4.3 Periods to Be Presented in Pro Forma Financial Information
Article
11 specifies the periods to be presented in the pro forma balance
sheet and the pro forma income statements. The registrant should use its fiscal year
when presenting pro forma financial information.
4.3.1 Pro Forma Balance Sheet
Rule 11-02(c)(1) indicates
that a pro forma balance sheet should be presented “as of the end of the most
recent period for which a consolidated balance sheet of the registrant is
required by [Rule 3-01] unless the
transaction is already reflected in such balance sheet.”
Therefore, a pro forma balance sheet should be presented for
only the most recent balance sheet included in or incorporated by reference into
the SEC filing (i.e., one pro forma balance sheet as of the end of the fiscal
year or the subsequent interim period, whichever is later). A pro forma balance
sheet is not required, however, if the registrant’s most recent historical
balance sheet included in the filing already reflects the consummated
transaction (e.g., the transaction occurred before the balance sheet date).
In determining the pro forma balance sheet to present in a Form
8-K, the registrant should consider the requirements in Rule 3-01 related to the
consolidated balance sheet as of the date of the initial
filing of the Form 8-K, not as of the filing date of the amendment, which may be
filed within 71 calendar days. However, a registrant that files a more recent
Form 10-K or Form 10-Q between the date of the initial
filing of the Form 8-K and the subsequent amendment may elect, but is not
required, to use the more recent historical balance sheet included in the
recently filed Form 10-K or Form 10-Q.
4.3.2 Pro Forma Income Statements
Rule
11-02(c)(2)(i) indicates that pro forma income statements should
be presented for “only the most recent fiscal year. . . and for the period from
the most recent fiscal year end to the most recent interim date for which a
balance sheet is required” by Rule 3-01 (except as noted below). Rule
11-02(c)(2)(i) also permits, but does not require, a pro forma presentation for
the comparative interim period of the previous fiscal year. However, a pro forma
income statement should not be presented “when the historical statement of
comprehensive income reflects the transaction for the entire period.” Therefore,
pro forma income statements should be based on the registrant’s latest fiscal
year and subsequent interim period unless the transaction is already reflected
in the registrant’s audited historical statements for the most recent full
fiscal year.
In addition, Rule 11-02(c)(4) indicates that a registrant may supplementally
present an additional pro forma income statement for the most recent 12-month
period whenever unusual events occur during the most recent fiscal year.
In limited circumstances, pro forma income statements are
required for all periods presented. Rule
11-02(c)(2)(ii) states, in part:
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.
When a pro forma income statement is required for all periods
presented, the annual pro forma income statements must match the annual periods
presented by the registrant in its historical financial statements (i.e., two or
three annual periods). For a transaction that is required to be accounted for as
a combination of entities under common control, the pro forma income statements
are required for the annual periods and, if needed, any interim period (1)
presented by the registrant and (2) in which the entities were under common
control.
When pro forma financial information reflects the accounting for
a common-control transaction or a discontinued operation, it may also reflect
additional transactions such as a debt refinancing or an unrelated significant
business acquisition or disposition. These additional transactions should be
presented in the pro forma income statements for only
the most recent fiscal year and subsequent interim period. The pro forma income
statements for the earliest two annual periods (or earliest annual period for an
SRC) should not include adjustments for the accounting for these additional
transactions and should only reflect the accounting for the common-control
transaction or the discontinued operation. The results of the pro forma income
statements for the earliest two annual periods (or earliest annual period for an
SRC) should be consistent with the registrant’s retrospectively revised annual
income statements when they are required to be presented in a subsequent SEC
filing (e.g., in a Form 8-K or in the registrant’s subsequent Form 10-K).
Example 4-5
Registrant A, a large accelerated filer,
acquired Company B on September 1, 20X3. On the basis of
the significance of this business acquisition, A
determines that B’s separate preacquisition financial
statements and pro forma financial information must be
filed on a Form 8-K.
On September 4, 20X3, A filed an initial
Form 8-K within four business days, as required, and
must amend the Form 8-K within 71 calendar days to
include B’s separate preacquisition financial statements
and pro forma financial information.
Under Rule 11-02(c)(1), a pro forma
balance sheet must be included as of the end of the most
recent period required for the registrant at the time of
the initial Form 8-K filing (i.e., June 30, 20X3). Rule
11-02(c)(2)(i) requires registrants to provide a pro
forma income statement for their most recent fiscal year
and interim period.
Registrant A therefore has two options for presenting the
pro forma financial information:
-
On the basis of its June 30 interim financial statements — Registrant A would provide a pro forma balance sheet as of June 30, 20X3, and pro forma income statements for the six-month period ended June 30, 20X3, and the year ended December 31, 20X2. Because the pro forma financial information would only reflect periods before the transaction, a separate column for B would be shown for all periods.
-
On the basis of its September 30 interim financial statements — Registrant A would have the option, but would not be required, to base the pro forma financial information on the September 30, 20X3, financial information provided that its Form 10-Q for the quarter ended September 30, 20X3, is filed before the Form 8-K is amended to include pro forma financial information. If A elects this option, it is not required to include a pro forma balance sheet in its Form 8-K because its historical September 30, 20X3, balance sheet already reflects the accounting for the acquisition of B. However, A must provide pro forma income statements for the nine months ended September 30, 20X3, and the year ended December 31, 20X2. The pro forma income statement for the year ended December 31, 20X2, would include a separate column for B’s results for the entire period. The pro forma income statement for the interim period would include a separate column for B’s results for the period from January 1, 20X3, to September 1, 20X3 (the acquisition date), since B’s results are already included in A’s financial information from September 1, 20X3, onward.
Example 4-6
Assume the same facts as in the previous
example, except that Registrant A acquired Company B on
October 5, 20X3, and has elected to include a pro forma
balance sheet as of September 30, 20X3, in the amended
Form 8-K to reflect the accounting for the acquisition
of B. A pro forma balance sheet is required because A’s
historical September 30, 20X3, balance sheet does not
reflect the accounting for the acquisition of B.
Registrant A would need to include pro
forma income statements for the year ended December 31,
20X2, and the nine-month period ended September 30,
20X3, including a separate column for B’s results for
the entire nine-month period.
Example 4-7
Assume the same facts as in Example
4-6, except that the acquisition of
Company B is considered a reorganization of entities
under common control, and common control existed for all
periods presented.
In this scenario, A has elected to
include a pro forma balance sheet as of September 30,
20X3, in the amended Form 8-K to reflect the accounting
for the acquisition of B. A pro forma balance sheet is
required because A’s historical September 30, 20X3,
balance sheet does not reflect the accounting for the
reorganization.
Registrant A would need to include pro
forma income statements for each of the three years in
the period ended December 31, 20X2, and for the
nine-month period ended September 30, 20X3, including a
separate column for B’s results for the entire
period.
4.3.3 Updating Pro Forma Financial Information in a Registration Statement or Proxy Statement
A registrant may need to update pro forma financial information
if it subsequently files (or amends) a registration or proxy statement. This is
the case even if the acquiree’s separate preacquisition financial statements do
not need to be updated.
4.3.3.1 Pro Forma Balance Sheet
A pro forma balance sheet should be presented as of the
registrant’s most recent balance sheet date included or incorporated by
reference in the registration statement unless the transaction is already
reflected in the historical balance sheet or in the proxy statement.
4.3.3.2 Pro Forma Income Statement
Pro forma income statements should generally be presented
for the registrant’s most recent fiscal year and interim period included or
incorporated by reference in the registration statement unless the business
acquisition is already reflected in the historical income statement for the
entire period (i.e., in the audited historical income statement for the most
recent full fiscal year and subsequent interim period) or in the proxy
statement. If required, the updated pro forma income statement in the
registration or proxy statement should include, as applicable, historical
financial information for the acquiree up to the date of acquisition or the
most recent historical financial information included or incorporated by
reference if the business acquisition has not yet been consummated. The pro
forma income statement should be updated in certain cases to reflect the
results of the acquiree for the entire period presented (annual and interim
if applicable).
Example 4-8
On December 2, 20X3, Registrant R, a
calendar-year-end company, files a registration
statement on Form S-3. The registration statement
includes or incorporates by reference R’s (1)
historical audited financial statements as of
December 31, 20X2 and 20X1, and for each of the
three years in the period ended December 31, 20X2,
and (2) unaudited interim financial statements as of
September 30, 20X3, and for the nine-month periods
ended September 30, 20X3 and 20X2.
On March 15, 20X3, R acquires
Company B, a calendar-year-end accelerated filer.
The transaction is a significant business
acquisition (at the 30 percent level) for R. On
March 19, 20X3, R files an initial Form 8-K
announcing the acquisition of B.
On May 28, 20X3, on the basis of the
significance of this business acquisition, R files a
Form 8-K/A with the required audited separate
preacquisition financial statements of B as of and
for the year ended December 31, 20X2, and pro forma
financial information as of and for the year ended
December 31, 20X2.
In the registration statement filed
on December 2, 20X3, R would incorporate by
reference the Form 8-K filed on March 19, 20X3, and
Form 8-K/A filed on May 28, 20X3. It must also
incorporate its most recent historical financial
statements included in its Form 10-Q for the quarter
ended September 30, 20X3, in the registration
statement in accordance with Rule
3-12. However, R is not required to
update the separate preacquisition financial
statements of B because the acquisition was
consummated on March 15, 20X3, and therefore the
intervening period between (1) the end of R’s most
recent fiscal year completed before the acquisition
and (2) the acquisition date is not a complete
quarter.
To comply with Rule
11-02(c) in the registration statement,
R must update the pro forma financial information
previously included in the Form 8-K/A. Since the
business acquisition is already reflected in R’s
historical balance sheet as of September 30, 20X3, a
pro forma balance sheet is not required. However, R
must provide an updated pro forma income statement
for the nine-month period ended September 30, 20X3,
because the transaction is not reflected in the
historical income statement for the entire period.
As a result, R’s income statement for the nine-month
period ended September 30, 20X3, would be combined
with B’s income statement from January 1, 20X3,
through the acquisition date (March 15, 20X3).
4.3.3.3 Updating Adjustments
In general, each time a registrant presents pro forma
financial information, it should ensure that any adjustments reflect the
best information available at the time. For example, a registrant may file
pro forma financial information before the close of a transaction (e.g., in
a Form S-4 related to a probable acquisition). When the transaction
subsequently closes, if the Form S-4 does not include substantially the same
information as that required in the Form 8-K reporting the consummation of
the transaction, the registrant must provide updated pro forma financial
information. The registrant would need to consider updating the adjustments
reflected not only for a change in the periods presented but also for
additional information that may now be available (e.g., a more complete
allocation of the consideration transferred).
A registrant may use a prospectus supplement for currently
effective registration statements (e.g., an existing Form S-3) upon which it
wishes to draw down or issue securities. A domestic registrant is not
obligated to amend the prospectus other than as specified by Section
10(a)(3) of the Securities Act and Regulation S-K, Rule 512(a), both of
which require an update for any “fundamental change
in the information set forth in the registration statement” (emphasis
added). Thus, a registrant is not required to update the pro forma financial
information that was previously included in the existing registration
statement on Form S-3 unless there has been a fundamental change. It is the
responsibility of management, in consultation with SEC legal counsel, to
determine what constitutes a fundamental change.
If presented, management’s adjustments (as described in Section
4.4.3), included or incorporated by reference in a
registration or proxy statement, must be updated.
4.3.4 Updating Pro Forma Financial Information in a Form 8-K for a Significant Business Acquisition Previously Included in a Registration or Proxy Statement
A registrant may have previously filed a registration or proxy
statement that included (1) separate preacquisition financial statements of an
acquiree in a probable acquisition and (2) pro forma financial information
related to the transaction. Upon consummation of the business acquisition, the
registrant must comply with the applicable Form 8-K filing requirements to
report the significant business acquisition. As discussed in Section 2.5.3.1, if the
information reported in a registration or proxy statement is “substantially the
same” as that required in the Form 8-K, such information may be omitted from the
Form 8-K.
While there is no separate SEC interpretive guidance on making
this determination, we believe that registrants should evaluate the
“substantially the same” criteria with respect to the pro forma financial
information in a manner consistent with their evaluation of the criteria for the
acquiree preacquisition financial statements. When performing this evaluation,
registrants should also consider whether there was a material change in the
underlying assumptions used (e.g., a material change to the consideration
transferred), including management’s adjustments (if applicable) that would
cause the previously filed pro forma financial information to be materially
incorrect or potentially misleading.
In addition, a registrant may choose to file updated pro forma financial
information in a Form 8-K so that it can be incorporated by reference into an
effective shelf registration statement or a new registration statement.
Example 4-9
Registrant R, a calendar-year-end company, entered into
an agreement to purchase Company B, also a
calendar-year-end company. On June 1, 20X3, R filed a
registration statement on Form S-4 to register the
securities being offered to the shareholders of B.
The financial statement requirements for
the Form S-4 were determined to be both R’s and B’s (1)
separate historical audited financial statements as of
December 31, 20X2 and 20X1, and for each of the three
years in the period ended December 31, 20X2, and (2)
unaudited interim financial statements as of March 31,
20X3, and for the three-month periods ended March 31,
20X3 and 20X2.
The Form S-4 also included a pro forma balance sheet as
of March 31, 20X3, and pro forma income statements for
the year ended December 31, 20X2, and the three-month
period ended March 31, 20X3. The transaction was
consummated on October 1, 20X3, and a Form 8-K reporting
the acquisition was filed in a timely manner.
Because of the requirements related to
the age of the financial statements and the fact that
the transaction was consummated on October 1, 20X3, R
would normally need to provide B’s separate interim
financial statements through June 30, 20X3, in the Form
8-K. However, if such financial statements were
previously included in a registration statement, the
information may be deemed substantially the same as that
required in the Form 8-K because the omitted period of B
(i.e., April 1, 20X3, through June 30, 20X3) is less
than two quarters (see Section 2.5.3.1).
In the absence of significant events, B’s interim
financial statements as of and for the six-month period
ended June 30, 20X3, may be omitted from the Form 8-K.
In the same manner, R does not have to provide pro forma
financial information for the business acquisition in
the Form 8-K or in an amendment thereto.
Note, however, that if the acquisition
was consummated on December 1, 20X3, R would have to
provide (1) B’s updated interim financial statements as
of and for the nine-month period ended September 30,
20X3, to satisfy the requirements related to the age of
the financial statements and (2) the related pro forma
financial information in the Form 8-K (or in an
amendment thereto). Otherwise, operating results for two
or more interim quarters would be omitted (i.e., the
quarters ended on June 30, 20X3, and September 30, 20X3)
and the previously filed financial statements of B and
pro forma financial information in the Form S-4 would
therefore not be deemed substantially the same as the
information needed in the Form 8-K.
Example 4-10
Registrant R, a calendar-year-end company, enters into an
agreement to acquire Company B, also a calendar-year-end
company. On December 15, 20X3, R files a registration
statement on Form S-4 to register the securities being
offered to B’s shareholders.
The financial statement requirements for
the Form S-4 were determined to be both R’s and B’s (1)
separate historical audited financial statements as of
December 31, 20X2 and 20X1, and for each of the three
years in the period ended December 31, 20X2, and (2)
unaudited interim financial statements as of September
30, 20X3, and for the nine-month periods ended September
30, 20X3 and 20X2.
The Form S-4 also included a pro forma balance sheet as
of September 30, 20X3, and pro forma income statements
for the year ended December 31, 20X2, and the nine-month
period ended September 30, 20X3. The transaction was
consummated on April 1, 20X4, and a Form 8-K reporting
the acquisition was filed in a timely manner.
Registrant R must amend the Form 8-K
within 71 calendar days to include (1) B’s updated
audited financial statements for the year ended December
31, 20X3, and (2) updated pro forma financial
information as of and for the year ended December 31,
20X3. Otherwise, pro forma financial information for the
most recent annual period would be omitted and,
therefore, the pro forma financial information
previously included in the Form S-4 would not be deemed
to be substantially the same as the information needed
in the Form 8-K. See Section
2.5.3.1.