Pro Forma Financial Information: A Snapshot
This guide provides a high-level summary of the SEC’s pro forma financial information requirements for significant business acquisitions and is based on the SEC’s latest rule amendments that became effective on January 1, 2021.
Introduction
Regulation S-X Rule 11-01(a)
When a public company (acquiror) completes the acquisition of a significant business or real estate operation, it must provide historical financial statements of the acquired business (target) and the related pro forma financial information.
Form and Content of Pro Forma Financial Information
Regulation S-X Rule 11-02
| Pro Forma Financial Statements | Other Forms and Content Disclosures |
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Form and Content of Pro Forma Adjustments
Regulation S-X Rule 11-02(a)
| Transaction Accounting | Autonomous Entity | Management | |
| When to present | Required | Required when the entity was previously part of another entity (generally spinoff transactions) | Optional – judgment must be applied to determine when there is reasonable basis for such adjustments |
| Where to reflect | Presented in separate column in the pro forma financial information | Presented in separate column in the pro forma financial information | Presented in the explanatory notes to the pro forma financial information |
| What to reflect |
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| How to reflect | For the pro forma statements of income, apply adjustments assuming transaction occurred as of the beginning of the acquiror’s fiscal year presented | ||
| For the pro forma balance sheet, apply adjustments assuming transaction occurred on the date of the acquiror’s balance sheet presented | N/A | ||
Companion Publications
Additional information on the SEC’s historical financial statement requirements for significant business acquisitions and real estate operations, including information on the significance tests as well as when and what to file, can be found in our companion publications.
Financial Statements of Acquired Businesses: A Snapshot
Financial Statements of Acquired Real Estate Operations: A Snapshot
1 Any forward-looking information provided is expressly covered by the safe harbor provisions under the related Securities Act and Exchange Act rules.
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