SEC and AICPA Issue Guidance on Conflict Minerals and Resource Extraction Issuer Payment Disclosures

Published on: 31 May 2013

The staff in the SEC’s Division of Corporation Finance issued interpretive guidance in the form of frequently asked questions (FAQs) on applying the SEC’s final rules on (1) conflict minerals (SEC Final Rule Release No. 34-67716) and (2) disclosure of certain payments by resource extraction issuers (SEC Final Rule Release No. 34-67717).

The SEC staff also confirmed that under both final rules, each of which requires registrants to file Form SD if the rule applies to them, a registrant’s eligibility to issue securities on Form S-3 is not affected by the Form SD filing requirements (e.g., timeliness of filing).

Specifics about the FAQs are outlined below.

Conflict Minerals FAQs

The conflict minerals FAQs clarify:

  • Which registrants are affected by the rule and confirm that an issuer’s subsidiary is within the rule’s scope.
  • Which activities are considered part of the mining process (i.e., not considered “manufacturing” and thus excluded from the rule).
  • Certain aspects related to the rule’s concepts of “necessary to the functionality or production” and “contract for manufacture.”
  • The application of product packaging and the use of tools and equipment in an issuer’s manufacturing process.
  • Certain Form SD preparation and filing requirements, including filing deadlines for new registrants.

Editor’s Note: On June 4, 2013, the AICPA issued interpretive guidance in the form of Q&As clarifying auditor independence considerations related to the independent private sector audit (IPSA) of an issuer’s conflict minerals report. The guidance addresses a number of topics, including (1) whether an auditor of an SEC registrant’s financial statements is precluded from performing the IPSA of the registrant’s conflict minerals report and (2) the scope of conflict-minerals-related services that an auditor may perform without affecting its independence. In addition, the Q&As include (1) a decision tree to help auditors determine whether conflict-minerals-related services are permitted (i.e., do not impair independence) and (2) a related matrix that details permitted and prohibited services.

Disclosure of Certain Payments by Resource Extraction Issuers FAQs

The extraction issuer FAQs are broadly grouped into the following categories:

  • Entities subject to the rule.
  • Clarification of the definition of a resource extraction issuer.
  • Definition of the term “mineral” as used in the rule.
  • Payments subject to the rule.

See Deloitte’s September 11, 2012, and September 27, 2012, Heads Up newsletters, respectively, for a discussion about each rule.

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