S-X Article 11

Pro forma financial statements for business combinations

Summary

Topic covers required use of pro forma financials

Required by Reg S-X to show effects of
significant business combinations
For new SEC rule on use of non-GAAP financial measures,
also commonly called pro forma financials,
see Non-GAAP financial measures

Regulation S-X Article 11

Requires use of pro forma financials
for significant business combinations

Reg S-X Article 11

S-B 310(d) Parallel provision for small business issuers

SEC Releases

Proposal release 33-7183 1995
Amended S-X 3-05 and S-X Article 11 to conform rules
for when target company financials and
business combination pro forma financials
must be included in SEC filings
Accordingly, Art. 11 pro forma financials need not be furnished unless separate target financials are required by S-X 3-05
Art. 11 was amended to conform the "significance threshold" for providing business combination pro forma financials to the minimum 20% significance level in S-X 3-05

Summary of Financials Required

Whenever audited financials of an acquired business are required, S-X Article 11 requires:

Condensed pro forma balance sheet

As of the end of the most recent period
for which a consolidated balance sheet is required

Prepared as if the transaction had occurred on
the date of the latest historical balance sheet

Condensed pro forma income statement

For the most recent fiscal year and the most recent interim period

Prepared as if the transaction had taken place at the beginning of the latest financial year included in the filing

Related SEC Rules

Rule 170
Prohibition of Use of Certain Financial Statements

Rule 14a-3(b).1
Financials in annual report generally exclude
S-X Article 3 and Article 11 material

SEC Forms

Form 8-K	Item 2.01 and Item 801
Form S-1	Item 11(e) and 16(b)
Form S-3	Item 11(b)
Form S-4	Detail S-3 registrants Item 10(b) Item 12(a)(3) Item 12(b)(2) Others registrants Item 14(e) S-3 targets Item 16(a) S-2 / S-3 targets Item 12(a)(3) Item 12(b)(2) Other targets Item 17(b)(7)
Sch 14A	Item 13(a)(1)
Form 10-K	Items 8 and 15

Practice Points

Underwriters may want pro forma information included

Effects of a business combination may still
need to be discussed in MD&A

Auditors may need to give comfort

Pro forma information can include adjustments that are directly related to the acquisition and any related financing transactions

For foreign issuers, SEC permits use of additional pro forma information

Related SEC Materials

SEC guidance re effects of FASB 141 /142

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