4.2 Form and Content of Pro Forma Financial Information
4.2.1 General Presentation Requirements
The basic presentation requirements for pro forma financial information are
outlined in Rule 11-02(a), which
specifies that such information should generally include the following:
- Introductory paragraph.
- Pro forma balance sheet.
- Pro forma income statement(s).
- Accompanying explanatory notes.
Article
11 does not require the presentation of pro forma statements of
cash flows and statements of changes in shareholders’ equity. Also, paragraph 3210.2 of the FRM notes that domestic
registrants are required to prepare their pro forma information in accordance
with U.S. GAAP, whereas FPIs should prepare their pro forma information by using
the same accounting principles used in their primary financial statements, which
may be U.S. GAAP, IFRS Accounting Standards, or their home-country GAAP
reconciled to U.S. GAAP. A registrant’s pro forma balance sheet and pro forma
income statements should generally be presented in columnar form, with separate
columns for historical financial information, pro forma adjustments, and pro
forma results.
4.2.1.1 Introductory Paragraph
Pro forma financial information should begin with an
introductory paragraph that describes, at a minimum, (1) the transaction(s),
(2) the entities involved, (3) the periods for which the pro forma financial
information is presented, and (4) what the pro forma presentation shows. The
introductory paragraph should clearly explain the purpose of the pro forma
financial information, including the date on which the accounting for the
transaction was assumed to occur.
Other information in the introductory paragraph may include:
- An outline of the range of possible results (see Section 4.2.2.1).
- If either the registrant or its acquiree expects to dispose of certain operations as part of being granted regulatory approval, the circumstances surrounding such expectations, any contingencies, and the reasonably possible impact (see Section 4.4.2.1.4).
- If a rate other than the current or committed interest rate is used, the basis of presentation, and the anticipated effects of the current interest rate environment.
4.2.1.2 Pro Forma Balance Sheet
A pro forma balance sheet may be presented in condensed form
in a manner similar to the presentation of interim financial statements
required in Form 10-Q under Regulation S-X, Article 10.
Captions in the pro forma balance sheet should reflect the major (i.e.,
numbered) captions in Regulation S-X, Rules 5-02, 6-04, 7-03, and 9-03. Captions representing any balance sheet amount
that is less than 10 percent of total assets may be combined with other
captions. A pro forma balance sheet is not required if the transaction is
already reflected in the registrant’s most recent historical balance sheet
included in the filing.
Registrants should note that, as indicated in paragraph 3240.11 of the FRM, the total column in the pro
forma balance sheet should not present cash as a negative balance. Also,
presenting a liability in lieu of negative cash would be inappropriate
unless the transaction reflected in the pro forma balance sheet gives rise
to such a liability; otherwise, recognizing a liability could imply an
outcome that is not possible under the transaction terms. Further, the
presentation of a liability may indicate that the pro forma financial
information does not reflect all the financing needed to complete the
acquisition.
4.2.1.3 Pro Forma Income Statements
Throughout this chapter, we refer to the “pro forma
statement of comprehensive income” in Article 11 as the “pro forma income
statement.” As discussed below, the pro forma income statement must reflect
continuing operations attributable to controlling interests, but
presentation of other comprehensive income is not required.
Pro forma income statements may be presented in condensed
form in a manner similar to the presentation of interim financial statements
required in Form 10-Q under Article 10. Captions in the pro forma income
statements should reflect the major (i.e., numbered) captions in
Regulation S-X,
Rules 5-03, 6-07, 7-04, and 9-04.
Rule
11-02(a)(3) states, in part:
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.
Rule
11-02(a)(5) requires registrants to present, in the pro forma
income statement, income from (1) continuing operations and (2) continuing
operations attributable to controlling interests; these amounts are
important because, as noted in paragraph
3240.6 of the FRM, they are used in the calculation of
earnings per share. Discontinued operations should not be reflected in the
pro forma financial information (i.e., the “bottom line” in the historical
and pro forma columns should be income from continuing operations).
Historical and pro forma earnings per share should be presented on the basis
of income from continuing operations (or net income if the registrant does
not report discontinued operations), and the number of shares used to
compute such amounts must be presented on the face of the pro forma income
statement and should only give effect to transaction accounting adjustments
and autonomous entity adjustments.
4.2.1.4 Accompanying Explanatory Notes
The pro forma financial information should be accompanied by notes that
clearly explain each pro forma adjustment, the assumptions used, and other
relevant information.
4.2.1.5 Narrative Presentation in Lieu of Pro Forma Financial Information
In the limited cases in which only a few adjustments are
required and those adjustments are easily understood, a registrant may
include a narrative presentation of the pro forma effects of a transaction.
In such instances, a registrant could provide narrative disclosures in lieu
of full pro forma financial information.
4.2.2 Pro Forma Presentation Considerations
4.2.2.1 Presentation of Pro Forma Financial Information When a Transaction Is Structured in Such a Way That Significantly Different Results May Occur
When a transaction is structured in such a way that a range
of significantly different results may occur, a registrant may need to
provide multiple sets of pro forma financial information. Rule 11-02(a)(10) states:
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.
Paragraph 3240.7 of
the FRM also emphasizes that, in such situations, the introductory paragraph
should describe the range of outcomes reflected in the pro forma financial
information and explain the key assumptions underlying each scenario. In
addition, it should clearly disclose the conditions required to close the
transaction. Paragraph 3240.8 of the
FRM further emphasizes that the form and prominence of any additional pro
forma presentations to show the range of possible outcomes should be based
on the specific facts and circumstances.
The following illustrates pro forma presentation in certain scenarios:
-
In cases in which the number of tender offer acceptances, or other transaction factors, may determine the accounting applied to a proposed business acquisition, the registrant should generally present pro forma financial information for each accounting method that could be applied. Paragraph 3240.9 of the FRM provides an example in which “the minimum number of acceptances would result in application of the equity method of accounting while the maximum number of acceptances would result in consolidation” and notes that registrants should present pro forma financial information reflecting each method.However, paragraph 3240.10 of the FRM indicates that it may not be sufficient to just provide the minimum and maximum possible outcomes, especially when other outcomes are as (or more) likely to occur and the impact of such different outcomes could be material.Similarly, it would not be appropriate for registrants to provide pro forma financial information for scenarios that do not meet the conditions of the transaction and therefore could not occur. For example, if the transaction can only be consummated in situations in which the post‑merger entity exceeds a minimum net tangible asset threshold, pro forma financial information generally should not be presented for scenarios in which that condition is not satisfied. However, if shareholders are being asked to vote on a proposal to remove the minimum net tangible asset condition, additional pro forma presentations should reflect the removal of that condition to depict the full range of potential outcomes.
- If a registrant seeks shareholder approval of an acquisition in a proxy statement and the number of common shares to be issued is determined by using a formula, the consideration transferred is subject to variability on the basis of the registrant’s common share price. The registrant may present pro forma effects by using the consideration transferred, measured as of the filing date (by using the most recent trading price). If reasonably possible variations in the share price could materially affect the goodwill to be recorded, the registrant should disclose the corresponding pro forma balance sheet impacts of increases and decreases in the share price (see paragraph 3240.12 of the FRM).
If only one variable may change in the transaction, a
registrant may consider disclosing just a sensitivity analysis rather than
multiple sets of pro forma financial information. The sensitivity analysis
presented should give an indication of the potential impact on the pro forma
financial information for an appropriate incremental fluctuation in the
variable that may change. For example, in a business acquisition, the final
consideration transferred may not be known at the time the pro forma
financial information is prepared. However, the ultimate resolution of the
consideration transferred may only affect cash and goodwill, in which case
the sensitivity analysis could be disclosed in narrative form in lieu of
separate pro forma presentations.
4.2.2.2 Combining Entities With Different Fiscal Year-Ends
A registrant must use its fiscal year-end when presenting
pro forma financial information. However, when the information of entities
with different fiscal year-ends is combined in pro forma financial
information to reflect a business acquisition, the historical financial
information of the acquiree that should be presented will depend on the
difference between the entities’ fiscal year-ends. Entities with fiscal
year-ends that differ by one quarter or less may combine their historical
financial information within their pro forma financial information without
any recasting of periods. If the fiscal year-ends differ by more than one
quarter, the acquiree’s historical information in the pro forma income
statement(s) must be adjusted and brought to within one quarter of the
registrant’s most recent fiscal year-end in accordance with Rule 11-02(c)(3).
This adjustment is generally accomplished by adding
subsequent interim-period results to the acquiree’s most recent
fiscal-year-end information and deducting the comparable preceding year
interim-period results to create a 12-month period ending within one quarter
of the registrant’s most recent fiscal year-end. The number of months
included for the acquiree’s historical operations should generally match the
number of months included for the registrant’s historical operations. It is
usually not appropriate, for example, to include 11 months of the acquiree’s
historical preacquisition results of operations if 12 months of the
registrant’s preacquisition results of operations are included in the pro
forma income statement. In accordance with paragraph 3301.2 of the FRM, since the acquiree’s historical
income statements should include the same number of months as the
registrant’s historical income statements, the staff “may permit
combinations of periods that involve overlaps or gaps in the information of
the target company of up to one fiscal quarter, provided that the resulting
annual and interim periods are of the same length required for the
registrant, and there are no overlaps or gaps in the registrant’s
information. However, the staff would not permit a registrant to omit an
interim pro forma presentation because of different fiscal periods.” For
example, the historical financial information of the acquiree for a specific
quarter might be included in both the annual and interim pro forma financial
information, or excluded from both. See Example 4-1.
Under Rule 11-02(c)(3), the notes to the pro forma financial
information should disclose (1) the periods combined and (2) the sales or
revenues and income for any periods that were excluded or included more than
once (e.g., an interim period that is included both as part of the fiscal
year information and the subsequent interim period). Note that in
circumstances in which different fiscal year-ends exist and the acquiree is
a foreign business, a domestic registrant may be required to include a
historical period for the foreign business acquiree in the pro forma
financial information that would be more current than the periods included
in the required historical financial statements of the foreign business
acquiree.
Example 4-1
Registrant R, a calendar-year-end
company, acquired Company B on August 1, 20X4.
Company B is an SEC registrant with an August 31
year-end. Both R and B are nonaccelerated filers
and, accordingly, the most recent periodic reports
filed with the SEC are their Form 10-Qs for the
quarters ended March 31, 20X4, and May 31, 20X4,
respectively.
Registrant R determines that the
acquisition of B is significant and therefore files
an initial Form 8-K on August 5, 20X4. In addition,
R must amend the Form 8-K within 71 calendar days
(amended Form 8-K) and file B’s separate
preacquisition financial statements and pro forma
financial information for the business
acquisition.
On the basis of its fiscal year-end,
R determines that the pro forma financial
information to be included in the amended Form 8-K
must include (1) a pro forma balance sheet as of
March 31, 20X4, and (2) pro forma income statements
for the year ended December 31, 20X3, and the
three-month period ended March 31, 20X4. These
periods are consistent with the requirements for pro
forma financial information included in the amended
Form 8-K (see Section
4.3).
The pro forma balance sheet as of March 31, 20X4,
should include B’s historical balance sheet as of
May 31, 20X4, since this is B’s most recent balance
sheet filed with the SEC. A pro forma income
statement is required for the year ended December
31, 20X3, and may combine the following:
- Registrant R’s historical income statement information for the year ended December 31, 20X3.
- Company B’s historical income statement information for the 12-month period ended November 30, 20X3.
Company B’s results for its 12-month period are
derived by adding the results of the three-month
period ended November 30, 20X3, to its income
statement for the year ended August 31, 20X3, and
subtracting the results of the three-month period
ended November 30, 20X2.
Alternatively, B’s results for a different 12-month
period that ends within one quarter of R’s year-end
may be presented in the pro forma financial
information for the year ended December 31, 20X3,
instead. For example, B’s historical income
statement information for the 12-month period ended
February 28, 20X4, would similarly be within one
quarter of R’s year-end of December 31, 20X4.
Company B’s results for this 12-month period could
be derived by adding the results of the six-month
period ended February 28, 20X4, to its income
statement for the year ended August 31, 20X3, and
subtracting the results of the six-month period
ended February 28, 20X3. In this case, no period
would be omitted or duplicated and, thus, additional
narrative disclosure regarding such omitted or
duplicated period would not be required.
A pro forma income statement is also required for the
subsequent interim period ended March 31, 20X4, and
may combine the following:
- Registrant R’s historical income statement information for the three-month period ended March 31, 20X4.
- Company B’s historical income statement information for the three-month period ended May 31, 20X4.
Given the different fiscal year-ends
of R and B, the notes to the pro forma financial
information should disclose the periods that were
combined. In addition, the notes should disclose B’s
sales or revenues and income for December 1, 20X3,
to February 28, 20X4, because this period is
excluded from B’s historical information in both the
annual and interim pro forma income statements.
4.2.2.3 Presentation of Pro Forma Financial Information When the Registrant’s Fiscal Year Is Less Than 12 Months
When there is a change in the registrant’s fiscal year-end,
the periods for which a registrant should prepare pro forma financial
information for a significant consummated or probable business acquisition
will depend on the length of the transition period (the period between the
closing of the registrant’s most recent fiscal year and the opening date of
its new selected fiscal year).
4.2.2.3.1 Transition Period Is Nine Months or More
Article 11 generally requires registrants to present pro
forma income statements for the latest fiscal year and subsequent
interim period (see Section 4.3). Rule 3-06 indicates that “the
filing of [historical] financial statements covering a period of 9 to 12
months shall be deemed to satisfy a requirement for filing financial
statements for a period of 1 year” in certain circumstances (see
Section 2.3). Such
circumstances include, but are not limited to, those in which a
registrant changes its fiscal year-end. Accordingly, if a registrant
changes its fiscal year-end and the transition period is nine months or
more (e.g., changes its fiscal year from March 31 to December 31), in a
manner consistent with paragraph
3230.1 of the FRM, the registrant may apply the guidance
in Rule 3-06 when preparing a pro forma income statement for the latest
year and may prepare a pro forma income statement for a nine-month
period. In addition, in the case of an acquisition, a registrant that
prepares the pro forma income statement for the most recent fiscal year
may combine its historical operations for the transition period with the
historical financial operations of the acquiree for the same number of
months as the registrant’s transition period.
Example 4-2
Registrant R, a large
accelerated filer, changes its fiscal year-end
from March 31, 20X3, to December 31, 20X3. It
files a transition report on Form 10-K on February
28, 20X4, which includes audited financial
statements for the nine-month transition period
ended December 31, 20X3, and the years ended March
31, 20X3, and 20X2.
On March 15, 20X4, R acquires
Company B, a calendar-year-end large accelerated
filer. Since the acquisition of B is significant
to R, R must file an initial Form 8-K to announce
the acquisition within four business days and
amend the Form 8-K within 71 calendar days
(amended Form 8-K) to include the required
separate preacquisition financial statements of B
and pro forma financial information. The pro forma
financial information requirements would be
satisfied as follows:
Pro Forma
Balance Sheet
Registrant R would satisfy the pro forma balance
sheet requirement by combining its historical
balance sheet as of December 31, 20X3, with B’s
historical balance sheet as of December 31,
20X3.
Pro Forma
Income Statement
Registrant R may satisfy the pro
forma income statement requirement by combining
its income statement for the nine-month period
ended December 31, 20X3, with B’s income statement
for the nine-month period ended December 31, 20X3
(which could be derived by subtracting the results
for the three-month period ended March 31, 20X3,
from those for the fiscal year ended December 31,
20X3). Since the transition period is nine months
or more, the registrant may apply the guidance in
Rule 3-06 when presenting a pro forma income
statement for the most recent fiscal year.
Note that pro forma financial
information is not required for any interim period
because the initial Form 8-K was filed within four
days of the acquisition on March 15, 20X4, and no
interim balance sheet for the registrant is
required to be filed under Rule 3-01 as of that
date.
4.2.2.3.2 Transition Period Is Less Than Nine Months
At the April 2004 AICPA SEC
Regulations Committee joint meeting with the SEC staff, the SEC staff
indicated that when a registrant changes its fiscal year-end and the
transition period is less than nine months, the registrant can satisfy
the requirement to include a pro forma income statement for the most
recent fiscal year by including either of the following:
- A “pro forma income statement for the most recent fiscal year . . . based on the transition period of the registrant, supplemented as necessary by earlier periods sufficient to provide 9 to 12 months of historical financial information for the registrant.”
- A pro forma income statement for the transition period in addition to a pro forma income statement for the registrant’s most recently completed full fiscal year (i.e., the period immediately preceding the transition period).
In either case, if the registrant and the acquiree have
different fiscal year-ends, the historical financial information for the
acquiree included in the pro forma financial information should be for a
period that ends within one quarter of the registrant’s period. In
addition, the acquiree’s operating results must be for the same number
of months presented for the registrant. See Section 4.2.2.2 for further
information.
Example 4-3
Registrant R, a large
accelerated filer, changed its fiscal year-end
from June 30, 20X3, to December 31, 20X3. It filed
a transition report on Form 10-K on February 28,
20X4, that included financial statements for the
six-month transition period ended December 31,
20X3, and for each of the three years in the
period ended June 30, 20X3.
On March 15, 20X4, R acquired
Company B, a calendar-year-end large accelerated
filer. Since the business acquisition is
significant to R, R must file a Form 8-K to
announce the acquisition within four business days
and amend the Form 8-K within 71 calendar days
(amended Form 8-K) to include the required
separate preacquisition financial statements of B
and pro forma financial information. The pro forma
financial information requirements would be
satisfied as follows:
Pro Forma
Balance Sheet
Registrant R would satisfy the
pro forma balance sheet requirement by combining
its historical balance sheet as of December 31,
20X3, with B’s historical balance sheet as of
December 31, 20X3.
Pro Forma
Income Statement
Registrant R may satisfy the pro
forma income statement requirement for the most
recent fiscal year by combining either of the
following:
- Its income statement for the 12 months ended December 31, 20X3 (derived by adding the six-month transition period ended December 31, 20X3, to R’s results of operations for the year ended June 30, 20X3, and deducting its results of operation for the six months ended December 31, 20X2), with B’s income statement for its fiscal year ended December 31, 20X3.
- Its transition-period income statement for the six months ended December 31, 20X3, with B’s income statement for the six months ended December 31, 20X3. In addition, since the six-month transition period would not satisfy the requirements for a period of one year, R would also be required to file a pro forma income statement that combines R’s income statement for its previous fiscal year ended June 30, 20X3, with B’s income statement for the 12 months ended June 30, 20X3 (derived by adding the results for the six-month period ended June 30, 20X3, to B’s income statement for the year ended December 31, 20X2, and subtracting the results of the six-month period ended June 30, 20X2).
Notethat pro forma financial
information is not required in the amended Form
8-K for any interim period after December 31,
20X3, because the acquisition was consummated
during the first quarter and the registrant is not
required to file an interim balance sheet under
Rule 3-01 as of the date of the initial 8-K
filing.
4.2.2.4 Reflecting Multiple Transactions in Pro Forma Financial Information
To inform investors about all material transactions or events, a
registrant may sometimes need to provide pro forma financial information
that reflects the occurrence (or probable occurrence) of multiple
transactions during a period.
Examples of scenarios in which multiple transactions may need to be
presented in pro forma financial information include the following:
- A registrant consummates, or it is probable that it will consummate, one or more additional significant acquisitions after it previously reported a significant acquisition during the most recent fiscal year or interim period. As noted in the highlights of the July 2017 CAQ SEC Regulations Committee joint meeting with the SEC staff, pro forma financial information in a Securities Act registration statement should reflect all relevant transactions. The SEC staff encourages registrants to show such transactions in the subsequent pro forma presentation provided in a Form 8-K since such disclosure is more comprehensive.
- An acquiree previously acquired a significant entity of its own during the most recent fiscal year and that information would be material to an understanding of the registrant or a vote on the transaction.
Rule
11-02(b)(4) requires registrants to use, at a minimum,
separate columns for each transaction for which pro forma financial
information is required. However, paragraph
3240.14 of the FRM indicates that in limited
circumstances, such as when transactions are entered into concurrently
and carried out in contemplation of one another, it may be appropriate
to present the transactions in a single column if doing so does not
reduce transparency. The paragraph provides an example in which a
transaction “can be reflected through a single, easily understood
journal entry such as an adjustment [to reflect] debt issued to finance
a significant business acquisition for which pro forma financial
information is also required.” Note that registrants must disclose each
transaction separately from other unrelated transactions, such as those
in which shareholders are being asked to vote on a particular
transaction. A registrant should consider the most appropriate
presentation for pro forma financial information when multiple
transactions have occurred (or their occurrence is probable) during the
periods presented and such transactions are not already reflected in the
historical financial statements.
Depending on the facts and circumstances, a registrant may present pro
forma financial information for multiple transactions in either of the
following ways:
- On a disaggregated basis (i.e., in multiple columns) in a single set of pro forma financial information.
- In multiple sets of pro forma financial information.
Also, transaction accounting adjustments must be shown
in a column that is separate from autonomous entity adjustments (see
Section
4.4), even for the same transaction.
A registrant must present pro forma financial
information in separate columns when multiple transactions are involved.
For example, the pro forma information for a transaction involving a
shareholder vote in connection with an acquisition should be presented
separately from other transactions or events for which pro forma
information is required, such as an unrelated equity or debt financing
or other significant acquisitions.
As noted above, when shareholder approval or other
action is required, a registrant should present the pro forma effects of
the transaction to be voted or acted on separately from other
transactions that are not contingent on the transaction to be voted on.
For example, a significant business acquisition that occurred before the
transaction being voted on could be presented in a separate column or in
a separate set of pro forma financial information, both of which would
adjust the historical financial statements. The pro forma “as adjusted”
amounts would then carry forward into the pro forma financial
information presented, reflecting the transaction to be voted on by the
shareholders. Also, as a best practice, a registrant would present any
consummated acquisitions in a separate column with a subtotal before
presenting a probable acquisition, even in circumstances in which
shareholder approval or other action is not required.
The example below
illustrates some of the options available to a registrant that is
presenting multiple transactions in pro forma financial information.
Example 4-4
On May 1, 20X4, Registrant R, a
calendar-year-end company, files a proxy statement
to solicit shareholder approval for the
acquisition of Company B. In separate transactions
before May 1, 20X4, R consummates two significant
business acquisitions and appropriately files Form
8-Ks for those transactions that include the
separate preacquisition financial statements of
each entity and the required pro forma financial
information. Registrant R acquires Company C on
January 31, 20X4, and Company D on February 10,
20X4.
In the proxy statement, pro forma financial
information as of and for the year ended December
31, 20X3, will reflect the consummated
acquisitions of C and D as well as the proposed
acquisition of B that requires shareholder
approval.
Because shareholders must vote
on the acquisition of B, the registrant must
present pro forma financial information for this
transaction separately from that for the two
consummated business acquisitions. Registrant R
may present a single set of pro forma financial
information as of and for the year ended December
31, 20X3, on a disaggregated basis, with separate
columns for the following:
- Historical financial information of R.
- Historical financial information of C.
- Transaction accounting adjustments reflecting the accounting for the acquisition of C.
- A pro forma “as adjusted” column reflecting the pro forma results for the acquisition of C.
- Historical financial information of D.
- Transaction accounting adjustments reflecting the accounting for the acquisition of D.
- A pro forma “as adjusted” column reflecting the pro forma results for the consummated acquisitions of both C and D before the proposed business acquisition requiring shareholder approval.
- Historical financial information of B.
- Transaction accounting adjustments reflecting the accounting for the proposed acquisition of B.
- Pro forma combined results.
Registrant R could also include
a separate set of pro forma financial information
for the acquisitions of C and D and then carry
forward those pro forma results as the starting
point for presenting pro forma financial
information that reflects the acquisition of B to
be voted on by shareholders, with separate columns
for the following:
- A pro forma “as adjusted” column reflecting the pro forma results for the consummated acquisitions of C and D (derived from the separate pro forma results).
- Historical financial information of B.
- Transaction accounting adjustments reflecting the accounting for the proposed acquisition of B.
- Pro forma combined results.
4.2.2.5 Prohibitions
Regulation S-X, Rule
11-02(a)(12), specifies that registrants must not do the
following (not all-inclusive):
- Present pro forma financial information within their historical financial statements or the notes, unless required by applicable U.S. GAAP or IFRS Accounting Standards (e.g., ASC 805).
- Present pro forma information (or summaries thereof) elsewhere in a filing that does not reflect all material transactions required in the pro forma financial information. For example, as noted in paragraph 3242.2 of the FRM, pro forma earnings per share should include the pro forma effects of all material transactions wherever it is presented in a filing.
- Reflect the adoption of accounting standards in pro forma financial information. Rather, the potential impact of the adoption of an accounting standard should be disclosed in the notes to the historical financial statements in accordance with SAB Topic 11.M.
- Include non-GAAP financial measures on the face of pro forma financial information. Paragraph 3242.5 of the FRM, however, clarifies that “[a]lternative measures of performance or liquidity and the effect of pro forma adjustments thereon may be disclosed in the [notes to] pro forma financial information provided the requirements of [Regulation S-K, Item] 10(e) are met.”