The SEC recently adopted comprehensive amendments to its rules that govern financial statement requirements for acquisitions or dispositions of significant businesses or other assets. The rules specify the historical financial statements of the business or assets and the related pro forma financial information a registrant must include in its Exchange Act and Securities Act filings. Registrants will first be required to comply with the amended rules at the beginning of their fiscal year commencing after December 31, 2020.
The amended rules update tests for measuring the "significance" of an acquired business to limit the over-identification of acquisitions as material to a registrant. Some of the rule changes substantially conform significance testing for disposed businesses to testing for acquired businesses, while others align the financial statement requirements for acquisitions of real estate operations with those applicable to other types of acquired businesses. In addition to enhancing consistency in financial reporting, the amendments reduce some financial statement filing burdens and, consistent with the SEC's disclosure effectiveness initiative, clarify and codify many requirements that previously had developed in market practice or been articulated in SEC staff guidance.
The SEC's 267-page adopting release for the amended rules (Release No. 33-10786) can be viewed here.
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