Retrospective Application of Accounting Rules in the Context of Form S-3

News Brief

By Chadwick Mills

As a follow-up to Cydney Posner's article on June 9, 2009, please note that calendar-year public companies were required to adopt a new accounting standard on comprehensive income (ASU 2011-05, as amended by ASU 2011-12) in their 2012 first quarter Form 10-Q with retrospective application. As described below (and see also Corp Fin's financial reporting manual (FRM) at Topic 13), if a company is filing a Form S-3 and had filed interim financial statements for a period that includes the date of adoption of a new accounting standard requiring retrospective application, Item 11(b)(ii) of Form S-3 normally requires the company to recast its prior period annual financial statements that are incorporated by reference to reflect the retrospective application (if material). However, similar to the accommodation noted in Cydney's article, in lieu of recasting the prior period annual financial statements, a company may (and assuming the company's auditors agree) instead include a selected financial data table either included in or incorporated by reference in the Form S-3 containing certain information. Accordingly, if your clients are filing or post-effectively amending Forms S-3 this year, please take note of this and make sure to discuss with the client and its auditors. Note that in the case of a takedown from an already effective shelf S-3, a prospectus supplement is not subject to the Item 11(b)(ii) updating requirements; rather, companies would instead apply the "fundamental change" guidance in S-K 512(a) discussed in FRM Section 13110.2.

Below are links to a couple of recent S-3s with the selected financial data table reflecting the above and attached.

Example filings:

http://www.sec.gov/Archives/edgar/data/1005201/000110465912040148/a12-10042_1s3.htm#SelectedFinancialData_091254  

http://www.sec.gov/Archives/edgar/data/1397821/000114420412031147/v313803_s3a.htm

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