2020.1 Significance Implementation — No Alternative Tests of Significance The staff generally will not accept alternative significance tests. The tests should be performed based on the requirements of S-X 3-05, 3-09, and 4-08(g), as applicable. If after performing the required significance tests a registrant believes that the tests specify periods beyond those reasonably necessary to inform investors, the registrant may make a written request to CF-OCA to waive one or more years of financial statements. Such requests should set forth the relevant factors considered by the registrant. In making this request, registrants should consider all facts and circumstances that provide an indication of the relative size of the acquired business. (Last updated: 7/1/2019)

2020.2 Significance Implementation - Business Combinations - Measurement Period Adjustments under ASC 805 and IFRS 3

In some circumstances, ASC 805 and IFRS 3 require retrospective adjustment of provisional amounts recognized at the acquisition date and the recognition of additional assets or liabilities that were not recognized at the acquisition date. The pre-acquisition financial statements for the most recently completed fiscal year used to measure significance should include measurement period adjustments for acquisitions completed within the most recently completed fiscal year when new information obtained about facts and circumstances that existed at the acquisition date for those acquisitions is known: (A) prior to effectiveness of an IPO for a new registrant or (B) on or before the date the initial Item 2.01 Form 8-K reporting the acquisition must be filed for an existing registrant. (Last updated: 9/30/2009)

2020.3 Significance Implementation - Business Combination Achieved in Stages or Step Acquisition of a Rule 11-01(d) Business — General

If a registrant increases its investment in a business relative to the prior year, base the tests of significance on the increase in the registrant's proportionate interest in assets and net income during the year, rather than the cumulative interest to date. However, step acquisitions which are part of a single plan to be completed within a twelve month period should be aggregated.

2020.4 Significance Implementation - Business Combination Achieved in Stages (a.k.a. Step Acquisition) — Remeasurement

Under ASC 805 and IFRS 3 as issued by the IASB, the acquirer's previously held equity interest in the acquiree is remeasured at its acquisition-date fair value with any resulting gain or loss recognized in earnings. The remeasurement of the previously held equity interest is not included in the asset or the investment test and the resulting gain or loss from remeasurement would be excluded from the income test as it is not included in the registrant's most recently completed fiscal year.

2020.5 Significance Implementation - Acquiring an Additional Interest in a Consolidated Entity
(Last updated: 9/30/2011)

When a registrant increases its investment in a company that is already reflected as a consolidated subsidiary in the audited financial statements of the registrant for a complete fiscal year, financial statements of the acquired investment are ordinarily not required. However, pro forma information may be required.

The staff's view that financial statements are ordinarily not required is premised on S-X 3-05(b)(4)(iii) which states that separate financial statements of the acquired business need not be presented once the operating results of the acquired business have been reflected in the audited consolidated financial statements of the registrant for a complete fiscal year unless such financial statements have not been previously filed or unless the acquired business is of major significance. Illustrative, but not all-inclusive, examples of when historical financial statements of an acquired business may be required in a step acquisition include:

Also, note that while S-X 11-01(c) states that pro forma effects of a business combination need not be presented if the acquired business' financial statements are not presented, we believe such pro forma financial statements are required pursuant to S-X 11-01(a)(8) when pro forma financial information giving effect to the step acquisition would be material to investors.

2020.6 Significance Implementation - Public Offering Proceeds

Registrant's assets may not be increased for purposes of the significance tests by including the pro forma effect of public offering proceeds received after the balance sheet date.

2020.7 Significance Implementation - Statements of Revenues and Direct Expenses

A registrant that has received an accommodation from CF-OCA to present a statement of revenue and direct expenses for the acquired business in lieu of full financial statements (See Section 2065) should not adjust the registrant's pretax income (i.e., the denominator in the income test) to exclude corporate overhead even though the target's pretax revenues less direct expenses (i.e., the numerator) excludes indirect expenses. If after performing the required significance tests using the target's pretax revenues less direct expenses and the registrant's pretax income, a registrant believes that the tests specify periods beyond those reasonably necessary to inform investors, the registrant may make a written request to CF-OCA to waive one or more years of financial statements.

2020.8 Significance Implementation - Related Businesses — General
(Last updated: 9/30/2012)

S-X 3-05 requires that related businesses be treated as a single business when measuring significance. Further guidance on this requirement is included below. If S-X 3-05 significance is met, separate financial statements of each of the related businesses are required, except that financial statements of the related businesses that are under common control or management may be, but are not required to be, presented on a combined basis for any annual or interim periods specified in S-X 3-05 for which the businesses are under common control or management. If the registrant believes that application of the significance tests results in a requirement to present financial statements of one or more related businesses that are not reasonably necessary to inform investors, the registrant may make a request to CF-OCA for relief.

2020.9 Significance Implementation - Related Businesses - Asset and Investment Tests
(Last updated: 9/30/2012)

Both the asset test and the investment test should be performed for each related business using the guidance provided in Section 2015. If either the sum of each related business's asset test significance or the sum of each related business's investment test significance exceeds the S-X 3-05 significance levels (see Section 2030), separate financial statements should be provided for the periods required by S-X 3-05 for each related business, except that financial statements for the related businesses that are under common control or management may be, but are not required to be, presented on a combined basis for any annual or interim periods specified in S-X 3-05 for which the businesses are under common control or management. See the Notes at Section 2020.8 for further guidance.

2020.10 Significance Implementation - Related Businesses — Income Test
(Last updated: 9/30/2012)

S-X 3-05 indicates that related businesses should be treated as if they are a single business combination. Therefore, calculate the income test significance using the combined income or loss from continuing operations before income taxes of all of the related businesses. The combined income or loss should be used to measure income test significance irrespective of whether any of the related businesses are under common control or management. If the income test significance exceeds the S-X 3-05 significance levels (see Section 2030), separate financial statements should be provided for the periods required by S-X 3-05 for each related business, except that financial statements of the related businesses that are under common control or management may be, but are not required to be, presented on a combined basis for any annual or interim periods specified in S-X 3-05 for which the businesses are under common control or management. See the Notes at Section 2020.8 for further guidance.