Chapter 2 — Identifying the Required Financial Statements for the Registration Statement

2.1 Introduction

One of the more challenging aspects of preparing for an IPO is ensuring that the entity has identified the appropriate financial statements to include in the filing. There are many considerations related to determining the appropriate financial statements to include in the IPO registration statement. For example, management will need to identify and prepare the financial statements both for the registrant and for any predecessor entities (see Section 2.3). In addition to the complexities associated with identifying the required financial statements for the registrant and its predecessor(s), management must consider other potential financial statement requirements that may result in additional meaningful historical financial information for investors in the IPO. The specific requirements, discussed in greater detail below, could be related to significant acquired or to be acquired businesses and real estate operations (along with the related pro forma financial information), equity method investments, guarantors of registered securities, or entities that collateralize registered securities.

Before preparing the registration statement, entities are strongly advised to consult with their independent auditors and legal counsel to determine the appropriate financial statements to include. When the circumstances are particularly complex, registrants may wish to submit a prefiling letter to the Division to preclear the planned financial statement presentation and avoid surprises or potential delays during the SEC’s review of their IPO filing. Registrants may wish to seek modifications to their financial statement reporting requirements when the application of a rule results in the requirement to provide more information than the registrant believes is necessary. For example, a registrant may submit a prefiling letter, referred to herein as a Rule 3-13 waiver, in which it requests to omit the financial statements for a significant acquired business, real estate acquisition, or equity method investment. See Section 2.4.5 for more information about Rule 3-13 waivers.