The US Securities and Exchange Commission (SEC) adopted final amendments to its rules on December 2, 2021 to implement the requirements in the Holding Foreign Companies Accountable Act of 2020. Although for the foreseeable future, the majority of the new rules are expected only to affect SEC registrants whose operations are based in China or Hong Kong, all SEC registrants that file their annual reports on Forms 10-K, 20-F, or 40-F need to be aware of new requirements that are not included in the forms themselves.

Specifically, a registrant filing an annual report for a period ended after December 15, 2021 that files financial statements using Inline XBRL, must tag three additional data elements:

  • the auditor(s) who provided the opinion(s) related to the financial statements in the annual report;
  • the location from where the auditor's report was issued; and
  • the Public Company Accounting Oversight Board (PCAOB) ID Number(s) of the audit firm(s) or branch(es) that provided the opinion.

As noted above, this new requirement cannot be found in the annual report forms themselves. Rather, the SEC has adopted an amendment to Rule 405 of Regulation S-T, effective January 10, 2022. The new paragraph in Rule 405 refers the reader to the SEC's Document Entity and Information (DEI) taxonomy in the EDGAR Filer Manual, Volume II: EDGAR Filing, which contains these new data elements in Section 6.5.54. While the SEC's adopting release states that the location of the information in the annual report is "up to the registrant," the EDGAR Filer Manual provides that the data "should be tagged where they normally appear, adjacent to the auditors' opinion."

The two most obvious locations to provide this information would be on the auditor's signature page to its report, which already includes the auditor's name and location, or in the new items added to Forms 10-K, 20-F, and 40-F to require disclosure regarding foreign jurisdictions that prevent PCAOB inspection (Items 9C, 16I, and B(18), respectively). Note, however, that to be included on the signature page to the audit report, the auditor, and not the company, would have to provide the revised disclosure.

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe - Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2020. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.