S-K Item 301, the registrant must provide disclosure regarding the lack of comparability of the data presented in the selected financial data table (if applicable and material).

The Committee asked the staff whether the Fixing America’s Surface Transportation Act (FAST Act) initial filing accommodations are available to registrants other than EGCs and to forms other than Form S-1 and F-1. The staff noted that it is unable to extend the relief broadly beyond what is set forth in the January 2016 Interim Final Rule (which included a request for comment on this specific point). Registrants may contact the appropriate group in CF-Disclosure Operations to discuss questions regarding the timing of reviews.

The Committee asked whether the following guidance included in the staff’s April 29, 2014 Public Statement is still current:

The staff confirmed that this continues to reflect the staff’s position.

The Committee and staff discussed the March 17 updates to the Financial Reporting Manual (FRM), in particular the changes to Section 11100.2 – Supplementary Quarterly Financial Data. The new guidance indicates that a calendar year-end EGC that elects to adopt the ASU 2014-09 for the annual period beginning on January 1, 2019 and for interim periods beginning on January 1, 2020 does not need to accelerate application of the standard to interim periods presented in the 2019 Form 10-K for the sole purpose of presenting quarterly financial data (e.g., under Item 302 of Regulation S-K). The Committee and the staff discussed the fact that the sum of the quarterly financial data for the year of adoption would not equal the corresponding annual period information. The staff noted that EGCs could address this discrepancy by clearly disclosing why the sum of the 4 quarterly figures for 2019 presented in the 2019 and 2020 annual reports do not agree to the corresponding annual amounts or provide other disclosures the EGC deems appropriate.

Mr. Kronforst indicated that staff is continuing work on its disclosure effectiveness initiative from both a Regulation S-K and a Regulation S-X perspective.

The Committee and staff discussed non-GAAP financial measures in light of remarks made by Chair White at the 2015 AICPA National Conference on Current SEC and PCAOB Developments and in other recent forums. The staff echoed the Chair’s remarks, confirmed that this continues to be an area of staff focus and indicated that they expect that focus to continue.

The Committee and the staff discussed whether a registrant that adopts the new revenue standard on a modified retrospective basis may provide supplemental pro forma information in MD&A to show what revenue and cost of goods sold would have been in prior periods if the registrant had elected full retrospective adoption. The staff indicated that it is considering whether it is appropriate under current rules for registrants to provide supplemental pro forma information as referenced above, including consideration as to whether this information would be considered non-GAAP financial information subject to the applicable requirements.

The SEC recently implemented Section 71003 of the FAST Act by adding General Instruction II.C to Form S-1 and General Instruction II.E to Form F-1. General Instruction II.C of Form S-1 reads as follows ¹ :

“A registration statement filed (or submitted for confidential review) under Section 6 of the Securities Act (15 U.S.C. 77f) by an emerging growth company, defined in Section 2(a)(19) of the Securities Act (15 U.S.C. 77b(a)(19)), prior to an initial public offering may omit financial information for historical periods otherwise required by Regulation S-X (17 CFR Part 210) as of the time of filing (or confidential submission) of the registration statement, provided that:

1. The omitted financial information relates to a historical period that the registrant reasonably believes will not be required to be included in this Form at the time of the contemplated offering; and

2. Prior to the registrant distributing a preliminary prospectus to investors, the registration statement is amended to include all financial information required by Regulation S-X at the date of the amendment.”

The Committee asked whether pro forma financial information for a fiscal year that the registrant reasonably believes will not be included in the registration statement at the time of the contemplated offering could be omitted from the pre-effective filings/submissions. The following scenario was presented:

Consider a calendar year-end EGC that submits or files a registration statement on Form S-1 for its initial public offering of common stock in December 2015. The company expects to commence its offering in April 2016 when annual financial statements for 2015 and 2014 will be required. The company completed a significant business acquisition in March 2015.

Would the company be required to include pro forma financial statements pursuant to Article 11 of Regulation S-X for the year ended December 31, 2014 in the December 2015 registration statement (recognizing that the pro forma financial information included in the final prospectus will be for the year ended December 31, 2015)?

Prior to the implementation of Section 71003 of the FAST Act, the December 2015 Form S-1 would have been required to include Article 11 pro forma financial information for the year ended December 31, 2014 and for the nine-months ended September 30, 2015.

The staff indicated that it plans to update the Financial Reporting Manual to provide the staff’s views on this matter.