2025 SEC Financial Statement Requirements: A Step-by-Step Guide for Foreign Companies

Navigating the financial statement requirements for non-U.S. issuers in registered offerings under U.S. federal securities laws is crucial for compliance and successful capital raising. Non-U.S. companies, particularly those qualifying as foreign private issuers (FPIs), must adhere to specific financial disclosure standards when accessing U.S. public markets.

Definition of Foreign Private Issuer (FPI)

An FPI is a non-U.S. entity that meets certain criteria regarding U.S. ownership and operational ties. Specifically, if 50% or more of its outstanding voting securities are held by U.S. residents, the issuer must not have:

A majority of its executive officers or directors as U.S. citizens or residents
More than 50% of its assets located in the United States
Its business principally administered in the United States

Meeting the FPI criteria allows issuers certain reporting flexibilities compared to domestic U.S. companies.

Financial Statement Requirements for FPIs

FPIs must include specific financial statements in their registration statements, prepared in accordance with:

U.S. Generally Accepted Accounting Principles (U.S. GAAP)
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB)
Local GAAP reconciled to U.S. GAAP

Required Financial Statements

Audited Annual Financial Statements

Balance sheet
Statement of comprehensive income
Statement of changes in equity
Statement of cash flows
Accompanying notes and schedules

Interim Unaudited Financial Statements

Covering at least the first six months of the fiscal year
Including comparative statements for the same period in the prior year
Prepared in accordance with U.S. GAAP, IASB IFRS, or local GAAP reconciled to U.S. GAAP

Considerations for Emerging Growth Companies (EGCs)

Non-U.S. issuers qualifying as EGCs—those with less than $1.235 billion in annual gross revenue—may benefit from reduced disclosure requirements, such as:

Including two years of audited financial statements instead of three
Providing Management's Discussion and Analysis (MD&A) for the periods presented in the financial statements

Best Practices for Compliance

Successfully navigating the complex financial reporting landscape requires careful attention to detail and robust processes:

Systematic Documentation: Maintaining comprehensive records of financial data and supporting documentation
Regular Monitoring: Staying current with regulatory changes and updating procedures accordingly
Quality Control: Implementing thorough review processes to ensure accuracy and completeness

Modern technology solutions can help streamline these processes, enabling organizations to maintain compliance while focusing on their core business objectives.

Nabu offers AI-powered tools to help organizations streamline their financial reporting processes and maintain regulatory compliance. Learn more about our solutions for non-U.S. issuers here.