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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:
  • why the registrant omitted the disclosures required by ASC 805, such as amounts of post-acquisition revenues and earnings and supplemental pro forma financial information; 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 expand to disclose the amount of net sales and income since the acquisition date included in your statements of income. Refer to ASC 805-10-50-2h(1). Please disclose the nature and amount of any material, nonrecurring pro forma adjustments directly attributable to the acquisition included in the pro forma net sales and income amounts. Refer to ASC 805-10-50-2h(4). Also, please reconcile the costs associated with the closing of the transaction with the amount disclosed in MD&A. Further, we note your narrative disclosures of the assets acquired and liabilities assumed. Given the significance of this acquisition, please consider providing a tabular reconciliation of the preliminary purchase price allocation and consideration paid using the guidance of ASC 805-20-50-1(c) and ASC 805-10-55-41.
  • Please tell us your consideration of the disclosure guidance in ASC 805-10-50-2h. If disclosure of any of the information is impracticable, you should disclose that fact and explain why the disclosures are impracticable. In addition, please tell us the amount of income from continuing operations before taxes, and cumulative effect of a change in accounting principle used to measure the significance of the acquired business under Rule 3-05 of Regulation S-X.
  • Please provide us with a summary of the income significance test pursuant to Rule 1-02(w) of Regulation S-X prepared in your determination of whether audited financial statements of the target company and full pro forma financial information should be provided pursuant to Rule 3-05 and Article 11 of Regulation S-X, respectively.
  • Please provide us with a summary of the income significance test pursuant to Rule 1-02(w) of Regulation S-X prepared in your determination of whether audited financial statements and full pro forma financial information should be provided pursuant to Rule 3-05 and Article 11 of Regulation S-X, respectively.
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