SEC Amends Certain Financial Disclosure Requirements

The U.S. Securities and Exchange Commission (SEC) has adopted amendments that modify certain financial disclosure requirements about acquisitions and dispositions of businesses. 

Among other things, the amendments will simplify the disclosure framework for issuers. Specifically, under the proposals, the audited financial statements required to be disclosed for an acquired business will be reduced from three years to two years. The amendments also will permit issuers to prepare financial statements of acquired businesses in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS-IASB”) without reconciliation to U.S. generally accepted accounting principles in certain circumstances.

Some of the amendments also may benefit companies seeking to launch an initial public offering (IPO). Specifically, the amendments allow a company filing an initial registration statement to omit separate audited financial statements of a previously-acquired significant business when those financial statements already have been included in the company’s audited financial statements for nine months or a year, depending on significance. The amendments also expand the circumstances in which a company may use pro forma financial information to test the significance of an acquisition.

Nasdaq has advocated for disclosure simplification and streamlining as part of its blueprint to revitalize the U.S. capital markets and issued a comment letter generally supporting the SEC’s proposal. Nasdaq believes the SEC has taken another important step toward improving the environment for public companies. 

Read the SEC’s adopting release here>

Read Nasdaq's comment letter here>

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