Payments including the following are required to be disclosed where they are made to governments to further the commercial development of oil, natural gas, or minerals and exceed an 'de minimus' amount (US$100,000 by payment category per fiscal year):
- Fees (including license fees)
- Production entitlements
- Infrastructure improvements.
The following information about the payments must be provided to the SEC by filling in a new form and also providing the information in XBRL tagged electronic format:
- Type and total amount of payments made for each 'project' (which is undefined to allow flexibility in applying the term to different business contexts)
- Type and total amount of payments made to each government
- Total amounts of the payments, by category
- Currency used to make the payments
- Financial period in which the payments were made
- Business segment of the resource extraction issuer that made the payments
- The government that received the payments, and the country in which the government is located
- The project of the resource extraction issuer to which the payments relate.
One of the ideas behind the rule is that if United States registered 'resource extraction issuers' make the disclosures required, the governments that receive resource related payments will also, to that extent at least, be more accountable to the people they govern. Similar disclosures are also being considered by the European Union and were in the IASB's Discussion Paper on Extractive Industries, published in April 2010, which included the 'Publish What You Pay' (PWYP) proposals calling for country-by-country reporting.
In finalising the rules, the SEC responded to responses received on its initial proposals, including addressing concerns about compliance costs and considering the effects of the rule on efficiency, competition, and capital formation. However, not all SEC Commissioners were in support of the proposed rules - for instance, Commissioner Daniel M. Gallagher noted constituent concerns about making competitively significant information available to competitors, the costs that may be incurred in collating the information, and the potential impacts on economic outcomes.
The new rules apply for fiscal years ending after 30 September 2013. Click for press release (link to SEC website).
The SEC also concurrently issued new a new rule requiring companies to publicly disclose their use of 'conflict minerals' that originated in the Democratic Republic of the Congo (DRC) or an adjoining country.