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

SEC Proposes Amendments To Regulation S-K

On August 8, 2019, the SEC canceled a public meeting which was slated to talk about proposed changes to disclosures related to business descriptions, legal proceedings and risk factors under Regulation S-K and instead, on the same day, issued proposed rule changes.  The proposed changes continue the SEC’s ongoing disclosure effectiveness initiative.  My ongoing running summary of proposed and implemented rule amendments, concept releases, reports and other relevant information related to disclosure changes can be found at the end of this blog.

The proposed changes take a more principles-based approach to business descriptions and risk factors, recognizing the significant changes in business models since the rule was adopted 30 years ago.  The proposed amendments to disclosures related to legal proceedings continues the current prescriptive approach.  In addition, the proposed rule changes are intended to improve the readability of disclosure documents, as well as discourage repetition and disclosure of information that is not material.

Item 101 – Description of Business