4.5 Special Circumstances

As noted in Section 2.9, if the aggregate significance of individually insignificant acquirees exceeds 50 percent, a registrant may be required to present pro forma financial information to reflect the aggregate effects of all individually insignificant acquisitions. Accordingly, for all individually insignificant acquisitions, a registrant must evaluate the aggregate significance of (1) probable acquisitions that do not exceed 50 percent, (2) consummated acquisitions that exceed 20 percent but do not exceed 50 percent and whose separate preacquisition financial statements do not yet have to be filed (i.e., within the 75-day grace period), and (3) any acquisitions consummated since the end of the registrant’s most recently completed fiscal year presented that do not exceed 20 percent. In registration statements or proxy statements, pro forma financial information must reflect all individually insignificant acquisitions even though separate preacquisition financial statements are only required for probable acquisitions that individually exceed 50 percent significance or consummated acquisitions that individually exceed 20 percent significance. Therefore, registrants may need to provide pro forma financial information for acquirees even when separate preacquisition financial statements are not required.

A registration statement filed on a Form S-4 may be used to register securities being offered to security holders of a business that has been identified as a potential acquisition (i.e., target). The acquiree’s separate preacquisition financial statement requirements for a Form S-4 will depend on whether an issuer’s shareholder vote is required or whether the target is a registrant, in which case separate preacquisition financial statements may be required even if the acquisition does not exceed the 20 percent significance level under Rule 1-02(w)(1) (see Section 2.4.4). However, pro forma financial information reflecting the accounting for such an acquisition on Form S-4 is only required if the acquisition exceeds the 20 percent significance level under Rule 3-05. See Item 5 of Form S-4 and other applicable instructions in that form regarding the requirements for pro forma financial information.

The pro forma financial information requirements for a business acquisition in a merger proxy statement vary according to factors such as (1) who the voting shareholders are and (2) the form of consideration. If the consideration issued in the business acquisition includes registered securities, the registrant must comply with the pro forma financial information requirements of Form S-4 (see Section 4.5.2). Pro forma financial information is generally required when it is material to a voting decision. For information about the pro forma requirements in proxy statements, see Section 2.4.5.1.