United States

Disclosure amendments: Acquired and disposed businesses


The SEC recently issued a final rule that amends the financial disclosure requirements in Rules 3-05, 3-14, 8-04, 8-05, 8-06 and Article 11 of Regulation S-X, as well as related rules and forms, for businesses acquired or to be acquired and for business dispositions. Among other ramifications, the amendments:

  • Update the significance tests by:
    • Revising the investment test and the income test
    • Expanding the use of pro forma financial information in measuring significance
    • Conforming, to the extent possible, the significance threshold and tests for a disposed business to those used for an acquired business
    • Revising the aggregation requirements for immaterial acquisitions
  • Require financial statements of the acquired business to cover no more than the two most recent fiscal years 
  • No longer require separate acquired business financial statements once the business has been included in the registrant’s post-acquisition financial statements for nine months or a complete fiscal year, depending on significance
  • 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, the need for interim income statements, special provisions for blind pool offerings, and the scope of the rule’s requirements
  • Amend the pro forma financial information requirements to include disclosure of: 
    • “Transaction Accounting Adjustments” reflecting only the application of required accounting to the transaction 
    • “Autonomous Entity Adjustments” reflecting the operations and financial position of the registrant as an autonomous entity if the registrant was previously part of another entity
    • Optional “Management’s Adjustments” depicting synergies and dis-synergies, if such adjustments would enhance an understanding of the pro forma effects of the transaction and certain conditions related to the basis and the form of presentation are met
  • Make corresponding changes to the smaller reporting company requirements in Article 8 of Regulation S-X, which also will apply to issuers relying on Regulation A
  • Add Regulation S-X Rule 6-11 to govern financial reporting for fund acquisitions by investment companies and business development companies

The amendments will be effective January 1, 2021. However, early application of the amendments is permitted.

How can we help you?

To discuss how our team can help your business, contact us by phone 800.274.3978 or


Subscribe to Financial Reporting Insights