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The accounting for business combinations and the related disclosures are a consistent area of focus for the SEC staff, with frequent comments related to:
  • Purchase price allocations, including questions about how fair value was determined and the key assumptions used;
  • Why the registrant omitted the pro forma financial information or other disclosures required by ASC 805; and
  • Compliance with the Regulation S-X Article 11 pro forma financial information requirements for significant business combinations disclosed on Form 8-K and in certain registration statements.
Comment Examples
Guidance references
  • Please provide more detail regarding the royalty rate for the subject trade name and respective required rates of return used in the relief from royalty calculation. In addition to quantifying the inputs, please tell us how these inputs were determined, if a range of inputs were considered, and the magnitude of the impact on the trade name value if other inputs within the range, if any, had been used.
  • Please disclose a qualitative description of the factors that make up the goodwill recognized in the transaction in accordance with ASC 805-30-50-1(a).
  • We note your business combinations during the year were material in the aggregate to total assets for the current and prior year. Please disclose the following pursuant to ASC 805-10-50- 3 or tell us why you believe you are not required to disclose this information:
    • The amount of acquisition-related costs, the amount recognized as an expense, and the line item or items in the income statement in which those expenses are recognized;
    • The amounts of revenue and earnings of the acquiree since the acquisition date included in the consolidated income statement for the reporting period; and
    • The revenue and earnings of the combined entity as though the business combinations that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period (supplemental pro forma information).
  • Please tell us how you considered the requirements for pro forma financial information pursuant to Article 11 of Regulation S-X for the sale of your Facilities described in Item 2.01 of Form 8-K.
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