Page 78 - Initial Public Offering - An Introduction to IPO on Wall Street

Financial Information—The SEC has clear and often complicated guidelines about the quality
and maturity of the financial reports that must be provided in a statement of registration, and
the consulting accountants of a business can play a vital role in helping it comply with those
guidelines. A business typically provides the things mentioned below in an effective Form S-
1:

 Audited balances as of the end of the previous two fiscal years;
 Audited accounts of revenue, cash flows and equity adjustments for each of the previous
three fiscal years (SRCs and EGCs may apply such details for a period of only two years);
 Specified financial information for the previous five fiscal years (summarized from the
account balances and revenue statements) (EGCs do not need to exhibit specified financial
information for any period leading up to the earliest audited date submitted and SRCs are
not required to submit any specified financial information); and
 Provisional financial reports are needed if the financial reports at the end of the financial
year are more than 134 days old, with the exception of the third quarter financial reports,
which are scheduled for the 45th day after the end of the latest financial year. Audited
financial reports for the financial year must be provided after the 45th day. It is possible to
present provisional financial reports in a simplified format and they are usually not audited.
However, independent auditors usually conduct an analysis of the provisional financial
reports.

It is also important to note the following:

 The most recent audited financial reports may not be more than one year and 45 days old
on the date of entry into force of the registration statement;
 It is appropriate to include different financial reports of important companies acquired or
to be bought. Criteria for financial statements vary from one to three years (or from one to
two years for EGCs), based on whether those conditions for relevance are met;
 The independent financial reports of the registrant’s major equity holders (except SRC
registrants) should, to the degree possible, have the same dates and times as the
consolidated and audited financial reports. These financial reports should only be audited
for terms in which the equity investment is considered to be relevant (as specified by the
SEC rules); and
 In cases where regulations prohibit its entities from freely transmitting funds to registrants,
businesses should disclose independent, independent (unconsolidated) financial details.
 Annual financial reports can be omitted from private submissions and public disclosures
by the EGCs if the annual financial statements refer to periods which are not fairly deemed
relevant at the time of the envisaged offer (i.e. prior to the delivery to shareholders of the
preliminary prospectus). It is not, however, appropriate for non-EGCs to exclude annual
financial reports from filings made publicly. Non-EGCs are allowed to exclude private
disclosures from financial reports (including both annual and provisional) if those financial
reports correspond with periods not fairly assumed to be needed at the time of public filing.
In public filings, all EGCs and non-EGCs are expected to provide transitional periods, even
though the periods are not expected to be provided independently at the time of the offer
envisaged.

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