Document Type
Article
Publication Date
1971
Abstract
Certain registration forms under the Securities Act of 1933 require, where debt securities are to be registered, a statement of the ratio of earnings to fixed charges. Certain registration and report forms under the Securities Exchange Act of 1934 permit the showing of such ratio. Registration statements have been filed recently with the Commission wherein the ratio of earnings to fixed charges was computed on the basis of the revenues and expenses set forth in financial statements which did not reflect the revenues and expenses of a substantial portion of the enterprise carried on by the registrant. For example, some issuers operate large affiliated credit companies or supplier companies which themselves are obligated for substantial amounts of fixed charges by reason of debt, leases or other contractual obligations. In addition, the registrant may have guaranteed the debt of a supplier company which is not a subsidiary of the registrant or may have entered into contracts with such supplier which provide for payments designed to service debt of the supplier. The fixed charges of such related companies are frequently not taken into account in computing the ratio of earnings to fixed charges for the registrant (or registrant and consolidated subsidiaries) and, therefore, such ratio standing by itself may be misleading where consideration of the revenues and expenses of the total enterprise would produce a materially different result. It is the position of the Commission that, in such instances, the ratio of earnings to fixed charges for the registrant must be accompanied by effective disclosure of the significance of fixed charges of other companies included in the enterprise whether or not the revenues and expenses of such companies are set forth in the financial statements of the registrant. Such disclosure usually should be accomplished by presenting the ratio of earnings to fixed charges for the total enterprise in equivalent prominence with the ratio for the registrant or registrant and consolidated subsidiaries.
Relational Format
article
Series Title
Accounting Series Release No. 122;Securities Act of 1933 Release No. 5176;Securities Exchange Act of 1934 Release No. 9279
Recommended Citation
United States. Securities and Exchange Commission, "Coverage of fixed charges" (1971). Federal Publications. 193.
https://egrove.olemiss.edu/acct_fed/193