IMA Financial Reporting Committee comment letter on SEC Release No. 33-10635, Proposed Rule−Amendments to Financial Disclosures about Acquired and Disposed Businesses
The IMA Financial Reporting Committee (FRC) issued a comment letter in response to SEC Release No. 33-10635,
Amendments to Financial Disclosures about Acquired and Disposed Businesses. In this release, the SEC seeks comments on amending its rules that require the disclosure of financial statements relating to acquired businesses, including real estate operations and investment companies, and pro forma financial information related to significant acquisitions and dispositions.
The Committee generally supports the proposal and its approach of revising the tests for determining the significance of an acquisition or disposition. In the Committee’s view, these amendments, if adopted, will improve the relevance and quality of financial reporting. However, the Committee raises several recommendations regarding the proposed amendments. These recommendations include the use of enterprise value (or in some cases, total assets) rather than the market value of common stock for the investment test. Other recommendations include using interim period financial information, applying the proposed rules to investment companies, and adjusting pro forma financial statements.