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- US GAAP
Preparing for an IPO can be a complex, time-consuming, and often
costly process. Accordingly, this Roadmap addresses financial reporting, accounting,
and auditing considerations to help companies navigate challenges related to
preparing an IPO registration statement and ultimately going public.
Promoting the U.S. IPO market has been a priority for SEC Chairman
Jay Clayton. On September 26, 2017, Chairman Clayton made the following statement
before the U.S. Senate Committee on Banking, Housing, and Urban Affairs:
It is clear to me that companies that go through the U.S. IPO
process emerge as better companies, with better disclosure. We want to encourage
and preserve that dynamic. Overall, the SEC will strive for efficiency in our
processes to encourage more companies to consider going public, which will
result in more choices for investors, job creation and a stronger U.S.
economy.
As further evidence of its commitment to promoting the U.S. IPO
market, the SEC released a final rule that became effective on December 3, 2019, and
that expands the “test-the-waters” accommodation and allows all prospective issuers
to gauge market interest in a possible IPO by permitting discussions with certain
investors before the filing of a registration statement. Previously, the
test-the-waters accommodation was only available to emerging growth companies
(EGCs). In a public statement on the final rule, SEC Chairman Jay Clayton indicated
the following:
The Commission’s new rule expands
“testing-the-waters” to all issuers, and will encourage more issuers to consider
entering our public equity markets. Issuers will be able to determine, either
prior to or following the filing of a registration statement, whether potential
institutional investors might have an interest in a contemplated registered
offering. This benefits all investors — as a result of these communications,
issuers can better identify information that is important to investors and
enhance the ability to conduct a successful registered offering, ultimately
providing both Main Street and institutional investors with more opportunities
to invest in public companies that, in turn, provide ongoing disclosures to
their investors.
In addition, as part of its disclosure effectiveness initiative, the SEC has been
exploring ways to make going public in the U.S. markets more attractive while still
protecting investors.
During the upcoming year, there will be increased uncertainties as a result of the
COVID-19 pandemic, the economic downturn, and the 2020 presidential election. These
events could have a big impact on the overall IPO market as well as on certain
market sectors and individual companies. Registrants should therefore ensure that
they are ready to respond to changing financial market conditions and that they are
prepared to face the challenges of undertaking an IPO despite such conditions.