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“Management’s Adjustments,” which are adjustments depicting synergies and dis-synergies of the acquisition for which pro
forma effect is being given and may only be presented if, in management’s opinion, such adjustments would enhance an
understanding of the pro forma effects of the transaction and certain conditions are met. Such conditions are that (a) there is
a reasonable basis for each such adjustment; (b) the adjustments are limited to the effect of such synergies and dis-synergies
on the historical financial statements that form the basis for the pro forma statement of comprehensive income as if the
synergies and dis-synergies existed as of the beginning of the fiscal year presented; (c) if such adjustments reduce expenses,
the reduction must not exceed the amount of the related expense historically incurred during the pro forma period
presented; and (d) the pro forma financial information reflects all Management’s Adjustments that are, in the opinion of
management, necessary to a fair statement of the pro forma financial information presented and a statement to that effect is
disclosed. Moreover, when synergies are presented, any related dis-synergies must also be presented.
Under the new rules, Transaction Accounting Adjustments and Autonomous Entity Adjustments are mandatory, while Management’s
Adjustments are optional, in the presentation of pro forma financial information under Article 11. Transaction Accounting Adjustments
and Autonomous Entity Adjustments must be presented in separate columns in the pro forma financial statements, while Management’s
Adjustments, if presented, should be presented in the explanatory notes to the pro forma financial information in the form of
reconciliations of pro forma net income from continuing operations attributable to the controlling interest and the related pro forma
earnings per share data after giving effect to Management’s Adjustments. The explanatory notes for Management’s Adjustments must
also include disclosure of the basis for and material limitations of each Management’s Adjustment, including any material assumptions
or uncertainties of such adjustment, an explanation of the method of the calculation of the adjustment, if material, and the estimated
time frame for achieving the synergies and dis-synergies of such adjustment. Any forward-looking information supplied in
Management’s Adjustments are covered by existing safe harbor rules under Rule 175 under the Securities Act of 1933, as amended (the
“Securities Act”) and Rule 3b-6 under the Exchange Act.
Target and Pro Forma Financial Statements Required in SEC Filings
In connection with a significant completed or probable acquisition, a registrant may be required to include Rule 3-05 historical financial
statements and Article 11 pro forma financial statements in different SEC filings, including in a Form 8-K, registration statements,
prospectus supplements, and proxy materials for a business combination. We discuss these in more detail below. Note that, in all
instances, the target’s financial statements must satisfy the usual age of financial statement requirements or “staleness” deadlines,
which, in turn, depend on the target’s filer status.
Requirements Under Form 8-K
A significant acquisition usually triggers the requirement to file a Form 8-K at three different periods: (1) a signing 8-K to be filed after
the acquisition agreement is signed; (2) a closing 8-K to be filed after the acquisition closes; and (3) a Form 8-K/A to be filed within
approximately 75 days of the closing of the acquisition.
Signing 8-K. Item 1.01 of Form 8-K requires a registrant to disclose in a Form 8-K its entry into a material definitive agreement
not made in the ordinary course of business. The Form 8-K should be filed within four business days from the signing of such
agreement and should disclose, among other things, the date of the agreement, identity of the parties, and a brief description
of the material terms and conditions of the agreement. No financial statements (either target or pro forma) are required to be
included in this Form 8-K.
Closing 8-K. Item 2.01 of Form 8-K requires a registrant to disclose in a Form 8-K that it has completed the acquisition of a
significant amount of assets, otherwise than in the ordinary course of business. The Form 8-K should be filed within four
business days from the closing of the acquisition and should disclose, among other things, the date of completion of the
acquisition, a brief description of the assets involved, the identity of the parties, and the nature and amount of consideration