The SEC has proposed rule amendments that revise required financial disclosure upon the acquisition and disposition of businesses in M&A transactions. The proposed changes would, among other things:

  • Update the significance tests under these rules by revising the investment test and the income test, and conforming the significance threshold and tests for a disposed business
  • Require the financial statements of the acquired business to cover up to the two most recent fiscal years rather than up to the three most recent fiscal years
  • Permit disclosure of financial statements that omit certain expenses for certain carve-out transactions
  • Clarify when financial statements and pro forma financial information are required
  • No longer require separate acquired business financial statements once the business has been included in the registrant’s post-acquisition financial statements for a complete fiscal year
  • Amend the pro forma financial information requirements to improve the content and relevance of such information; more specifically, these improvements would include disclosure of “Transaction Accounting Adjustments,” reflecting the accounting for the transaction, and “Management’s Adjustments,” reflecting reasonably estimable synergies and transaction effects

Our in-depth analysis on the SEC's proposed rules can be viewed here.