SEC Proposes Welcome Changes to Required Disclosures for Acquisitions and Dispositions
On May 3, 2019, the Securities and Exchange Commission proposed changes to the financial disclosure requirements relating to the acquisition and disposition of businesses. Currently, a registrant that acquires a business is generally required to provide up to three years of pre-acquisition financial statements of the acquired business if the acquisition is deemed “significant” under either the investment, asset or income test as set forth in Rule 1-02(w) of Regulation S-X. These tests have at times resulted in anomalous results that can have the effect of requiring financial disclosure for acquisitions that would not otherwise be material or requiring older financial statements of an acquired business that are less likely to be material to an investor’s understanding of the combined business.