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Public Company Financial Executive Brief
Analysis: New Guidance on Pro Forma requirements
for Business Combinations
By Jim Pitrat, CPA, Practice Leader - Assurance & Advisory Practice TUESDAY, JANUARY 4, 2011
Executive Summary:
Accounting Standards Update (ASU) No. 2010-29 clarifies that
pro forma revenue and earnings for a business combination
occurring in the current year should be presented as though
the business combination occurred as of the beginning of the
year or, if comparative statements are presented, as though
the business combination took place as of the beginning of
the comparative year.
Prior to the ASU, the FASB Accounting Standards Codification
(ASC) Section 805-10-50 , Business Combinations—Overall—
Disclosure, calls for public entities to present pro forma
revenue and earnings of the combined entity as follows:
• As if the date of acquisition was as of the beginning of
the current year, and,
• If comparative statements are presented, pro forma
amounts are required to be reported as if the acquisition
date of a business combination occurring during the
current period had taken place as of the beginning of the
comparative prior year.
Interpretation of the requirements was varied. Companies
would interpret the guidance in the following ways:
• When a business combination occurs during the current
period, pro forma revenue and earnings information
should be presented as though the acquisition took place
as of the beginning of the current year and as of the
beginning of the prior comparative year, or
• Pro forma information was disclosed as if the business
combination took place at the start of the prior
comparative year, with related acquisition adjustments
carried through in the current year.
The new ASU clarifies that pro forma information of the
combined entity should be presented as though the business
combination had occurred only as of the beginning of the
comparable year;
Additionally, the ASU requires certain additive supplemental
pro forma information concerning non-recurring pro forma
adjustments.
Amendments:
The disclosures required of public entities are as follows:
If comparative financial statements are not presented, pro
forma revenue and earnings of the combined entity should be
based on the assumption that the business combination took
place as of the beginning of the current year.
• If comparative financial statements are presented:
• Pro forma revenue and earnings of the combined
entity should be based on the assumption that the
business combination occurred as of the beginning of
the comparative year, and
• In the year following the business combination,
pro forma information should not be revised if
comparative statements for the year in which the
acquisition occurred are.
• Disclosure of the nature and amounts of any material
nonrecurring adjustments directly attributable to the
business combination included in the pro forma revenue
and earnings.
Rules related to acquisitions by a not-for-profit entity, have
also been amended to require disclosure of the nature and
amounts of any material nonrecurring adjustments directly
attributable to a business combination included in reported
pro forma revenue, changes in unrestricted net assets,
changes in temporarily restricted net assets, and changes
in permanently restricted net assets.
The new and amended disclosures should be applied
prospectively to business combinations consummated on or
after the start of the first annual reporting period beginning
on or after December 15, 2010, with earlier application
permitted.

For FurtHer inFormAtion, PLeAse contAct one oF tHe FoLLowinG:

Jim Pitrat: Harmeet singh: Gale moore:

JPitrat@singerlewak.com HSingh@singerlewak.com GMoore@singerlewak.com
310.477.3924 408.294.3924 949.261.8600
Practice Leader Business Combinations Subject Matter Expert Business Combinations Subject Matter Expert
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