Regulation S-X
Regulation S-X is the SEC's primary regulation governing the form and content of financial statements required in registration statements, annual and quarterly reports, and proxy statements filed with the SEC by public companies, investment companies, and other registrants.
Regulation S-X works in tandem with Regulation S-K to define what public companies must include in their SEC filings. Where Regulation S-K governs narrative and non-financial disclosures, Regulation S-X prescribes how financial statements must be prepared, what financial statements must be included, and what level of auditing or review is required.
Article 3 of Regulation S-X specifies the financial statements required for operating companies. An annual report on Form 10-K must include audited balance sheets for the two most recent fiscal years, and audited income statements and cash flow statements for the three most recent fiscal years. The financial statements must be prepared in accordance with US Generally Accepted Accounting Principles (GAAP) and audited by an independent registered public accounting firm in accordance with PCAOB standards.
The requirement for auditor independence is reinforced through Regulation S-X, which specifies what relationships and financial interests constitute an impairment of auditor independence. An auditor cannot have a direct financial interest in or material indirect financial interest in an audit client, cannot have certain employment relationships with the client, and cannot have provided certain non-audit services during the audit period. These independence requirements are designed to ensure that auditors' opinions reflect objective assessments rather than commercially motivated ones.
Regulation S-X also governs the financial statements required for acquisitions. When a registrant acquires a significant business, it must file separate financial statements for the acquired business — audited statements if the acquisition exceeds certain significance thresholds, and unaudited interim statements if applicable. The significance tests compare the target's assets, revenues, and the investment amount to the acquirer's consolidated figures, determining how many years of acquired-business financials must be furnished.
For investment companies — mutual funds, ETFs, closed-end funds — Article 6 and related articles of Regulation S-X provide a separate framework reflecting the distinct nature of investment company financial statements, including requirements for portfolio schedules, per-share data, and financial highlights.