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Financial Reporting Manual

Dec. 11, 2017

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TOPIC 3 - Pro Forma Financial Information

Regulation S-X Article 11

This Topic describes the circumstances in which pro forma financial statements should be presented in filings, the form of their presentation, and guidance to be considered in their preparation. Although the specific rules of S-X Article 11 do not apply to smaller reporting companies, those registrants can consult S-X Article 11 for guidance when preparing pro forma financial statements required by S-X 8-05 for business acquisitions. Smaller reporting companies should present pro forma information for other current or probable transactions if that presentation would be material to investors.


(Last updated: 9/30/2008)

3110 Significant Business Combination

3110.1Pro forma financial information is required if a significant business combination has occurred in the latest fiscal year or subsequent interim period, or is probable (see Section 2005.4). This includes any transaction or event that results in the registrant obtaining control over another entity. See Topic 2 for definition of a business and tests of significance. Pro forma presentation is not required if the transaction is already fully reflected in historical statements as a reorganization.

NOTE: While the acquisition of an investment to be accounted for under the equity method meets the definition of a business for purposes of S-X 3-05 financial statements and S-X Article 11, full pro forma financial information prepared under Article 11 generally is not required if the registrant elects the fair value option for the investment under ASC 825. In this situation, we expect registrants to include a narrative discussion explaining how the application of ASC 825 for this investment will impact the results of operations and balance sheet in future periods.

3110.2Additional pro forma information also may be appropriate if an acquiree of the registrant consummated a significant business combination of its own during the year, if that information would be material to an understanding of the registrant or a vote on a transaction.

3110.3Pro forma financial statements are not required for individually insignificant businesses unless they are significant in the aggregate at over the 50% level. If certain financial statements are included in the filing under S-X 3-05(b)(2)(i), registrants should consider whether the pro forma financial information would be misleading without giving effect to all individually insignificant acquisitions. Also, if a registrant presents the financial statements of an individually insignificant business, the staff encourages the registrant to also include S-X Article 11 pro forma financial information in the filing.

3110.4Pro forma information required by S-X Article 11 should be filed at the same time the audited financial statements of the acquired business are filed. Presentation of the acquiree’s financial statements without accompanying pro forma information can be misleading, and there is an expectation that the information required by Item 9.01 of Form 8-K will be filed as promptly as feasible. The pro forma information presented in connection with a Form 8-K reporting consummation of an acquisition is not expected to reflect definitive conclusions regarding allocation of the purchase price or other effects. However, uncertainties affecting the pro forma presentation and the possible consequences when they are resolved, if material, should be highlighted.

3120Disposition of a Significant Portion of a Business

3120.1Pro forma financial information is required if a disposition either by sale, abandonment or distribution to shareholders has occurred or is probable, and is not fully reflected in the historical financial statements. Pro forma data may be necessary, if the disposition is material, even if disposed operations do not satisfy the ASC 205-20 criteria of a discontinued operation.

3120.2Audited financial statements of the disposed entity generally are not required in the Form 8-K reporting the disposition, however, Item 9.01(b) requires pro forma information to be filed within 4 days after the disposition. The 71-day extension set forth in Item 9.01(a)(4) for filing financial statements and pro forma information for acquisitions is not available for dispositions. See the Division of Corporation Finance’s C&DIs for Exchange Act Form 8-K, Question 129.01.

3130Acquisition of One or More Real Estate Operations

Pro forma financial information is required if acquisitions which are in the aggregate significant have occurred in the latest fiscal year or subsequent interim period, or are probable. See Section 2320 for guidance related to aggregate significance tests for real estate acquisitions.

3140Roll-Up Transaction [S-K 914]

3140.1In connection with a transaction subject to S-K 914, pro forma financial information should be presented showing the effect on the successor entity assuming (1) that all combining entities participate and (2) participation is limited to those having the lowest combined net cash provided by operating activities for the last fiscal year of such entities. Consideration should be given to the need to present other variations of participation that are permitted by the terms of the roll-up. The following pro forma information should be presented:

  1. Balance sheet as of the later of the end of the most recent fiscal year or latest interim period;
  2. Statements of income with separate line items to reflect income (loss) excluding and including roll-up expenses and payments, earnings per share amounts, and ratio of earnings to fixed charges for the most recent fiscal year and the latest interim period;
  3. Statements of cash flows for the most recent fiscal year and the latest interim period;
  4. Book value per share as of the later of the end of the most recent fiscal year or the latest interim period; and
  5. Pro forma oil and gas reserve data, if applicable.

3150Registrant Previously was Part of Another Entity

Pro forma presentation may be necessary to reflect operations and financial position of the registrant as a stand-alone entity.

NOTE: Consider whether forward-looking information should be presented instead of or along with pro forma information, particularly in cases where a full set of audited financial statements of an acquired entity is not provided (e.g., audited statement of revenues and direct expenses). See Section 3290 below.


(Last updated: 12/31/2010)

3160.1Pro forma financial information is required if events or transactions have occurred or are probable for which disclosure of pro forma financial information would be material to investors, such as:

  1. Termination or revision of tax or other cost sharing agreements and other significant changes that render the registrant’s historical financial statements not indicative of the ongoing entity. [SAB Topic 1B.2]
  2. Declaration of dividends by a subsidiary subsequent to the balance sheet. [SAB Topic 1B.3]
  3. Changes in capitalization at the effectiveness or the close of an IPO.
  4. Receipt or application of offering proceeds under certain circumstances. See Sections 3230, 3320 and 3420 for further discussion.
  5. Other events and transactions which have had or will have a discrete material impact on a registrant’s financial statements. Possible examples include:
    • the repayment of debt
    • emerging from bankruptcy and registering securities under the 1934 Act coupled with fresh start accounting, reorganization, changes in capital structure, or other events and transactions.


(Last updated: 9/30/2008)


3210.1S-X Article 11 pro forma financial information is intended to provide investors with information about the continuing impact of a transaction by showing how a specific transaction or group of transactions might have affected historical financial statements, illustrating the scope of the change in the registrant’s financial position and results of operations.

3210.2The pro forma financial information should illustrate only the isolated and objectively measurable (based on historically determined amounts) effects of a particular transaction, while excluding effects that rely on highly judgmental estimates of how historical management practices and operating decisions may or may not have changed as a result of that transaction. Information about the possible or expected impact of current actions taken by management in response to the pro forma transaction, as if management’s actions were carried out in previous reporting periods, is considered a projection and not an objective of S-X Article 11. Presentation of forward looking and projected information should be confined to supplemental information separately identified as such (information that is not required or contemplated by Article 11) and in MD&A.

NOTE: Domestic registrants should prepare their pro forma financial statements in accordance with U.S. GAAP. Foreign private issuers should prepare their pro formas in accordance with U.S. GAAP, IFRS as issued by the IASB, or home-country GAAP reconciled to U.S. GAAP depending on the basis of accounting in the primary financial statements. See Topic 6.

3220 Pro Forma Condensed Balance Sheet

3220.1Pro forma presentation should be based on the latest balance sheet included in the filing. A pro forma balance sheet is not required if the acquisition or disposal is already reflected in a historical balance sheet.

3220.2Pro forma adjustments should be computed assuming the transaction was consummated on the date of the latest balance sheet included in the filing.

3220.3Adjustments reflected in the pro forma adjustments column should give effect to events that are directly attributable to each specific transaction and factually supportable. Adjustments should include those items that have a continuing impact and also those that are nonrecurring.

3230Pro Forma Condensed Statement of Comprehensive Income

3230.1Pro forma presentation should be based on the latest fiscal year and interim period included in the filing, unless the transaction is already reflected in the audited historical statements for the most recent full fiscal year. Unless the pro forma information gives effect to one of the two items (in Section 3230.2) below, a pro forma statement of comprehensive income should not be presented for more than one complete fiscal year. In addition to the required latest fiscal year and interim period, the staff generally does not object to a registrant providing a pro forma statement of comprehensive income for the corresponding prior interim period. (Last updated: 3/31/2009)

NOTE: After a change in fiscal year end in which the transition report has been filed on Form 10-K, the registrant may present pro forma information for the transition period and most recent fiscal year (and interim period). Alternatively, the registrant may present a pro forma statement of comprehensive income for the most recent annual period (9 to 12 months under S-X 3-06). In either case, the length of the period used for the target should be identical to the period of the registrant. (Last updated: 3/31/2010)

3230.2Pro forma presentation of all periods is required:

  1. For a business combination to be accounted for as a reorganization of entities under common control; or

    For example: A registrant files a registration or proxy statement that includes financial statements that do not yet reflect a combination to be accounted for as a reorganization of entities under common control. Pro forma statements of comprehensive income are typically required for each fiscal year for which the registrant’s historical financial statements are provided and the subsequent interim period. (Last updated: 10/20/2014)
  2. For discontinued operations (ASC 205-20) that are not yet reflected in the annual historical statements.

    For example: A non-SRC non-EGC registrant files a Form 8-K to report a significant disposition that has occurred, but has not yet been reflected in the registrant’s historical statements as a discontinued operation under ASC 205-20 for the three years presented in the registrant’s most recent Form 10-K. Pro forma statements of comprehensive income are typically required for these three most recent fiscal years and subsequent interim period. (Last updated: 6/30/2013)

NOTE: The staff generally objects to retroactive pro forma presentation of transactions for periods other than the latest year and interim period, except in the circumstances described here. In some cases, retroactive presentations of revenues and costs of revenues may be meaningful for discussion of trends in MD&A, but more comprehensive presentations (through operating income, for example) can be misleading because they cannot meaningfully or accurately depict what operating results would have been had the transaction occurred at the earlier date. (Last updated 3/31/2009)

3230.3Pro forma adjustments should be computed assuming the transaction occurred at the beginning of the fiscal year presented and carried forward through any interim period presented.

3230.4Adjustments shall give effect to events that are:

  1. directly attributable to each specific transaction,
  2. factually supportable, and
  3. expected to have a continuing impact.
Nature of Item Treatment in Pro Forma Financial Information
1. Material nonrecurring charges or credits and related tax effects which result directly from the transaction and which will be included in the income of the registrant within the 12 months following the transaction
  • Do not include in pro forma statements of comprehensive income.
  • Disclose these items in a note and clearly indicate that they were not included.
2. Infrequent or nonrecurring items included in the underlying historical financial statements of the registrant or other combining entities and that are not directly affected by the transaction Do not eliminate in arriving at pro forma results
3. Conforming change in accounting principles adopted by registrant Pro forma information should consistently apply the newly adopted accounting principles to all periods presented.
4. Discontinued operations If included in historical financial statements, present only the portion of the statement of comprehensive income through “income from continuing operations.”
5. Earnings per share
  • Present historical basic and diluted per share data based on continuing operations and pro forma basic and diluted per share data on the face of the pro forma statement of comprehensive income.
  • Also present the number of shares used to compute per share data if outstanding shares used in the calculation are affected by the transactions included in the pro forma financial statements.
6. Use of proceeds and earnings per share
  • The denominator in computing pro forma EPS should include only those common shares whose proceeds are being reflected in pro forma adjustments in the statements of comprehensive income, such as proceeds used for debt repayment or business acquisitions.
  • Common shares whose proceeds will be used for general corporate purposes, for example, should not be used in computing EPS. A company may present “additional” EPS data reflecting the issuance of all shares if it considers this information meaningful. If this additional EPS is shown on the face of the pro forma statement of comprehensive income, it should be labeled appropriately.
  • The footnotes to the pro formas should make the computation(s) of pro forma EPS transparent to investors.


3240.1Financial information should be presented in columnar form, with separate columns presenting historical results, pro forma adjustments, and pro forma results. In limited cases, (where there are only a few easily understood adjustments) a narrative description of the effects of the transaction may suffice.

3240.2Financial information should be preceded by an introductory paragraph which briefly describes:

  1. each transaction for which pro forma effects are presented,
  2. the entities involved,
  3. the periods presented, and
  4. an explanation of what the pro forma presentation shows.

3240.3Pro forma adjustments should be referenced to footnotes which clearly explain the assumptions involved.

3240.4Pro forma information may be in condensed form (similar to interim financial statements required in Form 10-Q) which reflects only those numbered captions of Regulation S‑X. Any balance sheet caption less than 10% of total assets may be combined with others; any statement of comprehensive income caption less than 15% of average net income of the registrant for the last three years (excluding loss years) may be combined with others. See S-X Article 11.

3240.5If the transaction is structured in such a manner that significantly different results may occur, additional pro forma presentations should be made that give effect to the range of possible results. The additional results may be of equal prominence or lesser, depending on the facts and circumstances. Additional presentations might include the following:

  1. Pro forma financial statements depicting minimum required issuances of securities or acceptance of offers along with separate pro forma depiction of maximum issuance or acceptance.
    1. If the minimum or maximum outcome will only affect the balance sheet, the registrant need only present an additional pro forma balance sheet.
    2. If the outcome of minimum or maximum participation does not have a pervasive impact on the financial statements, possible outcomes and their impacts may be discussed in a note to the pro forma financial statements.
    3. If the number of offer acceptances in a proposed business combination may determine the accounting to be applied to the transaction and the only factor influencing the appropriate accounting is the number of acceptances, full pro forma financial information should be presented assuming each accounting method. For example, if the minimum number of acceptances would result in application of the equity method of accounting while the maximum number of acceptances would result in consolidation of the target, full pro forma financial information should be presented assuming each accounting method. If other factors may influence the accounting, pro formas should be based on the most likely accounting to be applied to the transaction based on due diligence performed by the registrant and its financial advisors. (Last updated: 6/30/2009)
  2. Sensitivity analysis for a change in one variable which may produce different outcomes. Also see Section 3260 for guidance regarding changes in interest rates.

    For example: A registrant files a proxy statement requesting shareholder approval of an acquisition. The registrant will issue a certain number of common shares in the acquisition, the number of which will be determined by a formula such that the total dollar amount of the acquisition is subject to change. The registrant may present the pro forma effects of the acquisition using a purchase price calculated as if the acquisition was consummated at the date of filing (by using the most current trading price of the common shares). If the range of possible outcomes may have a material impact on the amount of goodwill to be recorded in the financial statements, the registrant should disclose the impact on the balance sheet of increases or decreases in the common share trading price.

3240.6Pro forma information for a particular acquisition or other transaction usually should be presented separately from pro forma information for unrelated transactions for which pro forma information may be required if:

  1. The proceeds of an offering will be used to fund that acquisition,
  2. Shareholders are being asked to vote on that acquisition or other transaction, or
  3. A Form 8-K is required to be filed for that acquisition or transaction.

Other transactions appropriate for inclusion in a pro forma presentation should be accumulated in a separate column. Otherwise, if consummation of more than one transaction has occurred or is probable, pro forma information may be presented on either a combined or separate basis. If combined, footnote explanation should disaggregate the various transactions in a reasonable fashion.

3240.7Generally, pro forma adjustments should be presented gross on the face of the pro forma statements. Alternatively, a more detailed explanation of the components of the adjustments may be presented in the notes to the pro forma statements.

3240.8An auditor's report on pro forma financial information is not required. However, any auditor report provided on pro forma financial information must comply with AICPA's guidelines as set forth in the Statement on Standards for Attestation Engagements; Reporting on Pro Forma Financial Information (as adopted by the PCAOB pursuant to Rule 3300T as Interim Attestation Standards). See AT Section 401. (Last updated: 6/30/2009)

3250In Business Combinations

3250.1Purchase Accounting

  1. Pro forma statements that give effect to a business combination using the purchase method of accounting generally require only two pro forma adjustments:
    1. The allocation of the purchase price, including adjusting assets and liabilities to fair value and recognizing intangibles, with related changes in depreciation and amortization expense; and
    2. The effects of additional financing necessary to complete the acquisition. However, other related adjustments may be necessary.
  2. Contractual terms of the combination such as major new compensation contracts with management would require pro forma adjustment if the new contracts are entered into as part of the acquisition agreement.
  3. Transaction costs should be recognized in the pro forma statements as follows:
    1. Direct, incremental costs of the specific acquisition which are not yet reflected in the historical financial statements of either the target or acquirer—No adjustment should be reflected in the pro forma statement of comprehensive income, but the pro forma balance sheet should reflect an adjustment (as the costs are non‐recurring and directly related to the transaction)
    2. Direct, incremental costs of the specific acquisition which are reflected in the historical financial statements of either the target or acquirer— An adjustment should remove those costs from the pro forma statement of comprehensive income (as a non‐recurring charge directly related to the transaction)
    3. Direct, incremental costs related to one or more other acquisitions that are reflected in the historical financial statements of either the target or acquirer— An adjustment should remove those costs from the pro forma statement of comprehensive income only if pro forma effect is given to the other acquisition as well. (Last updated: 3/31/2010)
  4. Actions to be taken by management subsequent to a business combination may relate to the planned disposal or termination of revenue producing activities, as well as other business integration activities. It is appropriate to present pro forma adjustments depicting the recurring effects of exiting revenue producing activities. That type of pro forma adjustment is consistent with the requirement to provide pro forma information depicting material dispositions as discussed in Section 3120. Only revenues and costs specifically identifiable with that revenue-producing activity may be included in the pro forma adjustments. Allocations of corporate costs should not be adjusted for the disposition.  (Last updated: 10/30/2020)
  5. Termination of employees and closing facilities are typical actions taken in connection with business combinations to eliminate costs perceived by management as redundant. The timing and effects of these actions are generally too uncertain to meet the S-X Article 11 criteria for pro forma adjustments. Management's estimate of how these actions (and other business integration activities not specifically associated with the disposition of a business) are expected to impact the operations and liquidity of the newly combined companies going forward should be discussed in MD&A and in supplemental information clearly identified as forward-looking information.
  6. A schedule showing the calculation of the purchase price (including the value assigned to non‑cash portions) should be provided in a note, if not otherwise reasonably apparent.

    NOTE: Under ASC 805, registrants should use the most recent stock price at the time of filing for determining the value of stock to be issued in a transaction that has not yet consummated. In addition, the notes to the pro forma balance sheet should include a disclosure of the date at which the stock price was determined and a sensitivity analysis for the range of possible outcomes based upon percentage increases and decreases in the recent stock price. The appropriate percentages should be reasonable in light of acquirer's volatility.

  7. The purchase price should be allocated to specific identifiable tangible and intangible assets (such as customer lists, contracts acquired, trademarks and patents, in-process research and development) and liabilities. If the accounting is preliminary/provisional, significant liabilities and tangible and intangible assets likely to be recognized should be identified and uncertainties regarding the effects of amortization periods assigned to the assets should be highlighted.

    NOTE: No adjustment should be made to the amounts of research and development expenses historically incurred by the target.
    (Last updated: 3/31/2010)

  8. If the registrant is awaiting additional information that may impact the measurement of a contingency of the acquired company during the measurement period specified by ASC 805, the registrant should disclose prominently that the purchase price allocation is preliminary/provisional. In this circumstance, the registrant should:
    1. Describe clearly the nature of the contingency;
    2. Discuss the reasons why the allocation is preliminary/provisional (e.g., identify the information that the registrant has arranged to obtain);
    3. Indicate when the allocation is expected to be finalized; and
    4. Furnish other available information which will enable a reader to understand the magnitude of any potential adjustment.

      In the absence of such disclosure, investors may assume reasonably that the purchase price allocation is final and that all future revisions of estimated fair values of assets and liabilities acquired will be reflected in income. 
  9. If contingent consideration is issuable (see ASC 805-30-20), the registrant should disclose the terms of the contingent consideration and the potential impact on future earnings.

    Contingent consideration classified as an asset or liability is remeasured to fair value at each reporting date until the contingency is resolved, and these changes in fair value are generally recognized in earnings. Updated pro forma statements of comprehensive income filed with a new or amended registration statement should not reflect any pro forma adjustments to give effect to changes in the fair value of contingent consideration in periods different than those in which such changes were recognized in the acquirer's post-acquisition financial statements. Pro forma financial information should include transparent disclosure about the contingent consideration arrangement and known changes in fair value. (Last updated: 9/30/2010)

    NOTE: Paragraph 3250.1(h) will no longer apply under ASC 805 because contingent consideration will be recognized at the time of the transaction.

  10. The expected useful lives or amortization periods of significant assets acquired in a purchase business combination, including identified intangibles, should be disclosed in a note to the pro forma financial statements.
  11. If amortization of purchase adjustments is not straight‑line, the effect on operating results for the five years following the acquisition should be disclosed in a note, if material.
  12. Either the registrant or its target may expect to dispose of certain operations in order for a merger to gain the approval of one or more U.S. regulatory agencies. Pro forma recognition should be given to the impact of those disposals to the extent they are identifiable at the time the pro formas are prepared. If operations to be disposed of are not identifiable with any reasonable certainty at that time, the notes to the pro forma financial information should disclose any contingencies and the reasonably possible impact on the financial statements. Pro forma financial information giving effect to the disposals should be filed on Form 8-K when the disposals occur if the disposition is significant under Item 2.01 of Form 8-K.
  13. If a registrant adopts a new accounting standard as of a different date and/or under a different transition method than a significant acquired business, the registrant must conform the date and method of adoption of the acquired business to its own in its pro forma financial information. The staff will consider requests for relief from this requirement. (Last updated: 12/1/2017)
  14. A registrant retrospectively adopts a new accounting standard on January 1, 2018 and in September 2018 it makes a significant acquisition and later files a Form 8-K that includes pro forma financial information for the year ended December 31, 2017 and the six months ending June 30, 2018.  The registrant does not need to apply the new accounting policy to the pro forma information for periods prior to adoption until it has reflected the new standard in the historical financial statements for those periods. As such, only the 2018 pro forma information need reflect the adoption of the new standard, while the 2017 pro forma information is not required to reflect adoption of the new standard.  However, if the registrant believes the effect of the new standard on 2017 historical information will be material, it should make appropriate disclosure to that effect in the notes to the pro forma financial information.  (Last updated: 12/1/2017)

3260Pro Forma Presentations Reflecting Debt Financing

3260.1Generally should be based on either the current interest rate or the interest rate for which the registrant has a commitment. If actual interest rates in the transaction can vary from those depicted, disclosures of the effect on income of a 1/8 percent variance in interest rates should be disclosed.

3260.2Although use of current or committed interest rates is appropriate in most cases, careful consideration should be given to the facts and circumstances specific to each presentation to determine whether the interest rate used is reasonable. Certain limited circumstances may warrant the use of an interest rate other than the current or committed rate. In some instances, the staff believes that the registrant should use the interest rates that were prevailing during the period covered by the pro forma information.

For example: If a registrant purchases a business whose assets comprise variable rate interest earning assets financed by variable rate debt, it may be inappropriate to use current interest rates for purposes of computing pro forma interest expense if historical income amounts related to interest earning assets are reflected using interest rates significantly different from current or committed rates.

When a rate other than the current or committed rate is used, prominent disclosure of the basis of presentation and the anticipated effects of the current interest rate environment should appear in the introduction to the pro forma financial statements and wherever pro forma information is provided.

3270Tax Effects

Normally, tax effects should be calculated with reference to the statutory rate in effect during the periods for which the pro forma statements of comprehensive income are presented. If taxes are not calculated on that basis, or if unusual effects of loss carryforwards or other aspects of tax accounting are depicted, an explanation should be provided in a note to the pro forma financial statements.

Companies are allowed to use different rates if they are factually supportable and disclosed.

3280Effects of New Contractual Arrangements

Effects of new major distribution, cost sharing, or management agreements, and compensation or benefit plans may be reflected only if amounts are factually supportable, directly attributable to the transaction, and expected to have a continuing impact on the statement of comprehensive income.

For example: In connection with a spin-off of a subsidiary, a formal management agreement between a registrant or target subsidiary and its parent that provides for payments intended to cover administrative costs incurred by the parent on behalf of the subsidiary may be terminated or modified. If a new agreement is executed with different terms or the old agreement is terminated and no new agreement is entered into because the subsidiary or its new parent will now perform the activities covered by the previous management agreement, pro forma adjustment for the contractually modified fee may be made.

3290"Carved Out" Businesses

3290.1A forecast about post-acquisition results of operations may be meaningful when provided with a pro forma statement of comprehensive income prepared in accordance with S-X Article 11 when historical financial statements of the acquiree are not indicative of future financial condition or results of operations because of changes in the business and the omission of various operating expenses in the financial statements of businesses carved out of larger entities. If a forecast is presented, management should clearly identify it as forward-looking. If the forward-looking information provided is not in the form of a comprehensive forecast of revenue and net earnings, disclosure of how revenue and operating efficiencies may vary given the assumptions underlying the forward-looking information that is provided should be included.

3290.2If a pro forma statement of comprehensive income is presented, management should limit it to information that is reliably determinable and not include forward-looking information within the pro forma statement of comprehensive income. Management also should disclose how the pro forma statement of comprehensive income is not indicative of operations going forward because it necessarily excludes various operating expenses. Material assumptions also should be fully explained in a note. If factually supportable, certain adjustments may demonstrate the effects of the changes in operations that may have affected historical revenues or operating expenses had they been implemented at the beginning of the historical period. [Instruction 4 to S-X Article 11] See Section 2065 for guidance about form and content of carve out financial statements. The limitations of the pro forma information should be explained clearly.


(Last updated: 9/30/2008)

3310Common Pro Forma Preparation Problems

The following adjustments generally are not appropriate on the face of the respective pro forma financial statements, but could be disclosed in the footnotes thereto.

3310.1Interest income from the use of proceeds from an offering or asset sale.

3310.2   Statement of comprehensive income presentation of gains and losses directly attributable to the transaction. However, such amounts should be presented as an adjustment to pro forma retained earnings with an appropriate explanation in the notes.

3310.3Pro forma adjustments that give effect to actions taken by management or expected to occur after a business combination, including termination of employees, closure of facilities, and other restructuring charges. Forecasts or projections may be the most appropriate way to depict the effect of such actions.

3310.4Alternative measures of performance or liquidity and the effect of pro forma adjustments thereon, provided the requirements of S-K 10(e) are met.

3320Prohibition on Assuming Offering Proceeds

3320.1Pro forma financial statements may not reflect the receipt or application of offering proceeds, except as follows:

  1. To the extent of a firm commitment from underwriter;
  2. To the extent of the minimum in a best‑efforts minimum/maximum offering;
  3. In a best‑efforts all‑or‑none offering; and
  4. Certain exceptions for savings and loan conversions.

3320.2A similar prohibition applies to pro forma capitalization tables, although the staff has allowed the following:

  1. In a minimum/maximum offering, presentation of both minimum and maximum; and
  2. In a rights offering or offerings of securities upon the exercise of outstanding warrants, may reflect proceeds to the extent exercise is likely in view of the current market price.

3330Combining Entities with Different Fiscal Years

3330.1An acquired entity's statement of comprehensive income should be brought up to within 93 days of the registrant's fiscal year, if practicable, by adding subse­quent interim results to the fiscal year's data and deducting the comparable preceding year's interim results, with appropriate dis­closure. [S-X 11-02(c)(3)]

3330.2Additional quantitative and narrative disclosure about gross profit, selling and marketing expenses, and operating income of any period excluded from or included more than once may be necessary to inform readers about the effects of unusual charges or adjustment in the omitted or double-counted period.

3330.3If a domestic registrant files a Form 8-K or registration statement for a business combination transaction and the target company is a foreign private issuer, the age of the pro forma information must be determined by reference to S-X 3-12. Depending on the fiscal year ends of the domestic registrant and the foreign target company, application of the age of financial statement rules may require the foreign target company to include a period in the pro forma information that would be more current than its separate historical financial statements. S-X Article 11 permits the ending date of the periods included for the target company to differ from those of the registrant by up to 93 days and may provide sufficient relief. The staff also may consider combinations of periods that involve overlaps or gaps in the information of the target company of up to 93 days, provided that the resulting annual and interim periods are of the same length required for the registrant, and there are no overlaps or gaps in the registrant's information. However, the staff would not permit a registrant to omit an interim pro forma presentation because of different fiscal periods.

(Last updated: 3/31/2011)

3340Historical Results Include Unusual Events [S-X 11-02(c)(4)]

If unusual events enter into the determination of operating results presented for the most recently completed fiscal year, the effect of such unusual events should be disclosed and the registrant should consider presenting an additional pro forma statement of comprehensive income for the most recent 12‑month period. The effects of the unusual events ordinarily should not be eliminated from pro forma data. The registrant may wish to consider furnishing a forecast in lieu of pro forma data.


(Last updated: 9/30/2008)

3410Sub-Chapter S Corporations and Partnerships

3410.1If the issuer was formerly a Sub-Chapter S corporation ("Sub‑S"), partnership or similar tax exempt enterprise, pro forma tax and EPS data should be presented on the face of historical statements for the periods identified below:

  1. If necessary adjustments include more than adjust­ments for taxes, limit pro forma presentation to latest fiscal year and interim period
  2. If necessary adjustments include only taxes, pro forma presenta­tion for all periods presented is encouraged, but not required.

3410.2In filings for periods subsequent to becoming taxable, pro forma presentations reflecting tax expense for earlier comparable periods should continue to be presented for periods prior to becoming taxable and for the period of change if the registrant elects to present pro forma information for all periods pursuant to 3410.1(b). Such pro forma presentations should continue to calculate the pro forma tax expense based on statutory rates in effect for the earlier period.

3410.3Undistributed earnings or losses of a Sub-S registrant should be reclassified to paid-in capital in the pro forma statements. [SAB Topic 4B] Similarly, undistributed earnings or losses of partnerships should be reclassified to paid-in capital in the pro forma statements. That presentation assumes a constructive distribution to the owners followed by a contribution to the capital of the corporate entity.

3410.4Sub-S registrants or partnerships that pay distributions to promoter-owners at the close or effectiveness with proceeds of the offering (rather than out of retained earnings) should consider the pro forma presentations specified in Section 3430.3.

3420Distributions to Promoters/Owners At or Prior to Closing of an IPO [SAB Topic 1B.3]

3420.1If a planned distribution to owners, regardless of whether it has been declared or whether it will be paid from proceeds, is not reflected in the latest balance sheet but would be significant relative to reported equity, a pro forma balance sheet reflecting the distribution accrual (but not giving effect to the offering proceeds) should be presented alongside the historical balance sheet in the filing.

3420.2If a distribution to owners, regardless of whether it is declared or whether it is reflected already in the balance sheet, is to be paid out of proceeds of the offering rather than from the current year's earnings, pro forma per share data should be presented (for the latest year and interim period only) giving effect to the number of shares whose proceeds would be necessary to pay the dividend (but only the amount that exceeds current year's earnings) in addition to historical EPS. The number of shares to be added to the denominator for purposes of pro forma per share data should not exceed the total number of shares to be issued in the offering. For purposes of this interpretation, a dividend declared in the latest year would be deemed to be in contemplation of the offering with the intention of repayment out of offering proceeds to the extent that the dividend exceeded earnings during the previous twelve months.

3430Other Changes in Capitalization At or Prior to Closing of an IPO

3430.1Generally, the historical balance sheet and statement of comprehensive income (including EPS) should not be revised to reflect modifications of the terms of outstanding securities that become effective after the latest balance sheet date, although pro forma data may be necessary. Depending on the facts and circumstances, the staff may not object if the registrant and its independent accountants elect to present retroactively a conversion of securities as if it had occurred at the date of the latest balance sheet included in the filing (with no adjustment of earlier statements). However, if the original instrument accrues interest or accretes toward redemption value after the balance sheet date until the conversion actually occurs, or if the terms of the conversion do not confirm the carrying value, only pro forma presentation would be deemed appropriate.

3430.2If terms of outstanding equity securities will change subsequent to the date of the latest balance sheet and the new terms result in a material reduction of permanent equity or, if redemption of a material amount of equity securities will occur in conjunction with the offering, the filing should include a pro forma balance sheet (excluding effects of offering proceeds) presented alongside of the historical balance sheet giving effect to the change in capitalization.

3430.3If the conversion of outstanding securities will occur subsequent to the latest balance sheet date and the conversion will result in a material reduction of earnings per share (excluding effects of offering), pro forma EPS for the latest year and interim period should be presented giving effect to the conversion (but not the offering).

3440Pro Forma Requirements for Real Estate and Leasing Operations

3440.1Statements of estimated taxable operating results and cash to be made available by operations are required in pro forma statements for real estate and leasing operations. These should be pro forma statements of the registrant, rather than of the property, giving effect to the acquisition.

  1. If the property is to be operated by the registrant, the presentation should be based on the most recent 12 month period and include only those adjustments which are factually supportable. Annualized results for a period less than twelve months is not appropriate.
  2. If the property to be acquired is subject to one or more leases, the presentation should be based on the rents to be paid in the first year of those leases. Material changes in the terms that will occur pursuant to the terms of the leases subsequent to the first year should be prominently disclosed.
  3. Registrants that are partnerships or REITs may present in tabular form for a limited number of years, typically one year, the estimated cash distribution per unit showing the portion thereof reportable as taxable income and the portion thereof that is a return of capital. If taxable net income will be greater than the cash available for distribution per unit, this should be disclosed.

3440.2To the extent applicable, pro forma information required by S-X Article 11 is also required.

3440.3Pro forma presentations should not include the effects of real estate properties for periods prior to actual construction since that type of adjustment would be a forecast or projection.

3440.4The provision of S-X 3-14 which permits estimated taxable operating results of real estate companies to include annualization of existing lease contracts is not applicable to equipment leasing companies or other businesses that generate income through leases.


(Last updated: 6/30/2009)

3510Alternative to Pro Forma Statements

Financial forecasts may be presented in lieu of pro forma condensed statements of comprehensive income. [S-X 11-03]

3520Presentation Requirements

3520.1All projections and forecasts must comply with the guidelines for projections in S-K 10. S-K 10 requires that management have a reasonable basis for the assumptions underlying their prospective financial statements. Similarly, the AICPA's guide, Prospective Financial Information, requires these assumptions to be reasonable and suitably supported. The level of support should be persuasive. [See section 6.32] Support for assumptions may include market surveys, general economic indicators, trends and patterns developed from the entity's operating history (e.g., historical sales trends), internal data and analyses (e.g., obligations under union contracts for labor rates), etc. An absence of adequate support may preclude a registrant's ability to include prospective financial statements in the filing. Additionally, a company with a limited operating history may not have a reasonable basis to present a financial forecast beyond one year.

3520.2Forecasts presented in lieu of pro forma financial statements must be presented in accordance with AICPA guidelines and the following guidance:

  1. Forecasts should cover a period of at least 12 months from the later of
    1. the latest historical balance sheet in the filing, or
    2. the date of the event.
  2. Forecasts should include the same degree of detail as that required in pro forma data and should clearly set forth any assumptions used.
  3. Historical information of the registrant and business to be acquired (if applicable) should be presented for a recent 12 month period in parallel columns with the forecast.


(Last updated: 9/30/2008)

3610Pro Forma Disclosures Required by GAAP

Certain pro forma disclosures are required by GAAP (e.g., ASC 805) and should be provided where applicable. Those presentations may differ in style and content from the requirements of S-X Article 11.

3620Filings Subsequent to an IPO

Pro forma basic EPS reflecting the conversion of preferred stock into common stock at the IPO date should not be presented in financial statements issued subsequent to the IPO.

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