Regulation S-X profoundly affects internal and external accountants and auditors, and directors and officers and numerous officials, employees and contractors of publicly reporting companies, and because of the need for accurate reporting of monies and other data, any operation of a company may be affected to require ultimate compliance with Regulation S-X and the Sarbanes–Oxley Act.
In May 2016 the SEC also issued additional Compliance & Disclosure Interpretations[5] related to the rules and regulations on the use of non-GAAP financial measures.
Major entities involved in its maintenance include: Because Regulation S-X is large and its impact on financial report is so pervasive, it is important to have a consistent terminology and to get it right from the beginning so that words and phrases have the same meaning throughout.
For examples: Accountant's report, Amount, Certified, Control, Fiscal Year, Share, Wholly Owned Subsidiary, and so on.
A specific meaning is not given for the complex term Internal control over financial reporting, but reference is made to Rule 13a-15(f).
As the failure to have such controls or properly implement them or use/provide their disclosure may come with penalties and since this phrase pervades thinking and rule-making in the securities industry, it is worth viewing this definition, a definition that requires management to be pro-active: The term internal control over financial reporting is defined as a process designed by, or under the supervision of, the issuer's principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: 1.
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; 2.
Title II of the Sarbanes–Oxley Act, entitled "Auditor Independence" required the Commission to adopt, by January 26, 2003, final rules such as 33-8183.
Section 201 of Sarbanes–Oxley require that non-audit services that are not prohibited under the Sarbanes–Oxley Act and the Commission's rules be subject to pre-approval by the registrant's audit committee.
Qualifications and Reports of Accountants After this initial section where the SEC lays out the requirements and limitations on interaction between company, management, audit committee, accountants and the auditor, Regulation S-X is then free to carry on and discuss the form and content of financial statements and financial reporting.
Rules 3-01 to 3-20 specify the balance sheets and statements of income and cash flows to be included in disclosure documents when prepared in accordance with Regulation S-X.
Other portions of Regulation S-X govern the examination, form and content of such financial statements, including the basis of consolidation and the schedules to be filed.
Such adjustments shall include, for example, appropriate estimated provisions for bonus and profit sharing arrangements normally determined or settled at year-end.
The degree of ownership of one entity by its parent; foreign subsidiaries; differing fiscal reporting periods - are among the factors management must consider in deciding if or to what extent to consolidate income statements.