C.5 SEC Reporting Considerations Related to Asset Acquisitions
When an SEC registrant acquires an asset or a group of assets, the registrant
may be required to report the acquisition on Form
8-K, Item 2.01. The nature of the registrant’s
disclosures depends on whether the asset or group
of assets (1) represents a business for SEC
reporting purposes or (2) is significant.
The definition of a business in SEC Regulation S-X, Rule 11-01(d), for SEC
reporting purposes differs from the definition of
a business in ASC 805-10 for U.S. GAAP accounting
purposes. Accordingly, the registrant must perform
a separate evaluation under Rule 11-01(d) to
determine its SEC reporting requirements. See
Section 2.1.1 of Deloitte’s Roadmap
SEC Reporting
Considerations for Business
Acquisitions for discussion of the
definition of a business for SEC reporting
purposes, and see Appendix D of this publication for
further information on SEC reporting requirements
for acquisitions that meet that definition.
If an asset acquisition does
not represent a business for SEC reporting
purposes, a registrant must evaluate the
significance of the transaction by using a
different test, as discussed in Section
2.1.3 of Deloitte’s Roadmap
SEC Reporting
Considerations for Business
Acquisitions.
Under Form 8-K, Item 2.01, the registrant must file a Form 8-K
within four business days after consummation of an
acquisition of a significant amount of assets. Instruction 4 of Item 2.01 discusses
significance and states, in part:
An acquisition or disposition shall be deemed to involve a
significant amount of assets:
(i) if the registrant’s and its other subsidiaries’ equity in the
net book value of such assets or the amount paid or received for the
assets upon such acquisition or disposition exceeded 10% of the
total assets of the registrant and its consolidated subsidiaries . .
. .
Connecting the Dots
A registrant may also be required by Form 8-K, Item 1.01, to
file a Form 8-K when it has entered into a material definitive agreement for
an acquisition (e.g., when it executes a contract for an acquisition). Item
1.01 is generally filed earlier than Item 2.01, which the registrant is not
required to file until the acquisition is consummated.
The required disclosures for acquisitions of significant assets
differ from the disclosures required for a significant business acquisition. Since
Rule 3-05 does not apply, no historical financial statements need to be filed.
However, the disclosures in Item 2.01 of Form 8-K should clearly (1) describe the
assets acquired, (2) describe the anticipated effects on the registrant’s financial
condition, and (3) indicate that the acquisition did not constitute the acquisition
of a business. When such information would be material to investors, the registrant
may consider including limited pro forma balance sheet information reflecting the
effects of the asset acquisition (or include a narrative discussion, for example,
when adjustments are easily understood). See Chapter 4 of Deloitte’s Roadmap SEC Reporting Considerations for
Business Acquisitions for further information.