D.11 Ongoing Reporting Requirements | DART – Deloitte Accounting Research Tool

After the transaction is consummated, the ongoing periodic reporting requirements for the combined company will depend on how the merger is accounted for. For a transaction in which the target is identified as the accounting acquirer and reverse recapitalization accounting applies, the historical financial statements of the target become those of the registrant. Therefore, the target’s historical financial statements will replace those of the SPAC beginning with the filing of the financial statements that first include the transaction. For example, if the transaction closes on March 15, 20Y0, the financial statements for the interim period ended March 31, 20X4, will first include the transaction. Therefore, the financial statements included in the March 31, 20X4, Form 10-Q and all future filings will represent those of the target and no longer the SPAC.

If the SPAC is determined to be the accounting acquirer, the combined company’s financial statements included in its periodic reports that reflect the transaction generally present (1) the target’s results of operations through the transaction date (often referred to as the predecessor period) and (2) financial statements of the registrant that include the post-transaction period (often referred to as the successor period). Because of the new basis established for the target’s assets and liabilities as a result of the acquisition, there will be a lack of comparability between the predecessor and successor periods. Therefore, the pre- and post-transaction periods must be separated, typically by a “black line,” to emphasize the change in the basis of accounting in the post-transaction periods. For example, in the scenario above, the Form 10-Q would reflect the operations and cash flows of the target for the predecessor period from January 1, 20X4, through March 14, 20X4, and the successor period from March 15, 20X4, through March 31, 20X4, as two distinct columns separated by a black line.

The combined company is required to file Forms 10-K and 10-Q in accordance with specific deadlines that depend on the combined company’s filing status, which are further discussed in Section 7.2. The post-de-SPAC transaction registrant must redetermine its SRC status within four business days after consummating the de-SPAC transaction and reflect this redetermination in any periodic reports filed more than 45 days after completing the de-SPAC transaction (other than for the purposes of its Super Form 8-K). When making this redetermination, the registrant should use the annual revenues of the target company for its most recently completed fiscal year reported in the Super Form 8-K; public float can be measured on any date within the four-day period after the de-SPAC transaction. However, the registrant would not make a redetermination upon completion of the de-SPAC transaction regarding other filing statuses, such as large accelerated filer, accelerated filer, nonaccelerated filer, EGC, or FPI.

In a manner consistent with Regulation S-X, Rule 15-01(e), the SPAC’s precombination financial statements may be excluded from subsequent periodic filings and registration statements once (1) the predecessor’s financial statements have been filed for all required periods through the acquisition date and (2) the registrant’s postcombination financial statements include the period in which the acquisition was consummated. For example, if a de-SPAC transaction closed on March 1, 20X4, once the Form 10-Q for the quarter ended March 31, 20X4, is filed, including financial statements of the target through the acquisition and the registrant’s postcombination financial statements, precombination SPAC financial statements would no longer be required in periodic filings or registration statements.

The combined company may file a new or amended registration statement after the transaction closes. The financial statement requirements for such registration statements will depend on how the merger is accounted for:

Reversere capitalizations — For transactions accounted for as reverse recapitalizations (i.e., the target is determined to be the accounting acquirer):
- If the combined company files a new or amended registration statement beforethe filing of the first periodic report that reflects the transaction, it does not need to retrospectively revise the financial statements to reflect the recapitalization since the financial statements do not yet include the period in which the transaction is reflected. However, such a registration statement must include the pretransaction financial statements of both the target and the SPAC.
- If the combined company files a new or amended registration statement after thefiling of the first periodic report that reflects the transaction but before the filing of the first annual report reflecting the transaction, it must consider whether the historical annual financial statements need to be retroactively revised to reflect the recapitalization. In such cases, since the financial statement periods included in the registration statement reflect the transaction, the pretransaction financial statements of the SPAC are not required in the registration statement (see Regulation S-X, Rule 15-01(e)). In addition, if a combined company that is not an SRC files a new or amended registration statement after the close of the transaction and reports a material retrospective change, it may need to disclose selected quarterly financial data for the affected quarters within (1) the two most recent fiscal years and (2) any subsequent interim periods for which financial statements are presented (see Regulation S-K, Item 302).
Business combinations — For transactions accounted for as business combinations (i.e., the SPAC is determined to be the accounting acquirer):
- Ifthe combined company files a new or amended registration statement beforethe filing of the first periodic report that reflects the transaction, the registration statement must include the pretransaction financial statements of both the target and the SPAC.
- If the combined company files a new or amended registration statement after thefiling of the first periodic report that reflects the transaction, the registrant must include (1) the financial statements of the target for the predecessor period and (2) the combined company for the successor period. In certain circumstances, the target’s financial statements presented through the transaction date may need to be audited. For example, if the transaction closes on June 1, 20X4, a registration statement filed in September 20X4, would include the unaudited interim financial statements of the target from January 1, 20X4 to May 31, 20X4 (predecessor period) along with the required annual financial statements of the target. The registrant would also include the unaudited interim financial statements of the combined company for June 1, 20X4, through June 30, 20X4 (successor period). However, since the financial statement periods included in the registration statement reflect the transaction, the SPAC’s pretransaction financial statements are not required in the registration statement (see Rule 15-01(e)). In its Form 10-K for the year ended December 31, 20X4, and a registration statement filed in April 20X5, the registrant must include audited pretransaction financial statements of the target for January 1, 20X4, through May 31, 20X4 (predecessor period), as well as for the appropriate prior fiscal years (i.e., 20X3 and 20X2), along with audited financial statements of the combined company for June 1, 20X4, through December 31, 20X4 (successor period). The financial statements may be presented as separate financial statements for the predecessor and successor periods or as one set with a black line separating predecessor and successor periods to highlight the differences in basis.
  
  Connecting the Dots
  
  Regardless of whether the transaction was accounted for as a reverse recapitalization (i.e., the target is determined to be the accounting acquirer) or as a business combination (i.e., the SPAC is determined to be the accounting acquirer), the SPAC’s precombination financial statements may be excluded from subsequent filings once (1) the predecessor’s financial statements have been filed for all required periods through the acquisition date and (2) the postcombination registrant’s financial statements include the period in which the acquisition was consummated. Accordingly, the SPAC’s financial statements may continue to be required in filings after the de-SPAC transaction, such as in the Super Form 8-K and registration statement (typically on Form S-1) filed to register the resale shares associated with the issuance of a PIPE, provided that they are filed before the financial statements of the registrant reflect the de-SPAC transaction.

The combined company will typically be required to use long-form registration statements (i.e., Form S-1) rather than short-form statements (i.e., Form S-3) for a year after the transaction. Question 115.18 of the SEC’s C&DIs on Securities Act Forms states that the combined company may meet the registrant requirements to use Form S-3 if it has at least 12 calendar months of Exchange Act reporting history after the transaction (not the IPO of the SPAC). Because of these and other matters that may arise, we recommend consultation with accounting and legal advisers.

In addition, as a public company, the combined company is also required to file current reports on Form 8-K that disclose various material events that may occur. For more information about such requirements, see Section 7.3.