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If the carve-out financial statements are part of a registration statement, SAB Topic 1.B.2 requires pro forma financial information in accordance with Regulation S-X Article 11 that reflects the impact of terminated or revised cost sharing agreements and other significant changes. Examples include recent debt issuances and new contractual arrangements with the former parent. The pro forma financial information may also need to reflect the divestiture of assets or depooling of businesses that were included in the carve-out financial statements but that will not be transferred in connection with the spin-off.
A pro forma balance sheet as of the most recent balance sheet date and an income statement for the most recently completed fiscal year and subsequent year-to-date interim period included in the SEC filing are generally required. As it relates to the balance sheet, only pro forma adjustments directly attributable to the transaction and factually supportable should be made and are prepared as if the transaction occurred as of the balance sheet date. In addition to being directly attributable and factually supportable, pro forma adjustments to the historical income statements must also be expected to have a continuing impact and are computed assuming the transaction was consummated at the beginning of the earliest fiscal year presented. Elimination of historical non-recurring charges, such as impairments or restructurings, as a pro forma adjustment is not permissible.
See SEC FRM, Topic 3 - Pro Forma Financial Information, for additional information.
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