Pro Forma Financial Information
Source:
Sections 210.11-01 through 210.11-03 appear at 47 FR 29837, July 9, 1982, unless otherwise noted.
210.11-01 — Presentation requirements.
(a) Pro forma financial information must be filed when any of the following
conditions exist:
(1) During the most recent fiscal year or subsequent interim period for which a
balance sheet is required by § 210.3-01, a significant business acquisition has
occurred (for purposes of this section, this encompasses the acquisition of an
interest in a business accounted for by the equity method);
(2) After the date of the most recent balance sheet filed pursuant to
§ 210.3-01, consummation of a significant business acquisition or a combination of
entities under common control has occurred or is probable;
(3) Securities being registered by the registrant are to be offered to the security holders of a significant business to be acquired or the proceeds from the offered securities will be applied directly or indirectly to the purchase of a specific significant business;
(4) The disposition of a significant portion of a business either by sale, abandonment or distribution to shareholders by means of a spin-off, split-up or split-off has occurred or is probable and such disposition is not fully reflected in the financial statements of the registrant included in the filing;
(5) [Reserved]
(6) Pro forma financial information required by § 229.914 of this chapter is
required to be provided in connection with a roll-up transaction as defined in
§ 229.901(c) of this chapter;
(7) The registrant previously was a part of another entity and such presentation is necessary to reflect operations and financial position of the registrant as an autonomous entity; or
(8) Consummation of other transactions has occurred or is probable for which
disclosure of pro forma financial information would be material to investors.
(b) A business acquisition or disposition will be considered significant if:
(1) The business acquisition meets:
(i) The definition of a significant subsidiary in § 210.1-02(w)(1), substituting 20
percent for 10 percent each place it appears therein; or
(ii) If the business is a real estate operation as defined in § 210.3-14(a)(2), the
significant subsidiary condition in § 210.1-02(w)(1)(i) (i.e., the investment
test condition), substituting 20 percent for 10 percent, as modified by the guidance
in § 210.3-14(b)(2)(ii).
(2) The business disposition, including a business that is a real estate
operation as defined in § 210.3-14(a)(2), meets the definition of a significant
subsidiary in § 210.1-02(w)(1), substituting 20 percent for 10 percent each place it
appears therein.
(3) The determination must be made, except as noted in paragraph (b)(4) of this
section for the continuous offerings described therein, by using:
(i) For amounts derived from financial statements, the registrant's most recent
annual consolidated financial statements required to be filed at or prior to the
date of acquisition or disposition and the business's pre-acquisition or
pre-disposition financial statements for the same fiscal year as the registrant or,
if the fiscal years differ, the business's most recent fiscal year that would be
required if the business had the same filer status as the registrant, however the
determination may be made using:
(A) The financial statements for the business described in § 210.3-05(e) or (f) if
the business meets the conditions for presenting those financial statements.
(B) Pro forma amounts for the registrant for the periods specified in
§ 210.11-01(b)(3) that only depict significant business acquisitions and
dispositions consummated after the latest fiscal year-end for which the registrant's
financial statements are required to be filed and only include Transaction
Accounting Adjustments (see § 210.11-02(a)(6)(i)), provided that:
(1) The registrant has filed audited financial statements for any
such acquired business for the periods required by § 210.3-05 or § 210.3-14 and the
pro forma financial information required by §§ 210.11-01 through 210.11-02 for any
such acquired or disposed business. The tests may not be made by “annualizing” data;
and
(2) If a registrant has used pro forma amounts to determine
significance of an acquisition or disposition, it must continue to use pro forma
amounts to determine significance of acquisitions and dispositions through the
filing date of its next annual report on Form 10-K (§ 249.310 of this chapter) or
Form 20-F (§ 249.220f of this chapter); or
(C) The registrant's annual consolidated financial statements, for the
most recent fiscal year ended prior to the acquisition or disposition, that are
included in the registrant's Form 10-K (§ 249.310 of this chapter) filed after the
date of acquisition or disposition, but before the date financial statements and pro
forma financial information for the acquisition or disposition would be required to
be filed on Form 8-K (§ 249.308 of this chapter).
(ii) If the business is a related business (see § 210.3-05(a)(3)),
combined pre-acquisition financial statements of the group of related businesses for
the fiscal year specified in paragraph (b)(3)(i) of this section.
(4) When a registrant, including a real estate investment trust, conducts
a continuous offering over an extended period of time and applies the Item 20.D.
Undertakings of Industry Guide 5, the income test condition does not apply, and the
determination must be made for the investment test condition, when it is based on
the total assets of the registrant and its subsidiaries consolidated, and the asset
test condition, if applicable, using the following for the registrant:
(i) During the distribution period, total assets as of the date of
acquisition or disposition plus the proceeds (net of commissions) in good faith
expected to be raised in the registered offering over the next 12 months, except
that for acquisitions total assets must exclude the acquired business; and
(ii) After the distribution period ends and until the next Form 10-K is
filed, total assets as of the date of acquisition or disposition, except that for
acquisitions total assets must exclude the acquired business; and
(iii) After that next Form 10-K is filed, the guidance in paragraph
(b)(3).
(c) The pro forma effects of a business acquisition need not be presented pursuant to
this section if separate financial statements of the acquired business are not
included in the filing, except where the aggregate impact of businesses acquired or
to be acquired is significant as determined by § 210.3-05(b)(2)(iv) or
§ 210.3-14(b)(2)(i)(C).
(d) For purposes of this rule, the term business should be evaluated in light of the facts and circumstances involved and whether there is sufficient continuity of the acquired entity's operations prior to and after the transactions so that disclosure of prior financial information is material to an understanding of future operations. A presumption exists that a separate entity, a subsidiary, or a division is a business. However, a lesser component of an entity may also constitute a business. Among the facts and circumstances which should be considered in evaluating whether an acquisition of a lesser component of an entity constitutes a business are the following:
(1) Whether the nature of the revenue-producing activity of the component will remain generally the same as before the transaction; or
(2) Whether any of the following attributes remain with the component after the transaction:
(i) Physical facilities,
(ii) Employee base,
(iii) Market distribution system,
(iv) Sales force,
(v) Customer base,
(vi) Operating rights,
(vii) Production techniques, or
(viii) Trade names.
(e) This rule does not apply to transactions between a parent company and its totally held subsidiary.
[47 FR 29837, July 9, 1982, as amended at 50 FR 49533, Dec. 3, 1985; 56 FR
57247, Nov. 8, 1991; 61 FR 54514, Oct. 18, 1996; 74 FR 18616, Apr. 23, 2009; 85
FR 54002, Aug. 31, 2020]
210.11-02 — Preparation requirements.
Deloitte Guidance and Links
(a) Form and content. (1) Pro forma financial information must
consist of a pro forma condensed balance sheet, pro forma condensed statements of
comprehensive income, and accompanying explanatory notes. In certain circumstances
(i.e., where a limited number of pro forma adjustments are required and
those adjustments are easily understood), a narrative description of the pro forma
effects of the transaction may be disclosed in lieu of the statements described in
this paragraph (a)(1).
(2) The pro forma financial information must be accompanied by an
introductory paragraph which briefly sets forth a description of:
(i) Each transaction for which pro forma effect is being given;
(ii) The entities involved;
(iii) The periods for which the pro forma financial information is
presented; and
(iv) An explanation of what the pro forma presentation shows.
(3) The pro forma condensed financial information need only include major
captions (i.e., the numbered captions) prescribed by the applicable sections
of Regulation S-X. Where any major balance sheet caption is less than 10 percent of
total assets, the caption may be combined with others. When any major statement of
comprehensive income caption is less than 15 percent of average net income
attributable to the registrant for the most recent three fiscal years, the caption
may be combined with others. In calculating average net income attributable to the
registrant, loss years should be excluded unless losses were incurred in each of the
most recent three years, in which case the average loss must be used for purposes of
this test. Notwithstanding these tests, de minimis amounts need not be shown
separately.
(4) Pro forma statements will ordinarily be in columnar form showing
condensed historical statements, pro forma adjustments, and the pro forma
results.
(5) The pro forma condensed statement of comprehensive income must
disclose income (loss) from continuing operations and income or loss from continuing
operations attributable to the controlling interest.
(6) The pro forma condensed balance sheet and pro forma condensed
statements of comprehensive income must include, and be limited to, the following
pro forma adjustments, except as noted in paragraph (a)(7) of this section:
(i) Transaction Accounting Adjustments. (A) Adjustments that
depict in the pro forma condensed balance sheet the accounting for the transaction
required by U.S. Generally Accepted Accounting Principles (U.S. GAAP) or, as
applicable, International Financial Reporting Standards as issued by the
International Accounting Standards Board (IFRS-IASB). Calculate pro forma
adjustments using the measurement date and method prescribed by the applicable
accounting standards. For a probable transaction, calculate pro forma adjustments
using, and disclose, the most recent practicable date prior to the effective date
(for registration statements), qualification date (for offering statements under 17
CFR 230.251 through 230.263 (Regulation A)), or the mail date (for proxy
statements).
(B) Adjustments that depict in the pro forma condensed statements of
comprehensive income the effects of the pro forma balance sheet adjustments in
paragraph (a)(6)(i)(A) of this section assuming those adjustments were made as of
the beginning of the fiscal year presented. Such adjustments must be made whether or
not the pro forma balance sheet is presented pursuant to paragraph (c)(1) of this
section. If the condition in § 210.11-01(a) that is met does not have a balance
sheet effect, then depict the accounting for the transaction required by U.S. GAAP
or IFRS-IASB, as applicable.
(ii) Autonomous Entity Adjustments. Adjustments that depict the
registrant as an autonomous entity if the condition in § 210.11-01(a)(7) is met.
Autonomous Entity Adjustments must be presented in a separate column from
Transaction Accounting Adjustments.
(7) Management's Adjustments depicting synergies and dis-synergies of the
acquisitions and dispositions for which pro forma effect is being given may, in the
registrant's discretion, be presented if in its management's opinion, such
adjustments would enhance an understanding of the pro forma effects of the
transaction and the following conditions are met:
(i) Basis for Management's Adjustments. (A) There is a reasonable
basis for each such adjustment.
(B) The adjustments are limited to the effect of such synergies and
dis-synergies on the historical financial statements that form the basis for the pro
forma statement of comprehensive income as if the synergies and dis-synergies
existed as of the beginning of the fiscal year presented. If such adjustments reduce
expenses, the reduction must not exceed the amount of the related expense
historically incurred during the pro forma period presented.
(C) The pro forma financial information reflects all Management's
Adjustments that are, in the opinion of management, necessary to a fair statement of
the pro forma financial information presented and a statement to that effect is
disclosed. When synergies are presented, any related dis-synergies must also be
presented.
(ii) Form of presentation. (A) If presented, Management's
Adjustments must be presented in the explanatory notes to the pro forma financial
information in the form of reconciliations of pro forma net income from continuing
operations attributable to the controlling interest and the related pro forma
earnings per share data specified in paragraph (a)(9) of this section to such
amounts after giving effect to Management's Adjustments.
(B) Management's Adjustments included or incorporated by reference into a
registration statement, proxy statement, Regulation A offering statement, or Form
8-K should be as of the most recent practicable date prior to the effective date,
mail date, qualification date, or filing date as applicable, which may require that
they be updated if previously provided in a Form 8-K that is appropriately
incorporated by reference.
(C) If Management's Adjustments will change the number of shares or
potential common shares, reflect the change within Management's Adjustments in
accordance with U.S. GAAP or IFRS-IASB, as applicable, as if the common stock or
potential common stock were outstanding as of the beginning of the period
presented.
(D) The explanatory notes must also include disclosure of the basis for
and material limitations of each Management's Adjustment, including any material
assumptions or uncertainties of such adjustment, an explanation of the method of the
calculation of the adjustment, if material, and the estimated time frame for
achieving the synergies and dis-synergies of such adjustment.
Instruction 1 to paragraph (a)(7): Any forward-looking information
supplied is expressly covered by the safe harbor rules under §§ 230.175 and 240.3b-6
of this chapter.
(8) All pro forma adjustments should be referenced to notes that clearly
explain the assumptions involved.
(9)(i) Historical and pro forma basic and diluted per share amounts based
on continuing operations attributable to the controlling interests and the number of
shares used to calculate such per share amounts must be presented on the face of the
pro forma condensed statement of comprehensive income and only give effect to
Transaction Accounting Adjustments and Autonomous Entity Adjustments.
(ii) The number of shares used in the calculation of the pro forma per
share amounts must be based on the weighted average number of shares outstanding
during the period adjusted to give effect to the number of shares issued or to be
issued to consummate the transaction, or if applicable whose proceeds will be used
to consummate the transaction as if the shares were outstanding as of the beginning
of the period presented. Calculate the pro forma effect of potential common stock
being issued in the transaction (e.g., a convertible security), or the
proceeds of which will be used to consummate the transaction, on pro forma earnings
per share in accordance with U.S. GAAP or IFRS-IASB, as applicable, as if the
potential common stock were outstanding as of the beginning of the period
presented.
(10) If the transaction is structured in such a manner that significantly
different results may occur, provide additional pro forma presentations which give
effect to the range of possible results.
(11) The accompanying explanatory notes must disclose:
(i) Revenues, expenses, gains and losses and related tax effects which
will not recur in the income of the registrant beyond 12 months after the
transaction.
(ii) For Transaction Accounting Adjustments:
(A) A table showing the total consideration transferred or received
including its components and how they were measured. If total consideration includes
contingent consideration, describe the arrangement(s), the basis for determining the
amount of payment(s) or receipt(s), and an estimate of the range of outcomes
(undiscounted) or, if a range cannot be estimated, that fact and the reasons why;
and
(B) The following information when the accounting is incomplete: A
prominent statement to this effect; the items for which the accounting depicted is
incomplete; a description of the information that the registrant requires,
including, if material, the uncertainties affecting the pro forma financial
information and the possible consequences of their resolution; an indication of when
the accounting is expected to be finalized; and other available information that
will enable a reader to understand the magnitude of any potential adjustments to the
measurements depicted.
(iii) For each Autonomous Entity Adjustment, a description of the
adjustment (including the material uncertainties), the material assumptions, the
calculation of the adjustment, and additional qualitative information about the
Autonomous Entity Adjustments, if any, necessary to give a fair and balanced
presentation of the pro forma financial information.
(12) A registrant must not:
(i) Present pro forma financial information on the face of the
registrant's historical financial statements or in the accompanying notes, except
where such presentation is required by U.S. GAAP or IFRS-IASB, as applicable.
(ii) Present pro forma financial information, or summaries of such
information, elsewhere in a filing that excludes material transactions for which pro
forma effect is required to be given.
(iii) Present the pro forma amounts in paragraph (a)(7) of this section
elsewhere in a filing without also presenting with equal or greater prominence the
amounts specified in paragraph (a)(7) of this section to which they are required to
be reconciled and a cross-reference to that reconciliation.
(iv) Give pro forma effect to the registrant's adoption of an accounting
standard in pro forma financial information required by §§ 210.11-01 through
210.11-03.
(b) Implementation guidance—(1) Historical statement of
comprehensive income. The historical statement of comprehensive income used
in the pro forma financial information must only be presented through income from
continuing operations (or the appropriate modification thereof).
(2) Business acquisitions. In some transactions, such as in
financial institution acquisitions, measuring the acquired assets at their
acquisition date fair value may result in significant discounts relative to the
acquired business's historical cost of the acquired assets. When such discounts can
result in a significant effect on earnings (losses) in periods immediately
subsequent to the acquisition that will be progressively eliminated over a
relatively short period, the effect of the discounts on reported results of
operations for each of the next five years must be disclosed in a note.
(3) Business dispositions. Transaction Accounting Adjustments
giving effect to the disposition of a business must not decrease historically
incurred compensation expense for employees who were not, or will not be,
transferred or terminated as of the disposition date.
(4) Multiple transactions. (i) When consummation of more than one
transaction has occurred, or is probable, the pro forma financial information must
present in separate columns each transaction for which pro forma presentation is
required by § 210.11-01.
(ii) If the pro forma financial information is presented in a proxy or
information statement for purposes of obtaining shareholder approval of one of the
transactions, the effects of that transaction must be clearly set forth.
(5) Tax effects. (i) Tax effects, if any, of pro forma adjustments
normally should be calculated at the statutory rate in effect during the periods for
which pro forma condensed statements of comprehensive income are presented and
should be reflected as a separate pro forma adjustment.
(ii) When the registrant's historical statements of comprehensive income
do not reflect the tax provision on the separate return basis, pro forma statements
of comprehensive income adjustments must reflect a tax provision calculated on the
separate return basis.
(c) Periods to be presented. (1) A pro forma condensed balance
sheet as of the end of the most recent period for which a consolidated balance sheet
of the registrant is required by § 210.3-01 must be filed unless the transaction is
already reflected in such balance sheet.
(2)(i) Pro forma condensed statements of comprehensive income must be
filed for only the most recent fiscal year, except as noted in paragraph (c)(2)(ii)
of this section, and for the period from the most recent fiscal year end to the most
recent interim date for which a balance sheet is required. A pro forma condensed
statement of comprehensive income may be filed for the corresponding interim period
of the preceding fiscal year. A pro forma condensed statement of comprehensive
income must not be filed when the historical statement of comprehensive income
reflects the transaction for the entire period.
(ii) For transactions required to be accounted for under U.S. GAAP or, as
applicable, IFRS-IASB by retrospectively revising the historical statements of
comprehensive income (e.g., combination of entities under common control and
discontinued operations), pro forma statements of comprehensive income must be filed
for all periods for which historical financial statements of the registrant are
required. Retrospective revisions stemming from the registrant's adoption of a new
accounting principle must not be reflected in pro forma statements of comprehensive
income until they are depicted in the registrant's historical financial
statements.
(3) Pro forma condensed statements of comprehensive income must be
presented using the registrant's fiscal year end. If the most recent fiscal year end
of any other entity involved in the transaction differs from the registrant's most
recent fiscal year end by more than one fiscal quarter, the other entity's statement
of comprehensive income must be brought up to within one fiscal quarter of the
registrant's most recent fiscal year end, if practicable. This updating could be
accomplished by adding subsequent interim period results to the most recent fiscal
year end information and deducting the comparable preceding year interim period
results. Disclosure must be made of the periods combined and of the sales or
revenues and income for any periods which were excluded from or included more than
once in the condensed pro forma statement of comprehensive income (e.g., an
interim period that is included both as part of the fiscal year and the subsequent
interim period).
Instruction 1 to paragraph (c)(3): In circumstances where
different fiscal year ends exist, § 210.3-12 may require a registrant to include in
the pro forma financial information an acquired or to be acquired foreign business
historical period that would be more current than the periods included in the
required historical financial statements of the foreign business.
(4) Whenever unusual events enter into the determination of the results shown for the
most recently completed fiscal year, the effect of such unusual events should be
disclosed and consideration should be given to presenting a pro forma condensed
statement of comprehensive income for the most recent twelve-month period in
addition to those required in paragraph (c)(2)(i) of this section if the most recent
twelve-month period is more representative of normal operations.
[47 FR 29837, July 9, 1982, as amended at 50 FR 49533, Dec. 3, 1985; 74 FR
18616, Apr. 23, 2009; 83 FR 50148, Oct. 4, 2018; 85 FR 54002, Aug. 31,
2020]
210.11-03 — Presentation of financial forecast.
(a) A financial forecast may be filed in lieu of the pro forma condensed
statements of comprehensive income required by § 210.11-02(a)(1).
(1) The financial forecast shall cover a period of at least 12 months from the latest of (i) the most recent balance sheet included in the filing or (ii) the consummation date or estimated consummation date of the transaction.
(2) The forecasted statement of comprehensive income shall be presented in the
same degree of detail as the pro forma condensed statement of comprehensive income
required by § 210.11-02(a)(3).
(3) Assumptions particularly relevant to the transaction and effects thereof should be clearly set forth.
(4) Historical condensed financial information of the registrant and the business acquired or to be acquired, if any, shall be presented for at least a recent 12 month period in parallel columns with the financial forecast.
(b) Such financial forecast shall be presented in accordance with the guidelines established by the American Institute of Certified Public Accountants.
(c) Forecasted earnings per share data shall be substituted for pro forma per share data.
(d) This section does not permit the filing of a financial forecast in lieu of
pro forma information required by U.S. GAAP or IFRS-IASB.
[As amended at 83 FR 50148, Oct. 4, 2018; 85 FR 54002, Aug. 31, 2020]