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Foreign private issuers
if it occurred outside the United States if
it had a substantial effect in the United
States or on its citizens.
9.9 Executive and employee
compensation programs
Cleary Gottlieb Steen & Hamilton LLP
Having a class of listed equity securities
generally facilitates using equity-linked
compensation programs for U.S. executives
and employees. For further information
concerning considerations relevant to
compensation programs, see Section 2.4.
The U.S. “say on pay” rules that require
U.S. domestic issuers to seek periodic
nonbinding shareholder votes to approve
executive compensation (see Section 2.4)
do not apply to foreign private issuers.
Early in the U.S. IPO planning process,
a foreign private issuer should review its
executive and employee compensation
programs with its advisers to ensure that
the U.S. disclosure and other requirements
relevant to them will not pose issues for
the company.
9.10 Financial information
KPMG LLP
The financial statement requirements
for an initial registration statement of a
foreign private issuer is found in Items 3,
8, 17 and 18 of Form 20-F and in Regulation
S-X. The financial statement requirements
differ in a number of significant ways from
those of domestic US issuers. Some of the
key differences in the requirements are as
follows:
• Audited financial statements generally
must cover each of the latest three
fiscal years, with certain exceptions:
• if the issuer has been in existence
less than the required three years,
financial information covering the
issuer’s predecessor entities (if
any) may need to be provided;
• if a jurisdiction outside the United
States does not require a balance
sheet for the earliest year of the
three-year period, that balance
sheet may be omitted; and
• audited financial statements
are required only for the most
recent two years if the financial
statements presented are prepared
in accordance with US GAAP.
• Foreign private issuers may use
GAAP other than US GAAP, but may
need to reconcile to US GAAP. This
reconciliation is not required if the
company uses IFRS as issued by the
IASB.
• Regardless of the basis of presentation,
the audited financial statements must
be accompanied by an audit report
issued by independent accountants
that are registered with the PCAOB
and audited in accordance with PCAOB
standards. Financial statements audited
under the International Auditing
Standards or other local country GAAS
would not be considered “audited”
financial statements for SEC purposes.
The accountants must meet SEC and
PCAOB standards for independence.
The SEC Staff will not object if the
audit report states that the audit was
also conducted in accordance with
home-country generally accepted
accounting standards.
• The latest audited annual financial
statements included in the registration
statement must be as of a date not
older than 12 months prior to the date
the registration statement is filed. The
SEC will waive this requirement in
cases where the company can represent
adequately that it is not required to
comply with this requirement in any
other jurisdiction outside the United
States, and that complying with the
requirement is impracticable or involves
undue hardship. Regardless, the latest
audited annual financial statements
included in the filing cannot be more
than 15 months old as of the date the
registration statement becomes effective.
• If a registration statement becomes
effective more than nine months
after the end of the last audited fiscal
year, the company must provide
unaudited interim financial statements
in accordance with, or reconciled to,
US GAAP (this reconciliation is not
required if the company uses IFRS as
issued by the IASB) covering at least
the first six months of the year.
• Foreign private issuers may report in
any currency.
• Financial statements of an acquired
foreign business need not be reconciled
from local GAAP to US GAAP when the
acquired business is below 30% for any
of the Rule S-X 1-02(w) significance
tests. This reconciliation is not
required if the acquired business uses
IFRS as issued by the IASB.
• Financial statements of a significant
equity method investment meeting the
significance threshold of Rule 3-09 of
Regulation S-X need not be reconciled to
US GAAP (or, if applicable, IFRS as issued
by the IASB), unless either of the two
tests is greater than 30% as calculated
on a US GAAP (or, if applicable, IFRS as
issued by the IASB) basis. A description
of the differences in accounting methods
is required, however, regardless of the
significance levels. ●
108 NYSE IPO Guide