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SEC amends acquisition and disposition disclosures

Defining Issues |  June 2020

SEC adopts rule to provide investors with more meaningful disclosures about acquired and disposed businesses.

The amendments are intended to assist registrants in making more meaningful determinations of whether an acquired or disposed business is significant and to improve information that investors receive about acquisitions and dispositions of businesses. KPMG has teamed with Latham & Watkins to provide a desktop reference guide summarizing the financial disclosure requirements under the amended rules.


Release No. 33-10786; 34-88914; IC-33872; File No. S7-05-19

  • Public companies, including foreign private issuers, registered investment companies and business development companies

Relevant dates

  • Effective January 1, 2021; early adoption is permitted.

Key impacts

The rule amends Regulation S-X for acquisitions and dispositions of businesses, including real estate operations, in Rules 3-05 and 3-14, Articles 8 and 11, and adds new Rule 6-11 for investment companies and business development companies.

The final amendments, among other things: 

  • Update the significance tests by:
    • revising the investment and income tests;
    • expanding the use of pro forma financial information in measuring significance; and
    • conforming the significance threshold and tests for a disposed business.
  • Require the financial statements of the acquired business to cover no more than the two most recent fiscal years.
  • Permit abbreviated financial statements for certain acquisitions of a component of an entity.
  • Codify current practices for acquired businesses that include oil- and gas-producing activities by:
    • requiring certain ASC 932 disclosures on an unaudited basis for each full year of operations presented for the acquired business; and
    • permitting abbreviated financial statements if certain conditions are met.
  • Do not require separate acquired business financial statements once the business has been included in the registrant’s post-acquisition audited annual financial statements for either nine months or a complete fiscal year, depending on significance.
  • Modify and enhance the required disclosure for the aggregate effect of acquisitions for which financial statements are not required or are not yet required, and expand the pro forma requirements.
  • Permit the use of, or reconciliation to, International Financial Reporting Standards as issued by the International Accounting Standards Board in certain circumstances.
  • Align Rule 3-14 with Rule 3-05 where no unique industry considerations exist.
  • Clarify the application of Rule 3-14 regarding the determination of significance, need for interim income statements, special provisions for blind pool offerings and the scope of the rule’s requirements.
  • Replace existing pro forma adjustment criteria with:
    • ‘Transaction Accounting Adjustments’
    • ‘Autonomous Entity Adjustments’
    • optional ‘Management’s Adjustments’.
  • Make corresponding changes to the smaller reporting company requirements in Article 8 of Regulation S-X, which will also apply to issuers relying on Regulation A.
  • Amend the definition of ‘significant subsidiary’ to provide a definition that is specifically tailored for investment companies.
  • Add new Rule 6-11 and amend Form N-14 for fund acquisitions by investment companies and business development companies.

External resources

SEC Adopts Amendments to Improve Financial Disclosures about Acquisitions and Dispositions of Businesses

Download the document:

SEC amends acquisition and disposition disclosures

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Accounting Research Online

Access our accounting research website for additional resources for your financial reporting needs.

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