On May 21, 2020, the Securities and Exchange Commission (the “SEC”) announced that it voted to adopt amendments to the regulations governing the acquisition and disposition of businesses. The amendments are intended to streamline information requirements and reduce the complexity and cost of disclosures related to these transactions.

Upon the acquisition or disposition of a business, registrants are required to disclose certain information. The extent of required disclosure is determined by the relative significance of the transaction to the registrant. The changes highlighted in the press release issued by the SEC include the following changes to the current rules:

• Updates to the significance test in Rule 1-02(w), Securities Act Rule 405 and Exchange Act 12b-2;
• No longer requiring historical financial statements for businesses that are considered insignificant and expanding required pro forma information to depict the aggregate effect of the transaction;
• Requiring no more than the two most recent years of financial statements to be provided for an acquired business;
• Allowing the omission of certain expenses from financial statements for acquisitions of a component of an entity;
• Permitting of the use of International Financial Reporting Standards as issued by the International Accounting Standards Board in certain circumstances;
• Limiting the time frame for which a company must provide separate financial statements for an acquired business;
• Amending the requirements for pro forma financial information to improve the content and relevance of this information; and
• The addition a new rule to cover financial reporting for fund acquisitions and amending the definition of “significant subsidiary” to provide a definition that is specifically tailored for investment companies;

The amendments will be effective January 1, 2021 and voluntary compliance with the final amendments will be permitted prior to that date.