Form and Content of Financial Statements
Rule 10-01 -- Interim Financial Statements
(a) Condensed statements. Interim financial statements
shall follow the general form and content of presentation prescribed by the
other sections of this Regulation with the following exceptions:
(1) Interim financial statements required by this rule need
only be provided as to the registrant and its subsidiaries consolidated and
may be unaudited. Separate statements of other entities which may otherwise
be required by this regulation may be omitted.
(2) Interim balance sheets shall include only major captions
(i.e., numbered captions) prescribed by the applicable sections of this Regulation
with the exception of inventories. Data as to raw materials, work in process
and finished goods inventories shall be included either on the face of the
balance sheet or in the notes to the financial statements, if applicable.
Where any major balance sheet caption is less than 10% of total assets, and
the amount in the caption has not increased or decreased by more than 25%
since the end of the preceding fiscal year, the caption may be combined with
(3) Interim statements of income shall also include major
captions prescribed by the applicable sections of this Regulation. When any
major income statement caption is less than 15% of average net income for
the most recent three fiscal years and the amount in the caption has not increased
or decreased by more than 20% as compared to the corresponding interim period
of the preceding fiscal year, the caption may be combined with others. In
calculating average net income, loss years should be excluded. If losses were
incurred in each of the most recent three years, the average loss shall be
used for purposes of this test. Notwithstanding these tests, Rule
4-02 applies and de minimis amounts therefore need not be shown separately,
except that registrants reporting under Article 9
shall show investment securities gains or losses separately regardless of
(4) The statement of cash flows may be abbreviated starting
with a single figure of net cash flows from operating activities and showing
cash changes from investing and financing activities individually only when
they exceed 10% of the average of net cash flows from operating activities
for the most recent three years. Notwithstanding this test, Rule
4-02 applies and de minimis amounts therefore need not be shown separately.
(5) The interim financial information shall include disclosures
either on the face of the financial statements or in accompanying footnotes
sufficient so as to make the interim information presented not misleading.
Registrants may presume that users of the interim financial information have
read or have access to the audited financial statements for the preceding
fiscal year and that the adequacy of additional disclosure needed for a fair
presentation, except in regard to material contingencies may be determined
in that context. Accordingly, footnote disclosure which would substantially
duplicate the disclosure contained in the most recent annual report to security
holders or latest audited financial statements, such as a statement of significant
accounting policies and practices, details of accounts which have not changed
significantly in amount or composition since the end of the most recently
completed fiscal year, and detailed disclosures prescribed by Rule
4-08 of this Regulation, may be omitted. However, disclosure shall be
provided where events subsequent to the end of the most recent fiscal year
have occurred which have a material impact on the registrant. Disclosures
should encompass for example, significant changes since the end of the most
recently completed fiscal year in such items as: accounting principles and
practices; estimates inherent in the preparation of financial statements;
status of long-term contracts; capitalization including significant new borrowings
or modification of existing financing arrangements; and the reporting entity
resulting from business combinations or dispositions. Notwithstanding the
above, where material contingencies exist, disclosure of such matters shall
be provided even though a significant change since year end may not have occurred.
(6) Detailed schedules otherwise required by this Regulation
may be omitted for purposes of preparing interim financial statements.
(7) In addition to the financial statements required by paragraphs
(a)(2), (3) and (4) of this section, registrants in the development stage shall
provide the cumulative financial statements (condensed to the same degree as allowed
in this paragraph) and disclosures required by Statement of Financial Accounting
Standards No. 7, "Accounting and Reporting by Development Stage Enterprises"
to the date of the latest balance sheet presented.
(b) Other instructions as to content. The following additional
instructions shall be applicable for purposes of preparing interim financial
(1) Summarized income statement information shall be given separately as to
each subsidiary not consolidated or 50 percent or less owned persons or as
to each group of such subsidiaries or fifty percent or less owned persons
for which separate individual or group statements would otherwise be required
for annual periods. Such summarized information, however, need not be furnished
for any such unconsolidated subsidiary or person which would not be required
pursuant to Rule 13a-13 or 15d-13
to file quarterly financial information with the Commission if it were a registrant.
(2) If appropriate, the income statement shall show earnings per share and dividends
declared per share applicable to common stock. The basis of the earnings per share
computation shall be stated together with the number of shares used in the computation.
In addition, see Item 601(b)(11) of Regulation
(3) If, during the most recent interim period presented, the registrant or any of its consolidated subsidiaries entered into a combination between
entities under common control, the interim financial statements for both the current year and the preceding year shall reflect the combined results
of the combined businesses. Supplemental disclosure of the separate results of the combined entities for periods prior to the combination shall be given,
with appropriate explanations.
(4) Where a material business combination has occurred during the current fiscal year, pro forma disclosure shall be made of the results of
operations for the current year up to the date of the most recent interim balance sheet provided (and for the corresponding period in the preceding year)
as though the companies had combined at the beginning of the period being reported on. This pro forma information shall, at a minimum, show revenue,
income before extraordinary items and the cumulative effect of accounting changes, including such income on a per share basis, net income, net income
attributable to the registrant, and net income per share.
(5) Where the registrant has disposed of any significant segment of its business
(as defined in paragraph 13 of Accounting Principles Board Opinion No. 30)
during any of the periods covered by the interim financial statements, the
effect thereof on revenues and net income-total and per share for all periods
shall be disclosed.
(6)In addition to meeting the reporting requirements specified by existing standards for accounting changes, the registrant shall state the date of any material accounting change and the reasons for making it. In addition, for filings on Form 10-Q, a letter from the registrant's independent accountant shall be filed as an exhibit (in accordance with the provisions of Item 601 of Regulation S-K, 17 CFR 229.601) in the first Form 10-Q after the date of an accounting change indicating whether or not the change is to an alternative principle which, in the accountant's judgment, is preferable under the circumstances; except that no letter from the accountant need be filed when the change is made in response to a standard adopted by the Financial Accounting Standards Board that requires such change..
(7) Any material retroactive prior period adjustment made during any period
covered by the interim financial statements shall be disclosed, together with
the effect thereof upon net income- total and per share- of any prior period
included and upon the balance of retained earnings. If results of operations
for any period presented have been adjusted retroactively by such an item
subsequent to the initial reporting of such period, similar disclosure of
the effect of the change shall be made.
(8) Any unaudited interim financial statements furnished shall reflect all
adjustments which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. A statement to that effect
shall be included. Such adjustments shall include, for example, appropriate
estimated provisions for bonus and profit sharing arrangements normally determined
or settled at year-end. If all such adjustments are of a normal recurring
nature, a statement to that effect shall be made; otherwise, there shall be
furnished information describing in appropriate detail the nature and amount
of any adjustments other than normal recurring adjustments entering into the
determination of the results shown.
(c) Periods to be covered. The periods for which interim financial statements are to be provided in registration statements are prescribed elsewhere in this Regulation (see Rules 210.3-01 and 3-02). For filings on Form 10-Q, financial statements shall be provided as set forth in this paragraph (c):
(1) An interim balance sheet as of the end of the most recent
fiscal quarter and a balance sheet as of the end of the preceding fiscal year
shall be provided. The balance sheet as of the end of the preceding fiscal
year may be condensed to the same degree as the interim balance sheet provided.
An interim balance sheet as of the en of the corresponding fiscal quarter
of the preceding fiscal year need not be provided unless necessary for an
understanding of the impact of seasonal fluctuations on the registrant's financial
(2) Interim statements of income shall be provided for the
most recent fiscal quarter, for the period between the end of the preceding
fiscal year and the end of the most recent fiscal quarter, and for the corresponding
periods of the preceding fiscal year. Such statements may also be presented
for the cumulative twelve month period ended during the most recent fiscal
quarter and for the corresponding preceding period.
(3) Interim statements of cash flows shall be provided for
the period between the end of the preceding fiscal year and the end of the
most recent fiscal quarter, and for the corresponding period of the preceding
fiscal year. Such statements may also be presented for the cumulative twelve
month period ended during the most recent fiscal quarter and for the corresponding
(4) Registrants engaged in seasonal production and sale of a single-crop agricultural
commodity may provide interim statements of income and cash flows for the
twelve month period ended during the most recent fiscal quarter and for the
corresponding preceding period in lieu of the year-to-date statements specified
in (2) and (3) above.
(d) Interim review by independent public accountant.
Prior to filing, interim financial statements included in quarterly reports
on Form 10-Q must be reviewed by an independent
public accountant using professional standards and procedures for conducting
such reviews, as established by generally accepted auditing standards, as may
be modified or supplemented by the Commission. If, in any filing, the company
states that interim financial statements have been reviewed by an independent
public accountant, a report of the accountant on the review must be filed with
the interim financial statements.
(e) Filing of other interim financial information in certain
cases. The Commission may, upon the informal written request of the registrant,
and where consistent with the protection of investors, permit the omission of
any of the interim financial information herein required or the filing in substitution
thereof of appropriate information of comparable character. The Commission may
also by informal written notice require the filing of other information in addition
to, or in substitution for, the interim information herein required in any case
where such information is necessary or appropriate for an adequate presentation
of the financial condition of any person for which interim financial information
is required, or whose financial information is otherwise necessary for the protection
Notice to Users: The Deskbook is made available
with the understanding that the University of Cincinnati College
of Law is not engaged in rendering legal, accounting or other professional
services. If legal advice or other expert assistance is required,
the services of a competent professional person should be sought. See Terms and Conditions of Use.