Topic 13 of the SEC’s Division of Corporation Finance Financial Reporting Manual discusses the effects of subsequent events on financial statements required in filings. Per Topic 13, certain events that occur after the end of a fiscal year will require retrospective revision of that year’s financial statements if they are reissued after financial statements covering the period during which the event occurred have been filed. Such events include reporting:
- Disclose certain matters if the original accounting on any repurchase agreements has changed.
- A change in accounting principle
- Discontinued operations
- Change in reportable segments
- Change in the reporting entity
- Stock splits
Re-issuance of the pre-event financial statements is required if those financial statements are required to be included or incorporated by reference into a registration or proxy statement, with the exception of Form S-8. If the pre-event financial statements are not reissued in connection with any filing under the Securities Act or Exchange Act, annual information does not need to be retrospectively revised until that information is included in the registrant’s next Annual Report on Form 10-K.
In a recent update to its Financial Reporting Manual, the Division of Corporation Finance added another event that requires retrospective revision of financial statements - retrospective adjustments to provisional amounts in a business combination. Under the acquisition method of accounting for a business combination, the acquirer records provisional amounts if there are any items for which the initial accounting is incomplete at the end of the reporting period in which the business combination occurs. If a registrant determines it must make a material retrospective adjustment to provisional amounts it previously reflected in its financial statements pursuant to the requirements of paragraph 51 of FASB Statement No. 141R, Business Combinations, (ASC 805-10-25) and this adjustment has not yet been reflected in any historical financial statements, the registrant should provide or incorporate by reference revised financial statements reflecting the retrospective adjustment if the adjustment is material.
If this retrospective adjustment has been reflected in subsequent interim historical financial statements, but the acquisition occurred in the preceding fiscal year and the adjustments are not reflected in the annual financial statements, the registrant should provide revised audited financial statements for the year of acquisition reflecting the adjustments. The revised financial statements are generally filed via Form 8-K.
It should be noted that the SEC’s guidance for retrospective adjustments to provisional amounts in a business combination is different from the guidance relating to changes in accounting principles, discontinued operations, and changes in reportable segments. In the case of a retrospective accounting change, discontinued operation, or change in reportable segment, previously issued financial statements cannot be retrospectively adjusted until after the financial statements covering the period during which the event occurred have been filed.
View the Division of Corporation Finance Financial Reporting Manual in full. |
