skip to main content

SPAC Accounting Troubles Continues as Industry Scrutiny Mounts

SPAC Accounting Troubles Continues as Industry Scrutiny Mounts

The latest accounting mishap for SPACs stems from mis-classifying the over-allotment option—an incentive program that allows underwriters to purchase additional shares at a discount following the IPO. While this is a pervasive practice, the errors should not prove as widespread as the regulatory overhaul from warrant reclassification or the incorrect classification of Class A shares.

SPACs need to initially record the over-allotment option as a liability during the 30-to-45-day incentive period before being recorded as a gain. Once underwriters take advantage of the option and buy all the shares, the liability disappears and, as Partner Scott Norris noted, that narrows the number of firms that have to look out for errors.

And with the amount of attention from all sides, Norris said it’s no surprise SPACs are still running into reporting issues, as the extra scrutiny uncovers financial reporting problems in places the market previously overlooked. “In the past when this occurred, no one did anything with this because no one thought this through,” he said. “But now, because we’re obviously very focused on SPACs, the SEC is very focused on SPACs, and they’re very focused on accounting for SPACs, this is a little accounting nuance that has created some hiccups.”


Bloomberg Tax subscribers can read the full article here.

Non-subscribers may request a copy of the article using the form on this page.


Please complete this form to hear from Scott Norris

Hide Firm Disclaimer


UHY LLP is a licensed independent CPA firm that performs attest services in an alternative practice structure with UHY Advisors, Inc., and its subsidiary entities. UHY Advisors, Inc.’s subsidiaries, including UHY Consulting, Inc., provide tax and business consulting services through wholly owned subsidiary entities that operate under the name of “UHY Advisors” and “UHY Consulting”. UHY Advisors, Inc., and its subsidiary entities are not licensed CPA firms. UHY LLP, UHY Advisors, Inc. and UHY Consulting are U.S. members of Urbach Hacker Young International Limited, a UK company, and form part of the international UHY network of legally independent accounting and consulting firms. “UHY” is the brand name for the UHY international network. Any services described herein are provided by UHY LLP, UHY Advisors and/or UHY Consulting (as the case may be) and not by UHY or any other member firm of UHY. Neither UHY nor any member of UHY has any liability for services provided by other members.

On this website, (i) the term "our firm", "we" and terms of similar import, denote the alternative practice structure conducted by UHY LLP and UHY Advisors, Inc. and its subsidiary entities, and (ii) the term "UHYI" denotes the UHY international network, in each case as more fully described in the preceding paragraph.