SEC amends rules on financial reporting of business acquisitions and dispositions

Abstract

Purpose

This article examines the comprehensive amendments recently adopted by the US Securities and Exchange Commission (SEC) to its accounting and other rules that govern financial statement filing requirements for significant business acquisitions and dispositions.

Design/methodology/approach

The article provides an in-depth analysis of the rule changes in the context of the SEC’s attempt to balance the right of investors to obtain adequate information about the impact of an acquired or disposed business on an SEC registrant against the filing burdens that can result from over-identification of acquisitions or dispositions as material to the registrant based on the SEC’s “significance” tests.

Findings

The rule amendments bring enhanced coherence to a reporting framework that has been characterized in part by inconsistencies, gaps, unreliable valuation principles, and ambiguities. The amendments contribute to the SEC’s ongoing disclosure effectiveness initiative by updating, clarifying, and codifying many requirements that had developed piecemeal in market practice or through guidance issued by the SEC’s staff.

Originality/value

This article provides expert guidance on a major SEC disclosure requirement from an experienced securities lawyer.

Citation

Parrino, R.J. (2021), "SEC amends rules on financial reporting of business acquisitions and dispositions", Journal of Investment Compliance, Vol. 22 No. 2, pp. 109-121. https://doi.org/10.1108/JOIC-07-2020-0011