Gaap: Financial Statements and Technical Line Ipo Essay

No. 2012-19 14 June 2012

Technical Line

IPO financial statement accounting and disclosure considerations
In this issue: Overview ........................................... 1 Public company accounting ............... 2 Public versus nonpublic company transition periods........................ 2 Staff Accounting Bulletins ............... 3 Stock compensation ....................... 4 Redeemable equity securities .......... 6 Public company accounting disclosures .................................... 7 Earnings per share.......................... 7 Segment reporting ......................... 8 Other public company enhanced disclosures ................................. 8 SEC disclosure requirements ............. 9 Financial statements of other entities .............................. 9 Summarized financial information about equity method investees .. 14 Pro forma financial information..... 14 Quarterly financial data ................ 16 Other IPO considerations................. 16

What you need to know
• Many companies have completed initial public offerings over the past two years, and the JOBS Act, which eases regulatory requirements for emerging growth companies, could encourage even more IPOs. • Companies beginning the IPO process should consider the numerous financial statement accounting and disclosure requirements they must meet in IPO registration statements and subsequent periodic filings.

Overview
The number of companies completing initial public offerings (IPOs) over the past two years has increased. Even more IPOs could follow due to the Jumpstart Our Business Startups Act (JOBS Act), which was enacted in April 2012 and eases regulatory requirements for a new category of issuer called an emerging growth company (EGC). Companies embarking on the IPO process have to comply with many accounting and disclosure requirements that don’t apply to private companies. Many of the additional requirements for public companies are dictated by US GAAP. Others are required by SEC rules and regulations. The SEC, the Financial Accounting Standards Board (FASB) and other accounting standard setters have determined that the recognition and measurement provisions of US GAAP should not differ based on the size of a company. However, some SEC rules and interpretations may require public companies to apply certain recognition and measurement principles differently than private companies.

Ernst & Young AccountingLink www.ey.com/us/accountinglink

Ernst & Young resources
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To the Point, JOBS Act to promote capital formation (SCORE No. CC0345) Technical Line, Implementing the JOBS Act (SCORE No. CC0348)

Public companies also must disclose much more than nonpublic companies in their financial statements. Before filing an IPO with the SEC, nonpublic companies should review whether their accounting policies and practices are appropriate, and they should include the required additional financial statement disclosures in annual and interim financial statements. This Technical Line reviews the more significant accounting and disclosure considerations for financial statements included in IPO SEC filings on Form S-1 and in subsequent periodic reports (e.g., Forms 10-K and 10-Q), including requirements for EGCs under the JOBS Act.

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Public company accounting
Public versus nonpublic company transition periods
New accounting standards often contain different transition provisions for public and nonpublic companies. Nonpublic companies generally have more time to adopt new standards than public companies. For example, public companies were required to adopt Accounting Standards Update No. 2011-5, Presentation of Comprehensive Income, for periods beginning after 15 December 2011. Nonpublic companies have to adopt ASU 2011-5 for fiscal years ending after 15 December 2012. When a nonpublic company files with the SEC to become a public company, it should apply all accounting standards — even new standards — as if it had

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Gaap: Financial Statements and Technical Line Ipo Essay

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