Welcome to the Division of Corporation Finance’s Financial Reporting Manual (FRM).

We now provide access to the Division’s informal accounting guidance in the FRM in two formats.
First, a new web-based format (see below) that is easy to access and navigate; and second, the traditional PDF format. 

Disclaimer: This Manual was originally prepared by the staff of the Division of Corporation Finance to serve as internal guidance. In 2008, in an effort to increase transparency of informal staff interpretations, the Division posted a version of the Manual to its website. Because of its informal nature, the Manual does not necessarily contain a discussion of all material considerations necessary to reach an accounting or disclosure conclusion. Such conclusions about a particular transaction are very fact dependent and require careful analysis of the transaction and of the relevant authoritative accounting literature and Commission requirements. The information in this Manual is non-authoritative. If it conflicts with authoritative or source material, the authoritative or source material governs. The information presented also may not reflect the views of other Divisions and Offices at the Commission. The guidance is not a rule, regulation or statement of the Commission and the Commission has neither approved nor disapproved this information. The information included in this Manual may be updated from time to time and positions may change. As a result, some of the information in this manual may not be up to date.
 

Table of Contents

Explanation of Abbreviations

Communications with the Division of Corporation Finance’s Office of Chief Accountant (CF-OCA)

Topic 1|Registrant’s Financial Statements

Topic 2|Other Financial Statements Required

  • 2000Businesses Acquired or to be Acquired
  • 2005Definitions and Requirements
  • 2010Determination of a Business
  • 2015Measuring Significance – Basics
  • 2020Implementation Points – Amounts Used to Measure Significance
  • 2025Implementation Points – Financial Statements Used to Measure Significance
  • 2030Financial Statement Periods Required Under S-X 3-05 and S-X 8-04
  • 2035Individually Insignificant Acquirees
  • 2040When to Present Financial Statements
  • 2045Age of Financial Statements – Basics
  • 2050Age of Financial Statements – Interaction of S-X 3-05(b)(4) and Instruction to Item 9.01 of Form 8-K
  • 2055Foreign Business, Hostile Tender Offers, and Troubled Financial Institutions
  • 2060Flowchart Overview of S-X 3-05
  • 2065Acquisitions of Selected Parts of an Entity
  • 2070SAB 80: Application of S-X 3-05 in Initial Registration Statements
  • 2100Disposition of a Business
  • 2110Definitions
  • 2120When are Financial Statements Required?
  • 2130Form 8-K – Measuring Significance of a Disposed Business
  • 2200Financial Statements of Target Companies in Form S-4
  • 2300Real Estate Acquisitions and Properties Securing Mortgages
  • 2305Real Estate Operations - Overview
  • 2310Real Estate Operations – When to Present Financial Statements
  • 2315Real Estate Operations – Measuring Significance
  • 2320Real Estate Operations – Individually Insignificant Acquisitions
  • 2325Real Estate Operations – Special Requirements for “Blind Pool” Offerings
  • 2330Real Estate Operations – Required Financial Statements
  • 2335REIT Formation Transactions
  • 2340Properties Subject to Triple Net Lease
  • 2345Properties Securing Loans, which in Economic Substance Represent an Investment in Real Estate, including Acquisition Development and Construction (ADC) Arrangements
  • 2350Properties Securing Loans that Represent an Asset Concentration [SAB Topic 1I]
  • 2355Gains/Losses on Sales or Disposals by Real Estate Investment Trusts
  • 2360Proxy Statements for Acquisitions of Real Estate Operating Properties
  • 2400Equity Method Investments, Including Fair Value Option
  • 2405Required Financial Statements
  • 2410Measuring Significance
  • 2415Combined/Consolidated Financial Statements of Investees
  • 2420Summarized Financial Data – Registrants Subject to S-X
  • 2425“Foreign Business” Investees
  • 2430Relief
  • 2435SFAS 159 [ASC 825] Fair Value Option for an Equity Method Investment and S-X 3-09 and S-X 4-08(g)
  • 2500Guarantors of Securities
  • 2510Exceptions to the General Rule
  • 2515Condensed Consolidating Financial Information
  • 2520Implementation Issues
  • 2530Recently Acquired Guarantor Subsidiaries
  • 2540Periodic Reporting by Subsidiary Issuers and Guarantors
  • 2600Collateralizations
  • 2610Measuring “Substantial Portion of the Collateral”
  • 2620When Financial Statements are Required
  • 2630Implementation Issues
  • 2700Credit – Third Party Financial Statements
  • 2705Asset-Backed Securities – Presentation of Certain Third Party Financial Information
  • 2710Third Party Credit Enhancements for Securities that are NOT “Asset-backed Securities”
  • 2800Other Financial Statements
  • 2805General Partner, Where Registrant is a Limited Partnership
  • 2810Parent-Only Financial Statements (Condensed)
  • 2815Financial Statements of a Significant Customer
  • 2820Substantial Asset Concentration

Topic 3|Pro Forma Financial Information

  • 3100Circumstances Requiring Pro Forma Presentations
  • 3110Significant Business Combination
  • 3120Disposition of a Significant Portion of a Business
  • 3130Acquisition of One or More Real Estate Operations
  • 3140Roll-Up Transaction
  • 3150Registrant Previously was Part of Another Entity
  • 3160Other
  • 3200Preparation Requirements – Form and Content
  • 3210Objective
  • 3220Pro Forma Condensed Balance Sheet
  • 3230Pro Forma Condensed Income Statement
  • 3240Form
  • 3250In Business Combinations
  • 3260Pro Forma Presentations Reflecting Debt Financing
  • 3270Tax Effects
  • 3280Effects of New Contractual Arrangements
  • 3290“Carved Out” Businesses
  • 3300Special Problems and Issues
  • 3310Common Pro Forma Preparation Problems
  • 3320Prohibition on Assuming Offering Proceeds
  • 3330Combining Entities with Different Fiscal Years
  • 3340Historical Results Include Unusual Events
  • 3400Special Applications
  • 3410Sub-Chapter S Corporations and Partnerships
  • 3420Distributions to Promoters/Owners At or Prior to Closing of IPO
  • 3430Other Changes in Capitalization At or Prior to Closing of IPO
  • 3440Pro Forma Requirements for Real Estate and Leasing Operations
  • 3500Projections and Financial Forecasts
  • 3510Alternative to Pro Forma Statements
  • 3520Presentation Requirements
  • 3600Other
  • 3610Pro Forma Disclosures Required by GAAP
  • 3620Filings Subsequent to an IPO

Topic 4|Independent Accountants’ Involvement

Topic 5|Smaller Reporting Companies

Topic 6|Foreign Private Issuers & Foreign Businesses

Topic 7|Related Party Matters

Topic 8|Non-GAAP Measures of Financial Performance, Liquidity and Net Worth

  • 8100Use of Non-GAAP Financial Measures
  • 8110Applicable Guidance
  • 8120Definition of a Non-GAAP Financial Measure
  • 8130General Applicability and Requirements of Regulation G and S-K 10(e)
  • 8140General Application of Regulation G and S-K 10 to Foreign Private Issuers
  • 8150[Reserved]
  • 8160[Reserved]
  • 8170[Reserved]
  • 8200Ratio of Earnings to Fixed Charges
  • 8210Required Disclosure
  • 8220Definition of Fixed Charges
  • 8230Dividend Requirements
  • 8240Definition of Earnings
  • 8250Equity in Investee’s Losses
  • 8260Pro Forma Effect of Refinancing
  • 8270Foreign Private Issuer
  • 8280Exhibit 12
  • 8300Tangible Book Value per Share
  • 8310Presentation of Net Tangible Book Value per Share
  • 8320Definition
  • 8330Staff Practice

Topic 9|Management's Discussion and Analysis of Financial Position and Results of Operations (MD&A)

Topic 10|Emerging Growth Companies

  • 10100Eligibility
  • 10110Eligibility as an EGC
  • 10120Other Eligibility Issues
  • 10200Scaled Disclosure Provisions
  • 10210General
  • 10220Financial Reporting Accommodations
  • 10230Accounting Standards Transition Period Accommodation
  • 10240Internal Control Over Financial Reporting [SOX 404] Accommodation
  • 10300Foreign Private Issuers
  • 10310General
  • 10320Number of Years Registrant Financial Statements to be Presented under IFRS
  • 10330Multi-Jurisdictional Disclosure System (“MJDS”)

Topic 11|Reporting Issues Relates to Adoption of New Accounting Standards

Topic 12|Reverse Acquisitions and Reverse Recapitalizations

  • 12100General
  • 12200Reporting Issues
  • 12210General
  • 12220Form 8-K
  • 12230Change in Accountants
  • 12240Change in Fiscal Year
  • 12250Auditor Issues
  • 12260Registration and Proxy Statements for Mergers, Acquisitions and Similar Transactions

Topic 13|Effects of Subsequent Events on Financial Statements Required in Filings

Topic 14|Tender Offers

Topic 15|Employee Stock Benefit Plan

Topic 16|Multijurisdictional Disclosure System

Index

Recent Download and Summary of changes

Financial Reporting Manual (PDF)

Updated: November 18, 2020

Summary of changes in current update

Sections of the Financial Reporting Manual have been updated as of October 30, 2020. These sections have been marked with the date tag, “Last updated: 10/30/2020,” to identify the changes. Previous updates are marked using the same convention and represent the last revision to that section. We include a date tag when the change is significant. Changes that are administrative in nature (for example, section reference updates or grammatical improvements) are not marked with a date tag.

Below is a summary of changes included in this update and a brief description of the change. Clicking the linked section number will direct you to the location of the change in the document. You may click on the embedded link in the document to return to this page.

This update does not include changes for three recent rulemakings, Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and Qualifications of Accountants. For questions related to these amendments, please contact the individual(s) listed on the related rulemaking

Section Comment

1340, 2030.1, 5110, 5120, and 5210.2

 Revised for amendments to Smaller Reporting Company definition pursuant to SEC Release No. 33-10513.

Topics 1-6, 8-11, and 14

 Revised for amendments related to SEC Release No. 33-10532, Disclosure Update and Simplification. Due to the volume of these revisions, e.g. replacing “income statement” with “statement of comprehensive income” throughout, only the Topics changed are cited.

1340

 Revised for amendments to Accelerated Filer and Large Accelerated Filer definitions pursuant to SEC Release No. 34-88365.

1110.1, 1120, 1210, 2015.6, 2515, 2810.1, 3250, 4130.2, 4130.3, 4710, 4850, 5110.3, 6120.5, 6240.1, 10110.2, 11110.1, and 11200

 Remove outdated Division of Corporation Finance guidance and GAAP references. Updated for changes to GAAP adoption dates, guidance issued by the PCAOB, Division of Corporation Finance, and Office of Chief Accountant in the last few years.

2050.1

 Clarified that Rule 3-13 of Regulation S-X applies only to the financial statements included in a Form 8-K and not to the timely filing requirement of the Form itself.

1140.5, 2200.7 and 4110.5

 Clarified audit requirements for a special-purpose acquisition company (“SPAC”) registrant’s non-reporting target in Form S-4/Form F-4.

2410.4

 Clarified Rule 3-09 of Regulation S-X income test calculation when there is more than one equity method investee.

4220

 Described the impact a substantial deficiency situation may have on “timely filed” criteria in certain rule and form eligibility standards.

4710

 Revised to include another example of when a “To Be Issued” Accountant’s Report may be accepted.