Regulation S-X - Explained
What is Regulation S-X?
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Table of ContentsWhat is Regulation S-X?What does Regulation S-X Do? Academic Research on Regulation S-X
What is Regulation S-X?
Regulation S-X outlines the specific form and content of financial statements that are required to be filed with the US Securities and Exchange Commission. Public companies are obligated to register their shares with the commission disclosing certain facts about the company in order to offer the shares to the public.
Financial reports constitute an important part of the registration as well as of the periodical reporting. It is mentioned as 17 C.F.R. Part 210. The name is "Form and Content of and Requirements for Financial Statements, Securities Act of 1933, Securities Exchange Act of 1934, Public Utility Holding Company Act of 1935, Investment Company Act of 1940, Investment Advisers Act of 1940, and Energy Policy and Conservation Act of 1975".
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What does Regulation S-X Do?
Regulation S-X, along with the Financial Reporting Releases (Staff Accounting Bulletins), provides the guidelines for the form and content of the financial statements of public companies to be filed with the SEC.
Financial statements are required to be filed as part of the registration statement under the Securities Act of 1933 or as part of the registration statements under section 12, annual or other reports under sections 13 and 15(d), and proxy and information statements under section 14 of the Securities Exchange Act of 1934. It is also a part of the registration statements and shareholder reports under the Investment Company Act of 1940.
These financial statements are to be compiled in accordance with the guidelines provided by Regulation S-X unless the forms which are to be used for registration and reporting under these sections of this Act specifically mention otherwise. Regulation S-X also mentions that this term "financial statements" includes all notes and related schedules. All the public companies operating in the US need to follow the guidelines provided by Regulation S-X in order to file accurately and truthfully.
Some of the terms used in Regulation S-X
The terms used in Regulation S-X are specifically defined. When used in Regulation S-X, these meanings are to be followed unless the context requires otherwise.
In this document, an independent public or certified public accountant specifies the scope of the audit made by her/him. The accountant also needs to express her/his opinion regarding financial statements taken as a whole. If the concerned accountant believes that an overall opinion cannot be expressed, she/he must explain the reasons.
Attestation report on internal control over financial reporting
It is a report by a registered public accounting firm expressing their views on whether the registrant maintained in all material respects, effective internal control over financial reporting.
Attestation report on assessment of compliance with servicing criteria for asset-backed securities.
It is a report by a registered public accounting firm expressing their opinion concerning an asserting party's assessment of compliance with servicing criteria, in accordance with standards on attestation engagements. If such opinions cannot be expressed, the reasons need to be explained.
A deficiency or a combination of deficiencies in internal control over financial reporting and there are reasons to believe that this deficiency may lead to a material misstatement of the registrant's annual or interim financial statements that may not be checked on a timely basis.
Audit (or examination)
Auditing the financial statement of an issuer means the examination of the statement by an independent accountant. The accountant needs to follow the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB") while expressing her/his view on the statement.
It is the annual accounting period and if a closing date has not been adopted, then a fiscal year is the calendar year ending on December 31.
The issuer of the securities which is being registered or for which an application or a report is being filed is called the registrant.
If the majority of a company is owned by people who are not US citizens or residents, it is not organized under the federal laws or any US state laws and the majority of its executive officers and directors are not citizens or residents of United States it is considered as a foreign company. If the first two conditions are common and more than 50% of the company's assets are located outside the country, then also it is considered as a foreign company. Some of the major accounting-related entities that helped the SEC to formulate Regulation S-X are:
- American Institute of Certified Public Accountants
- Federal Accounting Standards Advisory Board
- Financial Accounting Standards with FASB Accounting Pronouncements
- House Committee on Financial Services
- International Accounting Standards Board and IFRS pronouncements
- Public Company Accounting Oversight Board
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