A Roadmap to Initial Public Offerings

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.

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Acknowledgments Preface Contacts Chapter 1 — Introduction to Initial Public Offerings Chapter 2 — Identifying the Required Financial Statements for the Registration Statement Chapter 3 — Financial Statement Preparation and Disclosure Requirements Chapter 4 — Other Registration Statement Reporting Chapter 5 — Accounting Matters Chapter 6 — Audit Considerations Chapter 7 — What to Expect After the Registration Statement Is Declared Effective Appendix A — Common Disclosures on Form S-1 Appendix B — Summary of Scaled Disclosure Requirements Available to SRCs Appendix C — Key Benefits Available to EGCs and Non-EGCs Appendix D — Financial Statements of Businesses Acquired or to Be Acquired (Rules 3-05 and 3-14) Before the Adoption of SEC Final Rule No. 33-10786 Appendix E — Titles of Standards and Other Literature Appendix F — Abbreviations Appendix G — Changes Made in the 2020 Edition of This Publication

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.