Case 1-1 E-Centives, Inc.—Raising Capital in Switzerland
1. Possible factors (from Exhibit 1-7) relevant in e-centives decision to raise capital and list on the Swiss Exchange s New Market: a. Ease of raising capital (point 3). The Swiss Exchange s New Market has simple listing requirements designed to appeal to small companies. The contrast with the complex, detailed listing and reporting requirements in the United States is striking. b. Availability of capital (point 4). Switzerland has a large, well-developed capital market. c. Reputation of the exchange (point 5). The Swiss Exchange is well known for providing a high quality, efficient trading environment. d. Corporate profile and brand…show more content… Compliance with U.S. GAAP is more complex and expensive than compliance with other standards (such as IFRS), and the company might see some cost savings by avoiding U.S. GAAP if it isn’t required to use them.
4. Should the Swiss Exchange require e-centives to prepare its financial statements using Swiss accounting standards?
This is a debatable point. One would expect that investors on the Swiss Exchange would be more familiar with Swiss accounting standards than with any other, and that requiring Swiss accounting standards would make financial disclosures more easily understood to them than any others. This wouldn’t be true, however, for non-Swiss investors participating on the exchange, and ignores the fact that IFRS increasingly are becoming a common language for financial accounting disclosures. Accepting IFRS almost certainly would increase the pool of investors that would be readily able to understand disclosures by listed companies, and this would give the exchange a powerful reason to accept IFRS in addition to (if not instead of) Swiss accounting standards.
5. What are listing and financial reporting requirements of the Swiss Exchange’s New Market? Does e-centives appear to fit the profile of the typical New Market company?
From the case: The New Market is designed to meet the financing needs of rapidly growing
