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Preparing to go public<br />
• segment reporting for companies<br />
that are engaged in multiple lines of<br />
business or with operations in more<br />
than one geographic area. Required<br />
disclosures include separate revenues<br />
and operating data for each segment;<br />
• supplemental schedules for particular<br />
industries and circumstances; and<br />
• enhanced disclosure of financial and<br />
operational metrics for companies in<br />
certain industries.<br />
Companies that are classified in any<br />
of the following categories have modified<br />
reporting requirements:<br />
• “Smaller reporting company,” as<br />
defined by Item 10(f)(1) of Regulation<br />
S-K, generally applies to new issuers<br />
with an expected public float of<br />
less than $75 million when their<br />
registration becomes effective.<br />
• “Emerging growth company,” as defined<br />
by Section 2(a) of the Securities Act,<br />
generally applies to companies that<br />
have their initial sale of registered<br />
equity securities after December 8,<br />
2011 and have “total annual gross<br />
revenues” less than $1 billion during its<br />
most recently completed fiscal<br />
year.<br />
• “Foreign private issuer,” as defined<br />
by Section 3b-4 of the Exchange<br />
Act, generally applies to companies<br />
incorporated outside the United<br />
States that meet certain additional<br />
criteria.<br />
Some additional details regarding<br />
the first two categories, criteria for<br />
qualification and some of the differences<br />
in reporting requirements are outlined<br />
later in this chapter on pages 21–22.<br />
See Chapter 9 for additional information<br />
regarding foreign private issuers. A table<br />
containing selected comparative financial<br />
statement reporting requirements for<br />
these categories is provided in the<br />
appendices. The following discussion<br />
focuses on the SEC requirements for<br />
companies that do not fall into any of the<br />
above three categories.<br />
Audited financial statements: Audited<br />
annual financial statements required to<br />
be included in the registration statement<br />
include:<br />
• balance sheets as of the end of the two<br />
most recent fiscal years; if the company<br />
has been in existence for less than<br />
one year, an audited balance sheet as<br />
of a date within 135 days of the date<br />
of filing the registration statement is<br />
required; and<br />
• statements of income, cash flows,<br />
changes in stockholders’ equity and<br />
comprehensive income for each of the<br />
most recent three fiscal years or such<br />
shorter period as the company (and its<br />
predecessors) has been in existence.<br />
Designation of an acquired business<br />
as a predecessor is generally required<br />
where a company acquires in a single<br />
succession, or in a series of related<br />
successions, substantially all of the<br />
business (or a separately identifiable<br />
line of business) of another entity (or<br />
group of entities) and the company’s<br />
own operations prior to the succession<br />
appear insignificant relative to the<br />
operations assumed or acquired.<br />
Audited financial statements for the<br />
company and its predecessor must be<br />
accompanied by an audit report issued by<br />
independent accountants that are registered<br />
with the Public Company Accounting<br />
Oversight Board (PCAOB) and audited in<br />
accordance with PCAOB standards. If any<br />
of the audited financial statements required<br />
to be included with the registration<br />
statement were audited by a predecessor<br />
independent accountant, consent may be<br />
needed from that independent accountant<br />
to allow for inclusion of those financial<br />
statements and their audit report in the<br />
registration statement.<br />
The preparation of these financial<br />
statements often raises certain data<br />
collection, accounting and auditing issues,<br />
such as:<br />
• the need to reevaluate existing<br />
accounting policies and consider<br />
expanding disclosures to comply with<br />
reporting requirements for public<br />
companies (e.g., segment information,<br />
tax-rate reconciliation, earnings per<br />
share and general compliance with<br />
Regulation S-X and SEC interpretations<br />
of generally accepted accounting<br />
principles (GAAP));<br />
• the treatment of changes in accounting<br />
policies or financial statement<br />
presentation that arise during the<br />
most recent period covered by the<br />
financial statements that may have<br />
a retroactive impact on the financial<br />
statements and other financial<br />
information presented for previous<br />
years; and<br />
• the retrospective presentation of<br />
discontinued operations consistently<br />
across the periods covered by the<br />
financial information presented.<br />
Accordingly, a company with financial<br />
statements covering the required number<br />
of years should revisit those financial<br />
statements and ensure that they are<br />
compliant with SEC requirements and<br />
recent SEC staff interpretations. Any<br />
modifications to previously issued audited<br />
financial statements will likely require<br />
the independent accountant to perform<br />
additional procedures.<br />
Age of financial statements: Knowing the<br />
periods for which financial statements<br />
will be required to complete a particular<br />
financing is a critical step in planning an<br />
IPO. Financial statements must comply<br />
with the SEC’s age of financial statements<br />
requirements before the SEC staff will<br />
commence review of a filing.<br />
The age of financial statements<br />
included in an IPO is measured by the<br />
number of days between the date of<br />
effectiveness of the registration statement<br />
and the date of the latest balance sheet<br />
in the filing. The latest audited annual<br />
financial statements included in the<br />
prospectus cannot be more than one year<br />
and 45 days old.<br />
If more than 134 days have lapsed since<br />
the latest audited annual balance sheet,<br />
unaudited interim financial statements<br />
must also be included in the registration<br />
statement. Whenever updated interim<br />
financial statements are included, an<br />
interim income statement, statement of<br />
comprehensive income and statement<br />
of cash flows must be included for the<br />
corresponding period of the prior year.<br />
Interim financial statements for the<br />
first and second quarters must each be<br />
updated after 134 days. Interim financial<br />
statements for the third quarter must be<br />
updated 45 days after the following fiscal<br />
year-end, at which time audited financial<br />
16 NYSE IPO Guide