4.5 Special Circumstances
Pro forma financial information for a consummated or probable
business acquisition must generally be provided whenever the separate preacquisition
financial statements of a significant acquiree are required. However, in certain
circumstances, such information may be included when separate preacquisition
financial statements are not required, or vice versa.
4.5.1 Individually Insignificant Acquisitions
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 acquirees. The pro forma financial information must
reflect all individually insignificant acquirees even though separate
preacquisition historical financial statements are only required for probable or
consummated acquisitions that are individually significant (i.e., 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.
Connecting the Dots
Although there is no requirement to provide separate financial statements
for individually insignificant acquirees, a registrant must still obtain
sufficient historical financial information about all of its
individually insignificant acquirees to prepare the required pro forma
financial information when aggregate significance exceeds 50 percent, as
described above. In addition, when a material portion of the historical
financial information used to develop the pro forma financial
information has not been subject to audit or review, the level of
comfort that auditors are able to give underwriters in conjunction with
a securities offering may be affected.
4.5.2 Form S-4 Registration Statements for Securities Issued for a Business Acquisition
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 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 financial statements may be required even if the acquisition does not
exceed the 20 percent significance level under Rule
3-05 (see Section 2.4.4). However, pro forma financial information
reflecting 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.
4.5.3 Proxy Materials for a Business Acquisition
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 information
is generally required when it is material to a voting decision. For information
about the pro forma requirements in proxy materials, see Section 2.4.5.