SEC Reporting Common Accounting and Finance Issues
Most regular filings with the SEC are liberated. The accounting department is usually in charge of paying these charges, for which a specific procedure must be followed.
In the Fedwire Payments phase, we explain precisely how to cover the SEC.
One of the greatest temptations that a private company sees in going public is the chance to raise a massive amount of money out of investors.
Doing this can jumpstart a moribund company by enabling it to invest heavily in product development, advertising, acquisitions, etc. In short, there are a multitude of further accounting issues that a public business should deal with this a private company may never have to consider. In the following chapters, we supply a considerable quantity of detail about these accounting problems to demonstrate how company systems should be modified to increase them to the degree of a public company, as well as which additional accounting criteria are now relevant.
There are also procedural changes that a publicly-held firm must make in order to create GAAP-compliant financial statements, have them accepted by different people, reviewed or audited by the outside auditors, and registered with the SEC. Further, because the Types 10-K and 10-Q are governed by tight filing deadlines, there’s a need to close the books as quickly as possible, while minimizing the amount of bookkeeping errors that reach the financial statements.
Consequently, we notice in the Closing the Books chapter the organizational measures required to make certain that these filings are completed in a timely manner. A fourth issue is one which primarily impacts the controller and CFO — that of bookkeeping data released to the investment community. The individual responsible for this information release is the investor relations officer, who may push for the usage of non-standard formulas and ratios in order to demonstrate the best possible image of business performance for investors.
This can be a considerable concern for your accounting manager, since the SEC has imposed strict guidelines on how non-GAAP data is to be presented and reconciled back to GAAP-compliant information. Generally Accepted Accounting Principles GAAP is derived from the pronouncements of a run of government-sponsored accounting entities of which the Financial Accounting Standards Board (FASB) is the newest.
The SEC also problems accounting pronouncements via its Accounting Staff Bulletins and other announcements that are applicable only to publicly-held businesses and that are regarded as part of GAAP. GAAP is codified into the Accounting Standards Codification, which can be found on-line at asc.fasb.org at a basic format and in a more easily searchable published four-volume series. Public Company Finance GAAP is brief for Generally Accepted Accounting Principles.
GAAP is a large group of accounting standards and common industry use which were developed over many decades. It is used by companies to properly organize their financial data into accounting documents and outline it into financial statements, as well as disclose specific supporting information. Among the reasons for using GAAP is so that anyone reading the financial statements of numerous companies has a fair basis for comparison, because all businesses using GAAP have generated their financial statements using the identical set of rules. However, going public is not so easy, and requires a great deal of cash. An alternate to this IPO is the reverse merger, in which a private company buys a public shell company and carries public.
Though originally much less costly than an IPO, a reverse merger doesn’t provide an initial surge of cash from the sale of securities, and also doesn’t offer a ready market for the organization’s stock. Despite these flaws, reverse mergers continue to be popular for smaller companies trying to go public. We explain the reverse osmosis concept from the Reverse Merger chapter.
A final concern for a public business is an increased level of control over the enterprise. The Sarbanes-Oxley Act mandates a greater degree of management by public companies, which calls for an additional controls examination by the outside auditors, which may reasonably be considered an oppressive quantity of additional work. The result might be the imposition of numerous further controls. We point out several controls at the Accounting and Finance Controls chapter that could be of use.
If a company would like to sell stocks, it’s far easier to gain investor acceptance if the shares are registered, which means that investors can re-sell the stocks to third parties. On the other hand, the inventory registration process is lengthy and expensive. In the Registration Statements chapter, we describe the contents of this Form S-1 registration statement, as well as the prerequisites for using the simpler Type S-3.