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Financial Reporting Manual Updated

On January 30, 2023, the SEC’s Division of Corporation Finance updated its Financial Reporting Manual (“Manual”).  The latest update is dated as of December 31, 2022.  Although we attorneys like to leave the accounting to the accountants, the Financial Reporting Manual is a go to resource for all practitioners and is generally one of the many resources always open on my desktop.

As the preamble to the Manual states, it was originally created as internal guidance to the SEC staff.  In 2008, in an effort to increase transparency of informal staff interpretations, the SEC posted a version of the Manual to its website.  The SEC continues with its usual disclaimers that the manual is not formal guidance and that they can change their interpretations or views at any time, etc.  Regardless, we all use it as a resource and in my years of experience, have never had the SEC take a counter-position to the Manual’s guidance unless there has been

SEC Adopts Amendments To Disclosures Related To Acquisitions And Dispositions Of Businesses

One year after proposing amendments to the financial statements and other disclosure requirements related to the acquisitions and dispositions of businesses, in May 2020 the SEC adopted final amendments (see here for my blog on the proposed amendments HERE).  The amendments involved a long process; years earlier, in September 2015, the SEC issued a request for public comment related to disclosure requirements for entities other than the reporting company itself, including subsidiaries, acquired businesses, issuers of guaranteed securities and affiliates which was the first step culminating in the final rules (see HERE).

The amendments make changes to Rules 3-05 and 3-14, 8-04, 8-05, and 8-06 of Regulation S-x, as well as Article 11.  The SEC also amended the significance tests in the “significant subsidiary” definition in Rule 1-02(w), Securities Act Rule 405, and Exchange Act Rule 12b-2.  Like all recent disclosure changes, the proposed rules are designed to improve the information for investors while reducing complexity

Guide to Reverse Merger Transaction

What is a reverse merger?  What is the process?

A reverse merger is the most common alternative to an initial public offering (IPO) or direct public offering (DPO) for a company seeking to go public.  A “reverse merger” allows a privately held company to go public by acquiring a controlling interest in, and merging with, a public operating or public shell company.  The SEC defines a “shell company” as a publically traded company with (1) no or nominal operations and (2) either no or nominal assets or assets consisting solely of any amount of cash and cash equivalents.

In a reverse merger process, the private operating company shareholders exchange their shares of the private company for either new or existing shares of the public company so that

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