quired by the applicable form, need not be named in any financial statement. Reasonable grouping of such subsidiaries may be made, with an explanatory group caption which shall state the number of subsidiaries included in the group. § 210.3-06 Additional information.

The information required with respect to any statement shall be furnished as a minimum requirement to which shall be added such further material information as is necessary to make the required statements, in the light of the circumstances under which they are made, not misleading. This section shall be applicable to all statements required to be filed, including copies of statements required to be filed in the first instance with other governmental agencies.

§ 210.3-07 Changes in accounting principles and practices and retroactive adjustments of accounts.

(a) Any change in accounting principle or practice, or in the method of applying any accounting principle or practice, made during any period for which financial statements are filed which affects comparability of such financial statements with those of prior or future periods, and the effect thereof upon the net income for each period for which financial statements are filed, shall be disclosed in a note to the appropriate financial statement.

(b) Any material retroactive adjustment made during any period for which financial statements are filed, and the effect thereof upon net income of prior periods shall be disclosed in a note to the appropriate financial statement. § 210.3-08 Summary of accounting principles and practices.

Information required in notes as to accounting principles and practices reflected in the financial statements may be presented in the form of a single statement. In such case specific references shall be made in the appropriate financial statements to the applicable portion of such single statement.

§ 210.3-09 Conversion of items in foreign currencies.

The basis of conversion of all items in foreign currencies shall be stated, and the amount and disposition of the resulting unrealized profit or loss shown.

Valuation and qualifying reserves shall be shown separately in the financial statements as deductions from the specific assets to which they apply.

§ 210.3-12 Basis of determining amounts-book value.

If an instruction requires a statement as to "the basis of determining the amount," the basis shall be stated specifically. The term "book value" will not be sufficiently explanatory unless, in a particular instruction, it is stated to be acceptable with respect to a particular item.

§ 210.3-13 Current assets.

Items classed as current assets shall be generally realizable within one year. However, generally recognized trade practices may be followed with respect to the inclusion of items such as instalment receivables or inventories long in process, provided an appropriate explanation of the circumstances is made and, if practicable, an estimate is given of the amount not realized within one year. § 210.3-14 Current liabilities.

Items due and payable within one year shall in general be classed as current liabilities. However, generally recognized trade practices may be followed with respect to the exclusion of items such as customers' deposits and deferred income, provide an appropriate explanation of the circumstances is made. § 210.3-15 Reacquired evidences of indebtedness.

Reacquired evidences of indebtedness shall be shown separately as a deduction, under the appropriate liability caption. However, reacquired evidences of indebtedness held for pension and other special funds not related to the particular

(a) If material in amount the pertinent facts relative to firm commitments for the acquisition of permanent investments and fixed assets and for the purchase, repurchase, construction, or rental of assets under long-term leases shall be stated briefly in the balance sheet or in footnotes referred to therein.

(b) Where the rentals or obligations under long-term leases are material there shall be shown the amounts of annual rentals under such leases with some indication of the periods for which they are payable, together with any important obligation assumed or guarantee made in connection therewith. If the rentals are conditional, state the minimum annual amounts.

§ 210.3-19 General notes to balance

sheets.

If present in regard to the person for which the statement is filed the following shall be set forth in the balance sheet or in notes thereto:

The

(a) Assets subject to lien. amounts of assets mortgaged, pledged, or otherwise subject to lien shall be designated and the obligations secured shall be briefly identified. However, in the case of commercial, industrial, and public utility companies this rule need not be followed with respect to assets (other than current assets and securities) given as security for bonds, mortgages, and similar debt.

(b) Intercompany profits and losses. The effect upon any balance sheet item of profits or losses resulting from transactions with affiliated companies shall be stated. If impracticable of accurate de

termination, without unreasonable effort or expense, give an estimate or explain.

(c) Defaults. The facts and amounts concerning any default in principal, interest, sinking fund, or redemption provisions with respect to any issue of securities or credit agreements, or any breach of covenant of a related indenture or agreement, shall be stated. Notation of such default or breach of covenant shall be made in the balance sheet.

(d) Preferred shares. (1) If callable, the date or dates and the amount per share at which such shares are callable shall be stated.

(2) Arrears in cumulative dividends per share and in total for each class of shares shall be stated.

(3) Preferences on involuntary liquidation, if other than the par or stated value, shall be shown. When the excess involved is material there shall be shown (i) the difference between the aggregate preference on involuntary liquidation and the aggregate par or stated value; (ii) a statement that this difference, plus any arrears in dividends, exceeds the sum of the par or stated value of the junior capital shares and the surplus, if such is the case; and (iii) a statement as to the existence, or absence, of any restrictions upon surplus growing out of the fact that upon involuntary liquidation the preference of the preferred shares exceeds its par or stated value.

(e) Pension and retirement plans. (1) A brief description of the essential provisions of any employee pension or retirement plan shall be given.

(2) The estimated annual cost of the plan shall be stated.

(3) If a plan has not been funded or otherwise provided for, the estimated amount that would be necessary to fund or otherwise provide for the past service cost of the plan shall be disclosed.

(f) Restrictions which limit the availability of surplus for dividend purposes. Describe any such restriction, other than as reported in paragraph (d) of this section, indicating briefly its source, its pertinent provisions, and, where appropriate and determinable, the amount of the surplus so restricted.

(g) Contingent liabilities. A brief statement as to contingent liabilities not reflected in the balance sheet shall be made. In the case of guarantees of securities of other issuers a reference to the appropriate schedule shall be included.

210.3-20 General notes to profit and loss statements.

If present in regard to the person for which the statement is filed, the following shall be set forth in the profit and loss statement or in notes thereto:

(a) Instalment or deferred sales. If sales are made on a deferred basis, such as instalment sales or sales of equipment long in process of manufacture, the basis of taking profits into income shall be stated.

(b) Intercompany profits and losses. The amount of any profits or losses resulting from transactions between affiliated companies shall be stated. If impracticable of determination without unreasonable effort and expense, give an estimate or explain.

(c) Depreciation, depletion, obsolescence, and amortization. State for the period for which profit and loss statements are filed, the policy followed with respect to:

(1) The provision for depreciation, depletion, and obsolescence of physical properties or reserves created in lieu thereof, including the methods and, if practicable, the rates used in computing the annual amounts;

(2) The provision for depreciation and amortization of intangibles, or reserves created in lieu thereof, including the methods and, if practicable, the rates used in computing the annual amounts;

(3) The accounting treatment for maintenance, repairs, renewals, and betterments; and

(4) The adjustment of the accumulated reserves for depreciation, depletion, obsolescence, amortization or reserves in lieu thereof, at the time the properties are retired or otherwise disposed of, including the disposition made of any profit or loss on sale of such properties.

(d) Capital stock optioned to officers and employees. (1) A brief description of the terms of each option arrangement shall be given, including (i) the title and amount of securities subject to option; (ii) the year or years during which the options were granted; and (iii) the year or years during which the optionees became, or will become, entitled to exercise the options.

(2) State (i) the number of shares under option at the balance sheet date, and the option price and the fair value thereof, per share and in total, at the dates the options were granted; (ii) the number of shares with respect to which

options became exercisable during the period, and the option price and the fair value thereof, per share and in total, at the dates the options became exercisable; and (iii) the number of shares with respect to which options were exercised during the period, and the option price and the fair value thereof, per share and in total, at the dates the options were exercised. The required information may be summarized as appropriate with respect to each of these categories.

(3) State the basis of accounting for the such option arrangements and amount of charges, if any, reflected in income with respect thereto.

[15 F.R. 9385, Dec. 29, 1950, as amended at 18 F.R. 7231, Nov. 14, 1953]

CONSOLIDATED AND COMBINED
STATEMENTS

SOURCE: $ 210.4-01 to 210.4-14 appear at 15 F.R. 9386, Dec. 29, 1950, unless otherwise noted.

§ 210.4-01 Application of §§ 210.4-01 to 210.4-14.

Sections 210.4-01 to 210.4-14 shall govern the preparation of consolidated and combined statements.

§ 210.4-02 Consolidated statements of the registrant and its subsidiaries. The registrant shall follow in the consolidated statements principles of inclusion or exclusion which will clearly exhibit the financial condition and results of operations of the registrant and its subsidiaries: Provided, however, That,

(a) The registrant shall not consolidate any subsidiary which is not a majority-owned subsidiary;

(b) If the statements of a subsidiary are as of a date or for periods different from those of the registrant, such subsidiary may be consolidated only if all the following conditions exist: (1) Such difference is not more than 93 days; (2) the closing date of the subsidiary is expressly indicated; (3) the necessity for the use of different closing dates is briefly explained; and (4) any changes in the respective fiscal periods of the registrant and the subsidiary made during the period of report are clearly indicated, together with the manner of treatment;

(c) Consolidation of foreign subsidiaries: Due consideration shall be given to the propriety of consolidating with domestic corporations foreign subsidiaries whose operations are effected in

terms of restricted foreign currencies. If consolidated, disclosure should be made as to the effect, insofar as this can be reasonably determined, of foreign exchange restrictions upon the consolidated financial position and operating results of the registrant and its subsidiaries.

§ 210.4-03

Group statements of subsidiaries not consolidated.

For majority-owned subsidiaries not consolidated with the registrant there may be filed statements in which such subsidiaries are consolidated or combined in one or more groups pursuant to principles of inclusion or exclusion which will clearly exhibit the financial condition and results of operations of the group or groups. If it is essential to a properly summarized presentation of the facts, such consolidated or combined statement shall be filed.

§ 210.4-04 Statement as to principle of consolidation or combination followed.

(a) The principle adopted in determining the inclusion and exclusion of subsidiaries in each consolidated balance sheet and in each group balance sheet of unconsolidated subsidiaries shall be stated in a note to the respective balance sheet.

(b) As to each consolidated statement and as to each group statement of unconsolidated subsidiaries, a statement shall be made as to whether there have been included or excluded any persons not similarly treated in the corresponding statement for the preceding fiscal period filed with the Commission. the answer to the foregoing is in the affirmative, the names of such persons shall be given.

If

50-035-71-11

In general, intercompany items and transactions shall be eliminated. If not eliminated, a statement of the reasons and the methods of treatment shall be made.

§ 210.4-09 Special requirements as to insurance companies.

(a) Except as provided in paragraph (b) of this section, the statements of an insurance company shall not be consolidated or combined with the statements of any person.

(b) The statements of an insurance company other than a life insurance company may be consolidated if all of the following conditions exist:

(1) The insurance company is a totally-held subsidiary of the top parent included in the consolidation;

(2) Such top parent is not an insurance company, investment company, or bank holding company;

(3) The insurance company engages in no business of a material amount other than the insuring of risks arising in the ordinary course of business of such top parent and its other subsidiaries; and

(4) Separate financial statements for the insurance company are filed.

§ 210.4-10 Special requirements as to registrants which are bank holding companies.

If the registrant is a bank holding company: (a) Statements of the registrant may be consolidated only with the statements of subsidiaries which are bank holding companies.

(b) A consolidated statement of the registrant and any of its bank holding company subsidiaries shall not be filed unless accompanied by a consolidating statement which sets forth the individual statements of each subsidiary inIcluded in the consolidated statement.

(c) Consolidated or combined statements filed for subsidiaries not consolidated with the registrant shall not include any bank holding companies unless accompanied by consolidating or combining statements which set forth the individual statements of each included bank holding company subsidiary.

§ 210.4-12 Special requirements as banks.

to

If two or more majority-owned subsidiaries of a person are banks and are directly owned by a single parent, there shall be filed, in lieu of individual statements for such subsidiaries, combined statements showing the minority interest separately and eliminating any material inter-bank items; except that the statements of any such subsidiary which on the date of filing is a closed or liquidating bank shall not be included in any combined statement. Except as proIvided in the preceding sentence, statements of banks shall not be included in any consolidated or combined statements.

§ 210.4-13 Special requirements as to public utility holding companies. There shall be shown in the consolidated balance sheet of a public utility holding company the difference between the amount at which the parent's investment is carried and the underlying book

equity of subsidiaries as at the respective dates of acquisition.

§ 210.4-14 Special requirements as to commercial, industrial and mining companies in the promotional, exploratory or development stage subject to §§ 210.5a-01 to 210.5a-07. The financial statements required by §§ 210.5a-01 to 210.5a-07 shall not be prepared on a consolidated basis but shall, insofar as practicable, be prepared so as to show the information for the registrant and each of its subsidiaries in parallel columns.

COMMERCIAL AND INDUSTRIAL COMPANIES

SOURCE: $ § 210.5-01 to 210.5-04 appear at 15 FR. 9387, Dec. 29, 1950, unless otherwise noted.

§ 210.5-01 Application of §§ 210.5-01 to 210.5-04.

(a) Sections 210.5-01 to 210.5-04 shall be applicable to financial statements filed for all persons except:

(1) Commercial, industrial, and mining companies in the promotional, exploratory or development stage (see §§ 210.5a-01 to 210.5a-07).

(2) Management investment companies (see §§ 210.6-01 to 210.6-10). (3) Unit investment trusts (see §§ 210.6-10a to 210.6-13).

(4) Face-amount certificate investment companies (see §§ 210.6-20 to 210.6-24).

(5) Insurance companies other than life and title insurance companies (see §§ 210.7-01 to 210.7-06).

(6) Committees issuing certificates of deposit (see §§ 210.8-01 to 210.8-03). (7) Banks (see § 210.9-05). (8) Brokers and dealers (see § 240.this 17a-5 of chapter and form X-17A-5).

(b) Bank holding companies. Financial statements and schedules filed for bank holding companies shall be prepared in accordance with §§ 210.5-01 to 210.5-04 except that §§ 210.9-01 to 210.9-04, inclusive, shall be applicable thereto.

[15 F.R. 9387, Dec. 29, 1950, as amended at 16 F.R. 2655, Mar. 24, 1951]