New Financial Reporting Rules for Acquisitions and DispositionsBy
The U.S. Securities & Exchange Commission (SEC) has established new rules to improve the disclosure requirements for financial statements relating to acquisitions and dispositions of businesses. These rules will go into effect on January 1, 2021.
One big change these rules provide is in the “investment” and “income” tests that determine whether an acquisition is significant, which in turn triggers the requirement that the acquirer provide separate audited annual and unaudited interim pre-acquisition financial statements of the significant business.
The investment test will be revised to compare the registrant’s investments in and advances to the acquired or disposed business to the registrant’s aggregate worldwide market value, if available, and a revenue component is added to the income test.