SEC Proposes Amendments to Disclosures about Acquired and Disposed Businesses
On May 3, 2019, the SEC proposed amendments to the financial disclosure requirements for acquired and disposed businesses. The proposal is part of the SEC’s Disclosure Effectiveness Initiative and follows the SEC’s Request for Comment on the Effectiveness of Financial Disclosures about Entities Other Than the Registrant[1] published in September 2015. The proposed changes are intended to enhance the financial information about acquired and disposed businesses for investors, facilitate access to capital, and reduce the complexity and cost to prepare the required disclosures.
Some of the significant proposed amendments compared to the current requirements are as follows:
Topic | Proposed Amendments | Current Guidance |
Measuring the significance of an acquired business |
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Measuring the significance of a disposed business |
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Financial statement requirements for a significant acquired business |
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Financial statement requirements for individually insignificant businesses |
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Financial statement requirements for acquired real estate operations |
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Pro forma financial statements presented in accordance with Article 11 of Regulation S-X |
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The proposed amendments also include updates to:
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Clarify when historical financial statements and pro forma financial information is required;
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Make corresponding changes to the requirements for smaller reporting companies;
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Permit the use of, or reconciliation to, IFRS as issued by the IASB in the financial statements of an acquired business in certain circumstances;
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Define a significant subsidiary tailored to business development companies and other investment companies; and
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Address financial reporting for fund acquisitions by business development companies and other investment companies.
The proposal is subject to a 60-day public comment period after its publication in the Federal Register.
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