More Modernization and Simplification on the Horizon?

In the last week there have been two very interesting developments in the SEC’s disclosure effectiveness process. 

On May 3, 2019, the SEC formally proposed a rule to “improve the information that investors receive regarding the acquisition and disposition of businesses.”  The SEC indicated that [t]he proposed amendments are also intended to facilitate more timely access to capital and to reduce complexity and compliance costs of these financial disclosures. 

The proposed rules would change Regulation S-X Rules 3-05 and 3-14, Article 11, and other related rules and forms.  Among the many changes in the proposed rule are: 

  • Updates to the investment test and the income test in the significant subsidiary test 
  • Expanding the use of pro forma financial information in measuring significance 
  • Conforming the significance threshold and tests for a disposed business 
  • Requiring the financial statements of the acquired business to cover up to the two most recent fiscal years rather than up to the three most recent fiscal years 
  • Permitting disclosure of financial statements that omit certain expenses for certain acquisitions of a component of an entity. 

There are a raft of details in the proposed rule and you can find an extensive Fact Sheet with a link to the proposed rule here. 

 On May 9, 2019, in an open meeting, the SEC will consider proposing changes to the definitions of accelerated and large accelerated filers.  According to the meeting agenda: 

 The Commission will consider whether to propose new rule amendments to the accelerated filer and large accelerated filer definitions to promote capital formation for smaller reporting issuers by more appropriately tailoring the types of issuers that are included in the categories of accelerated and large accelerated filers and revising the transition thresholds for these filers. 

 As always, your thoughts and comments are welcome! 

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