PRA - Regulation__S-X_Supporting_Statement (2017)

SUPPORTING STATEMENT
FOR THE PAPERWORK REDUCTION ACT SUBMISSION FOR AN EXTENSION
OF A CURRENT INFORMATION COLLECTION
“REGULATION S-X”

A.

Justification

1.

Necessity of Information Collection

Issuers of securities are required under the securities laws to include financial statements in
certain registration statements, periodic reports and other documents filed with the Securities and
Exchange Commission (“Commission” or “SEC”). The SEC has the statutory authority to prescribe the
form in which the required information will be set forth in the financial statements, the items to be shown
in the balance sheet, earnings and cash flow statements, the methods to be followed in the preparation of
accounts, the determination of income, and the valuation of assets and liabilities. The SEC adopted
Regulation S-X in 1940 to implement certain segments of this authority, and it has been updated and
amended over the years. The regulation provides guidance as to the form and content of required
financial statements and specifies the footnotes and schedules that should be included in or filed with the
financial statements. It also addresses the qualifications of accountants, including their independence
from audit clients, and the content of their audit reports on financial statements.
Regulation S-X, however, does not require the filing of financial statements. Rather, those forms
and rules under the federal securities laws that do require financial statements refer to Regulation S-X for
guidance in the preparation of such statements.

2.

Purpose and Use of the Information Collection

The principal function of SEC forms and rules under the securities laws’ disclosure provisions is
to make information available to the securities markets. The SEC uses very little of the collected
information itself (except on an occasional basis in the enforcement of the securities laws). In this
respect, these information collections differ significantly from most other federal information collections
that are primarily for the use and benefit of the collecting agency.
The information required to be filed with the Commission permits verification of compliance
with securities law requirements and assures the public availability and dissemination of such
information. Private contractors reproduce much of the filed information and provide it to private parties,
and many other persons obtain information directly from the Commission’s public files. This information
is needed by security holders, investors, brokers, dealers, investment banking firms, professional
securities analysts and others in evaluating securities and making investment and voting decisions with
respect to them.
Regulation S-X lays the foundation for financial statement presentation in SEC forms and rules.
It assures the comparability and uniformity of financial information necessary for investment and
corporate governance analysis. This regulation, therefore, is the core of the SEC’s financial reporting
system.
3.

Consideration Given to Information Technology

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Retrieval of Regulation S-X is completed by using the GPO Access e-CFR website.
4.

Duplication

The Commission has undertaken an effort to identify duplicative private sector accounting
standards. Regulation S-X incorporates or modifies the information prepared under generally accepted
accounting principles (“GAAP”) for use in filings with the Commission.
The SEC oversees and works closely with private sector organizations, such as the Financial
Accounting Standards Board (“FASB”), to establish accounting standards. The FASB maintains the
Accounting Standards Codification (“Codification”), which the Commission has recognized as GAAP.
The FASB engages in a lengthy, deliberative process before issuing any updates to the Codification. The
Commission often cannot wait until the completion of this process to take a position on a new accounting
practice, and the SEC may adopt a rule in Regulation S-X to address a practice before the FASB is able to
consider it. After the Codification is amended, the Commission evaluates the amendment and determines
whether the S-X rule remains necessary. If the Codification amendment and the related rule in
Regulation S-X are duplicative, the SEC may rescind its rule in order to avoid confusion.
Not all of the rules in Regulation S-X, however, are in anticipation of pending action by the FASB. As
noted above, these rules also supplement or clarify GAAP, including the Codification, for Commission
registrants. These rules generally elicit financial information that, although not incorporated into GAAP,
is, in the opinion of the Commission, material to decisions made by investors and shareholders.
Regulation S-X does not duplicate other federal collections of information. The information
required by Regulation S-X is not available from other sources. Maintaining Regulation S-X as a uniform
source of standards across multiple Commission filings helps protect against duplication within the
Commission.
5.

Effect on Small Entities

The Commission has taken several steps to lessen the impact of accounting and financial
statement requirements on small entities. The Commission has adopted Regulations A and D, and certain
scaled disclosure requirements in Regulation S-K and S-X, which reduce the reporting requirements for
certain small issuers in terms of both the number of years for which there must be audited financial
statements and the Commission’s accounting rules that apply to small offerings.

6.

Consequences of Less Frequent Collection

If the information were collected less frequently than currently required, investors and security
holders would be unable to evaluate the performance and financial position of registrants on a timely
basis and their ability to make investment and voting decisions would be hindered accordingly.
7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)

Issuers may be required to file financial statements that comply with Regulation S-X more often
than quarterly, such as upon the offer and sale of securities or upon the acquisition of a business.
However, under the Commission’s integrated disclosure system, the financial statements of previously
filed annual and quarterly reports typically are incorporated by reference into the filings related to the sale
of securities.
The remainder of factors under this item are not applicable.

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8.

Consultations Outside the Agency

Prior to submission for OMB review, Regulation S-X was proposed for public comment. [No
comments were received on this request during the 60-day comment period prior to OMB’s review.]
Over the years, each time the Commission has amended the specific rules within Regulation S-X,
it has sought the advice of public commenters. These comments consistently have been helpful in
addressing the practical impact of the rule proposals, the costs versus the benefits of such proposals, and
additional recordkeeping that would be required by registrants if such proposals were adopted.
In addition, the Commission staff also meets periodically with the staffs of the FASB, various
committees of the American Institute of Certified Public Accountants (“AICPA”), and the Public
Company Accounting Oversight Board to discuss matters of mutual interest, including the Commission’s
accounting requirements. The Commission staff also periodically meets with representatives of the
public, including investors, registrants, auditors, and members of the business community, to discuss,
among other things, the Commission’s accounting and disclosure requirements. Topics discussed may
include the availability of financial data, how frequently that data should be collected and reported, the
clarity of the rules in Regulation S-X, and the recordkeeping, disclosure, reporting formats, and data
elements to be reported and disclosed.
9.

Payment or Gift

Not applicable.
10.

Confidentiality

Not applicable.
11.

Sensitive Questions

No questions of a sensitive nature are asked. The information collection does not collect any
Personally Identifiable Information (PII)
12.

Burden of Information Collection

Regulation S-X is the repository for rules regarding the form and content of the financial
statements filed with the Commission. It, however, does not direct registrants to file such financial
statements or to collect financial data. Regulation S-X merely indicates what should be in the financial
statements and how such statements should be presented when they are required to be filed by other rules
and forms under the federal securities laws. Because Regulation S-X does not require any information to
be filed with the SEC, only one burden hour is assigned to cover incidental reading of the regulation.
13.

Cost to Respondents

To avoid double-counting, costs associated with the preparation of financial statements are
assigned to the forms and rules that require those financial statements be filed with the Commission, and
not to Regulation S-X. In the context of this submission, therefore, there are no costs to respondents
assigned to Regulation S-X.
14.

Cost to the Federal Government

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Annualized cost to the federal government should be negligible, consisting mostly of electronic
storage for maintaining filings made through the EDGAR system. Again, however, the requirement to
make these filings is not contained in Regulation S-X itself.
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Explanation of Changes in Burden

Not applicable.

16.

Information Collections Planned for Statistical Purposes

Not applicable.
17.

Approval to Omit OMB Expiration Date

The Commission is not seeking approval to omit the expiration date.
18.

Exceptions to Certification for Paperwork Reduction Act Submissions

This collection complies with the requirements in 17 CFR 210

B.

Collection of Information Employing Statistical Methods
Not applicable.