Pre-IPO Accounting & Reporting Hot Topics

by Feb 28, 2023IPO

Going through a full readiness exercise can be a time consuming exercise for companies looking to IPO.

Where to begin? My advice – look at processes & procedures around accounting hot topics. Could a new hire easily book those transactions or put together the FS disclosures with adequate SOPs? Do they stand up against GAAP for a potential audit?

  1. Revenue recognition – Not only do you need to ensure full compliance with ASC 606 or IFRS 15, but you need to ensure a well documented accounting policy can support this, including the nature of all earned revenues and the recognition pattern on the same. Are you able to track your revenue streams separately for disaggregated disclosures or to produce MD&A explanations? Have you fully substantiated your separate performance obligations and point in time vs. over time revenue recognition?
  2. Stock compensation – Cheap stock is a very common SEC comment when a company has issued equity in the 12-24 months leading up to IPO. Do you have appropriate 3rd party valuations to support the expense recognized? Is your capitalization table in order and easily managed? Complex capital structure can make required EPS disclosure more time intensive. You may be required to pro forma your EPS, so it’s important that this is automated to the extent possible.
  3. Segment reporting – Private companies haven’t normally formalized their segments, do you understand who is your CODM and what information they are using to assess the business? To the revenue point above, are you able to report separate revenues & operating results across business or geographic regions? How does your ERP allow for this data to be summarized?
  4. Fair value measurement – If you have made any acquisitions, what support is available for PPA & how FV has been determined? We have already discussed the importance of FV support of equity, but how about other assets & liability on your BS as fair value, can you support those in an audit?
  5. Disclosures – SEC disclosures require a step-up from normal GAAP disclosures across the board. Can you produce entity-wide information such as disaggregated revenues and geographical data? Are you ready for additional business combination & EPS disclosures? Do you have disclosure controls & procedures? This is required in a SOX environment.

Regarding those accounting/reporting hot topics, well this is just a handful of them. There’s of course many more areas to consider, always happy to chat further about it!

Katrina Nacci

Katrina Nacci


Submit a Comment

Your email address will not be published. Required fields are marked *