Tag Archives: FPI

The Application of IFRS 19, Subsidiaries without Public Accountability in SEC Filings

Reporting,

Cheryl Linthicum, Associate Director at SEC Institute wrote this post.  You may want to check out the foreign private issuer workshops she and Gary Brown will be leading this year at https://www.pli.edu/programs/seci

IFRS 19, adopted in May 2024, permits financial statements of certain subsidiaries of reporting companies to provide reduced disclosures when applying recognition, measurement, and presentation requirements of IFRS.  On May 17, 2024, SEC Chief Accountant Paul Munter and Corporation Finance Division Director Erik Gerding issued a Statement for foreign private issuers (FPIs) to consider making additional disclosures when including financial statements that apply IFRS 19.

Foreign private issuers are permitted to file financial statements in accordance with either U.S. GAAP or IFRS as issued by the IASB.  A reporting FPI would not be allowed to apply IFRS 19.  However, it is possible in some situations, such as an acquisition of a subsidiary of another company where the subsidiary applies IFRS 19, that financial statements subject to the reduced disclosure requirements of IFRS 19 could be included in an SEC filing.

The SEC’s statement reminds foreign private issuers that in such a situation:

    • The scope of IFRS 19 is limited to entities that do not have public accountability;
    • There may be situations where financial statements that apply IFRS 19 are included in filings with the SEC;
    • In these situations, the staff believes that the requirements of IFRS 19 and the SEC’s disclosure requirements are likely to necessitate additional disclosure in financial statements filed with the SEC; and
    • SEC staff in the Office of the Chief Accountant and in the Division of Corporation Finance are committed to assisting registrants and are available for consultation.

XBRL for Foreign Private Issuers Using IFRS

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By George M. Wilson & Carol A. Stacey

Foreign Private Issuers (FPI’s) who file using IFRS have been in a conundrum about XBRL because there was no usable IFRS taxonomy. The SEC excepted these FPI’s from XBRL until an appropriate taxonomy was developed.

A usable IFRS XBRL taxonomy was formally announced by the SEC on March 1, 2017. The announcement includes a link to the IFRS XBRL Taxonomy that FPI’s must use.

The SEC indicated that FPI’s who use IFRS may begin to submit XBRL financial statements immediately, and that they MUST submit XBRL financial statements for periods ending on or after December 15, 2017.

 

As always, your thoughts and comments are welcome!

Developments for Foreign Private Issuers

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In the SEC world Foreign Private Issuers (FPI’s) are companies organized outside the United States who have stock that trades on a US exchange. Foreign Private Issuers are permitted to use a special reporting system which includes the Form 20-F Annual Report and Form 6-K for other reporting. This system has a number of accommodations for companies organized outside the United States. For example, FPI’s are actually allowed to report to the SEC using IFRS and the volume of compensation disclosures can be substantially less than for domestic registrants.

 

Like all SEC reporting regimens, the FPI system has its own nuances and subtleties. For example, simply being organized outside the US does not entitle a company to use the FPI system. The more formal definition of a FPI is in an Exchange Act Rule:

 

  • 240.3b-4   Definition of “foreign government,” “foreign issuer” and “foreign private issuer”.

 

(Note: (a) and (b) omitted)

 

(c) The term foreign private issuer means any foreign issuer other than a foreign government except for an issuer meeting the following conditions as of the last business day of its most recently completed second fiscal quarter:

 

(1) More than 50 percent of the issuer’s outstanding voting securities are directly or indirectly held of record by residents of the United States; and

 

(2) Any of the following:

 

(i) The majority of the executive officers or directors are United States citizens or residents;

(ii) More than 50 percent of the assets of the issuer are located in the United States; or

(iii) The business of the issuer is administered principally in the United States.

 

This means that a company that is currently a FPI must monitor its status to see if it continues to meet this definition. If at some point it no longer meets the definition it must switch to the regular Form 10-K, Form 10-Q and Form 8-K reporting regimen. You may also find Topic 6 of the Financial Reporting Manual, Foreign Private Issuers & Foreign Businesses, helpful.

 

To help FPI’s deal with some of the unique aspects of this special system PLI is offering a One-Hour Briefing on October 6 entitled “Accessing the U.S. Capital Markets:  What Foreign Private Issuers Need to Know.” You can learn more about the briefing here.

 

Also, while we have offered our SEC Reporting Skills Workshop for 20-F Filers on an on-site basis over the past few years, we will have a public session of the workshop in New York late next year along with our Annual Forum in New York.

 

As always, your thoughts and comments are welcome!