Excluding an Acquisition from Management's Evaluation 1139

  • What about disclosure controls and procedures (i.e. 302)?
    Can you be more specific with your question?

  • The FAQs on the SEC website link provided above seem to refer specifically to changes in internal control over financial reporting. The 302 certification also refers to evaulation of disclosure controls and procedures. Do you interpret the SEC quidance to refer to both the evaulation of disclosure controls and procedures and changes in internal control over financial reporting?

  • I think that they are specific to 404, unless otherwise noted.

  • Thanks for the link anyway. I’ve got what I really needed 🙂

  • What are the consequences of closing on an acquisition just prior to a quarter end? What disclosure would be required in the 10-Q if there were not enough time to evaluate controls at the new acquisition?

  • Closing on an acquisition just prior to quarter end should not have much impact at all on the income statement. The primary impact would be on the balance sheet and cash flow as far as how the acquired entity is included in the financial statements. There should be controls around the consolidation of the purchase price and how it is reflected in the financial statements.
    Controls at the acquired entity are not important at this point since it should have minimal income statement impact on the consolidated financial statements at that level.

  • I agree with your point, however, (and sorry to belabor this but…) If it was a material acquisition, would the CEO / CFO certs still have to mention the fact that their certification excluded controls at the new acquisition? Seems like that would be prudent…

  • Issuers typically disclose the name and the significance as a percentage of sales and total assets compared to the consolidated financial statements in the annual report on form 10-K or the quarterly report on form 10-Q.%0AYou can check out the disclosure in item 15 (controls and procedures) of Alcon’s annual report on form 20-F (it is a foreign private issuer) that was filed on March 18, 2008 and the form 20-F that was filed on March 19, 2007 in EDGAR on sec.gov. See also Novartis January 31, 2007 and January 30, 2006.%0Ae.g. ‘Management has excluded Chiron Corporation and NeuTec Pharma plc, from its assessment of internal control over financial reporting as of December 31, 2006 because they were acquired by the Novartis Group in business combinations during 2006. Total assets and total revenues of Chiron Corporation, and NeuTec Pharma plc, represent approximately 16%, or USD10.9 billion and 4%, or USD1.6 billion, respectively, of the related consolidated financial statement amounts as of, and for the year ended, December 31, 2006.’

  • Do you know of any examples of language used in item 4 of Form 10-Q to disclose the exclusion of an acquired entity for the grace period?

  • I want to understand what would be the reporting impact of an acquired business entity’s control failure on over all reporting of consolidated entity. The grace period of 1 year has already been completed. And the control environment of that entity is concluded as not effective, the entity holds 5% stake in the overall revenue of total group. Please suggest if that would impact the overall conclusion of entity.

Log in to reply