Selection of Reporting Currency for Financial Statements of Foreign Private Issuers, et al.; Final Rules and Proposed Rule SECURITIES AND EXCHANGE COMMISSION

SUMMARY: The Commission is announcing the adoption of amendments to

Regulation S-X and Form 20-F to facilitate registration and reporting

by foreign private issuers. The amendments allow foreign issuers

flexibility in the selection of the reporting currency used in filings

with the Commission, and streamline financial statement reconciliation

requirements for foreign private issuers with operations in countries

with hyperinflationary economies.

EFFECTIVE DATE: December 20, 1994.

FOR FURTHER INFORMATION CONTACT:

Wayne E. Carnall, Deputy Chief Accountant, Division of Corporation

Finance at (202) 942-2960, Mail Stop 3-13, U.S. Securities and Exchange

Commission, 450 Fifth Street NW., Washington, DC 20549.

SUPPLEMENTARY INFORMATION: As described in detail below, the Commission

is adopting amendments to Rule 3-20\1\ of Regulation S-X\2\ and Form

20-F\3\ under the Securities Exchange Act of 1934.\4\

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\1\17 CFR 210.3-20.

\2\17 CFR 210.

\3\17 CFR 249.220f.

\4\15 U.S.C. 78a et seq.

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I. Introduction

The Commission is adopting amendments to facilitate registration

and reporting by foreign private issuers by allowing flexibility in the

selection of the reporting currency used in filings with the Commission

and by streamlining financial statement reconciliation requirements for

foreign private issuers with operations in countries with

hyperinflationary economies. Under the amended rules, a foreign private

issuer can state amounts in its financial statements in any currency

which it deems appropriate. In addition, a foreign private issuer that

accounts in its primary financial statements for its operations in a

hyperinflationary economy in accordance with International Accounting

Standards No. 21, ``The Effects of Changes in Foreign Exchange Rates,''

as amended in 1993 (``IAS 21''), using the historical cost/constant

currency method would not need to reconcile the differences that would

result from application of the U.S. standard, Statement of Financial

Accounting Standards No. 52, ``Foreign Currency Translation'' (``SFAS

52''). The amendments adopted today were proposed by the Commission on

April 19, 1994.\5\

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\5\See Securities Act Release No. 7054 (April 19, 1994) (59 FR

21644) (the ``Proposing Release'').

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Most of the comment letters received regarding the proposals were

supportive of the Commission's efforts to increase flexibility in the

selection of the reporting currency and to streamline the

reconciliation process for foreign private issuers.\6\ The Commission

believes that this flexibility can be provided to foreign private

issuers with no loss of material information that is necessary for a

U.S. investor to make an informed investment decision. The amendments

are being adopted largely as proposed, with certain modifications and

clarifications in response to public comments.

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\6\Fourteen comment letters on the proposal were received. Those

letters and a summary of the comments are available for public

inspection and copying in File No. S7-11-94 at the Commission's

Public Reference Room in Washington, DC.

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II. Reporting Currency of Foreign Private Issuers

A. Selection of a Reporting Currency

The amendments adopted today permit a foreign private issuer to

state the amounts in its primary financial statements using any

currency which it deems appropriate. The proposed requirement that the

reporting currency also be used to report to a majority of the issuer's

nonaffiliated securityholders has been deleted in response to comments,

as discussed below.

Commenters generally agreed with the Proposing Release on the need

to increase flexibility in the selection of the reporting currency.

Commenters agreed that rules regarding reporting currency have been

troublesome for some foreign issuers that operate in various

currencies. Compliance with the rule previously governing selection of

the reporting currency was problematic for some issuers because no

primary economic environment could be identified, and the country of

incorporation had minimal significance to operations. In addition,

several commenters cited the preference of U.S. investors for financial

statements prepared using the U.S. dollar as the reporting currency.

A number of commenters expressed the view that, as proposed, the

rule was overly restrictive in requiring that the reporting currency

used in filings with the Commission also be used in financial

statements that are distributed to the majority of the issuer's

nonaffiliated shareholders. Commenters believed that requirement would

force some foreign issuers to distribute an additional set of financial

statements, stated in the currency used for reporting to the

Commission, to securityholders outside the U.S. who would find the

additional material of no interest or benefit. Mandating delivery of

financial statements in foreign countries is not appropriate or

necessary for the protection of U.S. investors. Accordingly, the

restriction has been deleted from the rule as adopted.

Several commenters favored increased flexibility but suggested

various limiting criteria for determining the appropriate currency. A

few commenters indicated a view that an issuer should use the same

reporting currency for all external reporting. One commenter suggested

that the Commission ask the Financial Accounting Standards Board

(``FASB'') to undertake a project on the selection of reporting

currency. The Commission does not believe that a need for new

restrictions on a registrant's choice of reporting currency has been

demonstrated, and does not believe reporting currency is an issue that

needs to be addressed by the FASB. Moreover, restricting an issuer that

chooses to sell its securities in U.S. public markets to a single

reporting currency in all external reports in any jurisdiction is not

practical or necessarily helpful to U.S. investors. Foreign law or

custom may require an issuer to publicly distribute financial

statements in a currency that is not as meaningful and relevant to U.S.

investors as another currency. The Commission believes management and

its advisors should be free to select the reporting currency that is

most useful for U.S. markets. Of course, reporting practices will

continue to be monitored to assess the practiced application of today's

amendments.

One commenter that generally supported increased flexibility in the

selection of the reporting currency indicated that issuers should not

be permitted to report in U.S. dollars if the currency of its primary

economic environment or the currency in which dividends are paid is a

currency of a hyperinflationary economy or is subject to material

exchange restrictions. That suggestion has not been followed. Domestic

issuers that conduct substantial operations in countries whose currency

is hyperinflationary consolidate those operations and present them in

U.S. dollars. While translation from a currency of a hyperinflationary

environment into a more stable currency presents some practical

problems, the accounting profession has addressed these situations.

SFAS 52 provides guidance on the translation of operations in

hyperinflationary economies under U.S. GAAP, and IAS 21, as discussed

in a separate section of this release, also prescribes a method of

translation.

The rule has not been revised, as suggested by one commenter, to

address material foreign exchange restrictions and controls because the

resolution of such issues typically is dependent on the particular

facts and circumstances. Registrants are encouraged to discuss unique

issues regarding exchange restrictions or controls involving the

registrant and its subsidiaries and other affiliates with the

Commission's staff prior to filing.

The amended rule requires, as was proposed, specific disclosure in

a note to the financial statements if the currency in which the issuer

expects to declare dividends is different from the reporting currency,

or there are material exchange restrictions affecting the reporting

currency or the currency in which dividends are paid. Registrants are

reminded that to the extent that depicted trends and reported results

are affected by exchange rate fluctuations, explanatory disclosure

should be provided in filings with the Commission as part of the

explanation of the material changes from year to year required by

management's discussion and analysis in Regulation S-K\7\ as well as

the comparable sections presented in Item 9 of Form 20-F.\8\

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\7\17 CFR 229.303.

\8\17 CFR 249.220f.

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The adopted rule applies to financial statements of the registrant.

Financial statements furnished with respect to equity investees or

acquired businesses may be prepared using the same reporting currency

as the registrant's primary financial statements or the currency in

which that entity normally prepares its financial statements. If the

currency selected for the separate financial statements of acquisitions

and investees differs from that of the registrant, pro forma

information and condensed financial data of an investee should be

prepared using the reporting currency of the registrant.\9\

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\9\In circumstances where a registrant furnishes separate

financial statements of an equity investee pursuant to Rule 3-09 of

Regulation S-X, the staff has not required the registrant to also

furnish summarized financial data of the investee pursuant to Rule

4-08(g) of Regulation S-X (17 CFR 210.4-08(g)) (See Staff Accounting

Bulletin No. 44, Topic 6:K (March 3, 1983) (47 FR 10789). However,

if the separate financial statements of an equity investee are not

prepared in the same reporting currency as the issuer, the

summarized financial data pursuant to Rule 4-08(g) of Regulation S-X

should be provided in the primary financial statements.

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B. Measurement

The Proposing Release requested comment on two alternative

approaches to measuring transactions that would then be translated into

the reporting currency. Commenters, with one exception, supported the

method described as Approach A. Under that approach, the issuer would

measure separately its own transactions, and those of each of its

material operations (for example, branch, division, subsidiary, or

joint venture) that are included in the issuer's consolidated financial

statements and located in a non-hyperinflationary environment, using

the particular currency of the primary economic environment in which

the issuer or the operation conducts its business.\10\ Financial

statement amounts so determined would be translated to the reporting

currency using the methodology that is prescribed by SFAS 52 for

translation of financial statements from a functional currency to a

reporting currency. Under that method, (a) all assets and liabilities

are translated into the reporting currency at the exchange rate at the

balance sheet date, (b) all revenues, expenses, gains, and losses are

translated at the exchange rate existing at the time of the transaction

or, if appropriate, a weighted average of the exchange rates during the

period or year, and (c) all the translation effects of exchange rate

changes are included as a separate component (``cumulative translation

adjustment'') of shareholders' equity.

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\10\An issuer with a material operation in a hyperinflationary

environment would measure the transactions of the operation in the

reporting currency pursuant to SFAS 52, except that no

reconciliation to that method will be required in the circumstances

discussed in Section III of this release.

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Commenters generally objected to Approach B because measurement of

reported results of operations and financial position would be

dependent on the issuer's particular reporting currency, rather than

the economic environment in which the business operated. Pursuant to

Approach B, all transactions of the issuer and its subsidiaries would

be measured (or remeasured if not so measured initially) using

reporting currency, except that transactions of each of its material

foreign operations (for example, branch, division, subsidiary, or joint

venture) included in the consolidated financial statements and located

in a non-hyperinflationary environment would be measured using the

particular currency of the primary economic environment in which the

foreign operation conducts its business. Financial statement amounts

determined for the material foreign operations of the issuer would be

translated using the methodology prescribed by SFAS 52 for translation

of financial statements from a functional currency to a reporting

currency, as described above. Commenters also opposed Approach B

because it could not be readily implemented by foreign issuers that

report in several currencies due to the significant data and

computational requirements of the remeasurement process. While the

Commission has determined not to adopt Approach B in the amendment,

issuers that have historically presented results using that method are

encouraged to discuss with the staff possible resolutions of any

particular problems that may be encountered by the issuer as a result

of the Commission's adoption of Approach A.

C. Changes of Reporting Currency

As was proposed, the final amendments provide that changes in the

reporting currency require the financial statements of periods prior to

the change be comprehensively recast as if the new reporting currency

had been used.\11\ To comprehensively recast prior financial

statements, a methodology consistent with SFAS 52 should be applied.

That is, the income statement and statement of cash flows should be

translated into the new reporting currency using an appropriately

weighted average exchange rate for the applicable period, and assets

and liabilities should be translated using the exchange rate at the end

of the applicable period. Registrants that encounter unusual or complex

problems in the implementation of a change in reporting are encouraged

to discuss those issues with the staff prior to filing.

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\11\A change in the reporting currency may or may not be

coincidental with a change in the currency of the primary economic

environment in which the operations exist. The U.S. accounting

guidance applicable to a change in an entity's functional currency

appears in paragraph 9 of SFAS 52. The effects of differences

between the method of accounting in the primary financial statements

for a change in functional currency and the method of accounting

prescribed by U.S. GAAP should be explained and quantified where

reconciliation is required pursuant to Item 17 or Item 18 of Form

P20-F.

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While the number of periods for which retroactive recasting of

results is computed generally does not affect relationships among

balance sheet or income statement amounts, it may affect the allocation

of amounts between the cumulative translation adjustment and other

stockholder equity accounts. As proposed, the adopted rule specifies

that financial statements of prior periods need be comprehensively

recast as if the new reporting currency had been used only since the

earliest period presented in the filing that initially reflects the

change in reporting currency.

In response to requests for views regarding the need to disclose

the reasons for a registrant's change in its reporting currency,

several commenters questioned the need for the disclosure or doubted

that the information would be useful. Comments of financial analysts

supported such a disclosure. The Commission agrees with those

commenters that indicated that disclosure of the reason for the change

would be informative, and accordingly, the adopted rule requires that

disclosure.

III. Foreign Issuer Operations in a Hyperinflationary Economy

As adopted, the rules eliminate the requirement that a foreign

private issuer quantify the effects of a translation methodology for

operations in a hyperinflationary environment which differs from SFAS

52 so long as the method used in the financial statements conforms with

IAS 21, provided that the method is used consistently for all periods.

IAS 21, as amended in 1993, requires that amounts in the financial

statements of the hyperinflationary operations be restated for the

effects of changing prices using a methodology permitted by

International Accounting Standard No. 29, ``Financial Reporting in

Hyperinflationary Economies'' (``IAS 29''), and then translated to the

reporting currency. The adopted rule differs from the proposal in that

it limits the permissible method for restating for effects of changing

prices to the historical cost/constant dollar method, as discussed

below.

Commenters supporting the Commission's proposal cited various

reasons including the high cost of reconciliation for differences in

accounting for hyperinflationary operations, support for harmonization

of international accounting standards, and the view that IAS 21 is

theoretically superior to SFAS 52. In addition, commenters observed

that acceptance of IAS 21 without reconciliation is consistent with the

Commission's existing rule that does not require the elimination of the

effects of inflation in price level adjusted financial statements in

the reconciliation to U.S. GAAP. One commenter opposed the proposal,

suggesting that the Commission was abandoning the objective of

providing the market with comparable information about issuers. The

Commission's acceptance of IAS 21 for purposes of foreign issuers is

based, in part, on the recognition that financial information reported

about the hyperinflationary operations of a foreign issuer will not

necessarily be comparable to a U.S. issuer or to another foreign issuer

if that information is determined on a basis consistent with SFAS 52.

Since SFAS 52 requires the use of the reporting currency as the

currency of measurement for hyperinflationary operations, reported

results are dependent on the reporting currency under SFAS 52. IAS 29

addresses that problem by adjusting measurements in the local currency

for inflation before translation to the reporting currency.

IAS 29 permits two methods of adjusting for the effects of changing

prices: (a) Restatement of historical cost amounts into units of

currency that have the same general purchasing power (historical cost/

constant currency method), or (b) measurement as current cost, with

amounts for prior periods restated for changes in the general level of

prices (current cost method). In response to a request for comments

concerning the appropriateness of accepting either method under IAS 29,

two commenters indicated that the flexibility permitted by IAS 29 would

not promote consistency or an understanding of the financial

statements. In recognition of this concern, the adopted rule does not

allow the use of the current cost approach. The Commission believes

that the historical cost/constant currency method is the preferable

choice of the two because it is more likely to facilitate comparison

among similarly situated companies. Under the historical cost/constant

currency method, amounts in the financial statements of the

hyperinflationary operation are restated for the effects of changing

prices, and then translated to the reporting currency.

The elimination of the alternative of using the current cost method

is not expected to have a significant effect on many registrants.

Issuers from several countries currently prepare financial statements

filed with the Commission that are adjusted for inflation. With the

exception of Mexico, it is the predominant practice in most of these

countries to use a method consistent with the historical cost/constant

currency method in IAS 29.\12\ The elimination of the availability of

using the current cost method does not apply to situations in which the

issuer's reporting currency comprehensively includes the effects of

price level changes. Such entities can continue to use the current cost

method. That is, the current cost method is eliminated only for those

issuers whose reporting currency is not adjusted for inflation (stable

reporting currency), but have operations in a hyperinflationary

economy. Issuers that use the current cost method for operations in a

hyperinflationary economy should discuss their particular circumstances

with the staff.

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\12\The Commission has been advised that the Mexican Institute

of Public Accountants recently approved an amendment to eliminate

the use of the current cost method.

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As proposed, a hyperinflationary environment is defined in the

adopted rule as one experiencing cumulative inflation of approximately

100% or more over the most recent three year period, as measured using

an appropriate inflation index which measures general price levels in

the country. This definition is consistent with that used to define a

hyperinflationary entity under SFAS 52.\13\ Accordingly, foreign

private issuers may omit reconciliation of accounting differences

arising from the use of IAS 21 for hyperinflationary operations only

when they would have been required to comply with the comparable

provisions of SFAS 52.

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\13\See paragraph 11 of SFAS 52.

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Consistent with the rule prior to amendment, foreign private

issuers that prepare their financial statements in a reporting currency

that comprehensively includes the effects of price level changes are

not required to eliminate such effects in the reconciliation to US

GAAP. Item 17(c)(2)(iv)(A) and Item 18(c)(2)(iv)(A) of Form 20-F does

not require that the entity operate in a hyperinflationary environment.

One commenter questioned whether the proposed rule only applies to

a subsidiary that operates in a hyperinflationary environment, or if it

would apply equally to a parent company that operated in a

hyperinflationary environment.

The adopted rules would apply equally to the parent company. It

would also be acceptable for a parent company to apply the

remeasurement principles of SFAS 52. The legal structure of an entity

should not affect the financial statements.

IV. Cost-Benefit Analysis

No specific data were provided in response to the Commission's

request regarding the costs and benefits of the amendment being adopted

today. Several issuers did indicate, however, that if the Commission

adopted the method to measure transactions described as Approach B in

the Proposing Release that significant additional recordkeeping would

be required. In addition, commenters supporting the proposal with

respect to hyperinflationary accounting noted that the current

reconciliation requirements did not meet the cost benefit test because

of the complexities of preparation. The Commission believes that the

amendments will reduce costs and that the adoption of these rules will

be beneficial to U.S. investors, as it will encourage more foreign

companies to list their securities and raise capital in the United

States and will be consistent with investor protection.

V. Regulatory Flexibility Act Certification

Pursuant to the Regulatory Flexibility Act (5 U.S.C. 605(b)), the

Chairman of the Commission has certified that the revisions to rules

and forms will not have a significant impact on a substantial number of

small entities. Members of the public who wish to obtain a copy of the

Regulatory Flexibility Certification should contact Wayne E. Carnall,

(202) 942-2960, Deputy Chief Accountant, Division of Corporation

Finance, Mail Stop 3-13, Securities and Exchange Commission, 450 Fifth

Street NW., Washington, DC 20549.

VI. Statutory Bases

The Commission's rules and forms are amended pursuant to section 19

of the Securities Act of 1933 and sections 3(b), 4A, 12, 13, 14, 15,

16, and 23 of the Securities Exchange Act of 1934.

VII. Effective Date

The final rule and amendments to the Commission's rules and forms

shall be effective immediately upon publication in the Federal

Register, in accordance with the Administrative Procedure Act, which

allows effectiveness in less than 30 days after publications for, inter

alia, ``a substantive rule which grants or recognizes an exemption or

relieves a restriction.'' 5 U.S.C. 553(d)(1).

List of Subjects in 17 CFR Parts 210 and 249

Accounting, Reporting and recordkeeping requirements, Securities.

Text of Rule and Form Amendments

In accordance with the foregoing, Title 17, Chapter II of the Code

of Federal Regulations is amended as follows:

PART 210--FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL

STATEMENTS, SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF

1934, PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, INVESTMENT

COMPANY ACT OF 1940, AND ENERGY POLICY AND CONSERVATION ACT OF

1975.

1. The authority citation for part 210 is revised to read as

follows:

Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77aa(25),

77aa(26), 78l, 78m, 78n, 78o(d), 78w(a), 78ll(d), 79e(b), 79j(a),

79n, 79t(a), 80a-8, 80a-20, 80a-29, 80a-30, 80a-37a, unless

otherwise noted.

2. By revising Sec. 210.3-20 to read as follows:

Sec. 210.3-20 Currency for financial statements of foreign private

issuers.

(a) A foreign private issuer, as defined in Sec. 230.405 of this

chapter, shall state amounts in its primary financial statements in the

currency which it deems appropriate.

(b) The currency in which amounts in the financial statements are

stated shall be disclosed prominently on the face of the financial

statements. If dividends on publicly-held equity securities will be

declared in a currency other than the reporting currency, a note to the

financial statements shall identify that currency. If there are

material exchange restrictions or controls relating to the issuer's

reporting currency, the currency of the issuer's domicile, or the

currency in which the issuer will pay dividends, prominent disclosure

of this fact shall be made in the financial statements. If the

reporting currency is not the U.S. dollar, dollar-equivalent financial

statements or convenience translations shall not be presented, except a

translation may be presented of the most recent fiscal year and any

subsequent interim period presented using the exchange rate as of the

most recent balance sheet included in the filing, except that a rate as

of the most recent practicable date shall be used if materially

different.

(c) If the financial statements of a foreign private issuer are

stated in a currency of a country that has experienced cumulative

inflationary effects exceeding a total of 100 percent over the most

recent three year period, and have not been recast or otherwise

supplemented to include information on a historical cost/constant

currency or current cost basis prescribed or permitted by appropriate

authoritative standards, the issuer shall present supplementary

information to quantify the effects of changing prices upon its

financial position and results of operations.

(d) Notwithstanding the currency selected for reporting purposes,

the issuer shall measure separately its own transactions, and those of

each of its material operations (e.g., branches, divisions,

subsidiaries, joint ventures, and similar entities) that is included in

the issuer's consolidated financial statements and not located in a

hyperinflationary environment, using the particular currency of the

primary economic environment in which the issuer or the operation

conducts its business. Assets and liabilities so determined shall be

translated into the reporting currency at the exchange rate at the

balance sheet date; all revenues, expenses, gains, and losses shall be

translated at the exchange rate existing at the time of the transaction

or, if appropriate, a weighted average of the exchange rates during the

period; and all translation effects of exchange rate changes shall be

included as a separate component (``cumulative translation

adjustment'') of shareholder's equity. For purposes of this paragraph,

the currency of an operation's primary economic environment is normally

the currency in which cash is primarily generated and expended; a

hyperinflationary environment is one that has cumulative inflation of

approximately 100% or more over the most recent three year period.

Departures from the methodology presented in this paragraph shall be

quantified pursuant to Items 17(c)(2) or 18(c)(2) of Form 20-F

(Sec. 249.220f of this chapter).

(e) The issuer shall state its primary financial statements in the

same currency for all periods for which financial information is

presented. If the financial statements are stated in a currency that is

different from that used in financial statements previously filed with

the Commission, the issuer shall recast its financial statements as if

the newly adopted currency had been used since at least the earliest

period presented in the filing. The decision to change and the reason

for the change in the reporting currency shall be disclosed in a note

to the financial statements in the period in which the change occurs.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

3. The authority citation for part 249 continues to read in part as

follows:

Authority: 15 U.S.C. 78a, et seq., unless otherwise noted;

* * * * *

Sec. 249.220f [Amended]

4. By amending Form 20-F (referenced in Sec. 249.220f) by revising

paragraph (c)(2)(iv) of Item 17 and adding Instruction (5) to Item 17,

by revising paragraph (c)(2)(iv) of Item 18 and adding Instruction (4)

of Item 18 to read as follows:

Note: The form 20-F does not and the amendments will not appear

in the Code of Federal Regulations.

Form 20-F

* * * * *

Item 17. Financial Statements

* * * * *

(c) * * *

(2) * * *

(iv) (A) Issuers that prepare their financial statements on a

basis of accounting other than U.S. generally accepted accounting

principles in a reporting currency that comprehensively includes the

effects of price level changes in its primary financial statements

using the historical cost/constant currency or current cost

approach, may omit the disclosures specified by paragraphs

(c)(2)(i), (c)(2)(ii), and (c)(2)(iii) of this item relating to

affects of price level changes. The financial statements should

describe the basis of presentation, and that such effects have not

been included in the reconciliation.

(B) Issuers that prepare their financial statements on a basis

of accounting other than U.S. generally accepted accounting

principles that translates amounts in financial statements stated in

a currency of a hyperinflationary economy into the issuer's

reporting currency in accordance with International Accounting

Standards No. 21, ``The Effects of Changes in Foreign Exchange

Rates,'' as amended in 1993, using the historical cost/constant

currency approach, may omit the disclosures specified by paragraphs

(c)(2)(i), (c)(2)(ii), and (c)(2)(iii) of this Item relating to the

effects of the different method of accounting for an entity in a

hyperinflationary environment.

(C) If the method of accounting for an operation in a

hyperinflationary economy complies with IAS 21, a statement to that

effect must be included in the financial statements. The

reconciliation shall state that such amounts presented comply with

Item 17 of Form 20-F and are different from that required by U.S.

GAAP.

* * * * *

Instructions

* * * * *

(5) For purposes of this Item, a hyperinflationary economy is

one that has cumulative inflation of approximately 100% or more over

the most recent three year period.

* * * * *

Item 18. Financial Statements

* * * * *

(c) * * *

(2) * * *

(iv) (A) Issuers that prepare their financial statements on a

basis of accounting other than U.S. generally accepted accounting

principles in a reporting currency that comprehensively includes the

effects of price level changes in its primary financial statements

using the historical cost/constant currency or current cost

approach, may omit the disclosures specified by paragraphs

(c)(2)(i), (c)(2)(ii), and (c)(2)(iii) of this item relating to

effects of price level changes. The financial statements should

describe the basis of presentation, and that such effects have not

been included in the reconciliation.

(B) Issuers that prepare their financial statements on a basis

of accounting other than U.S. generally accepted accounting

principles that translates amounts in financial statements stated in

a currency of a hyperinflationary economy into the issuer's

reporting currency in accordance with International Accounting

Standards No. 21, ``The Effects of Changes in Foreign Exchange

Rates,'' as amended in 1993, using the historical cost/constant

currency approach, may omit the disclosures specified by paragraphs

(c)(2)(i), (c)(2)(ii), and (c)(2)(iii) of this Item relating to the

effects of the different method of accounting for an entity in a

hyperinflationary environment.

(C) If the method of accounting for an operation in a

hyperinflationary economy complies with IAS 21, a statement to that

effect must be included in the financial statements. The

reconciliation shall state that such amounts presented comply with

Item 18 of Form 20-F and are different from that required by U.S.

GAAP.

* * * * *

Instructions

* * * * *

(4) For purposes of this Item, a hyperinflationary economy is

one that has cumulative inflation of approximately 100% or more over

the most recent three year period.

* * * * *

By the Commission.

Dated: December 13, 1994.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-31035 Filed 12-19-94; 8:45 am]

BILLING CODE 8010-01-P