Considering an IPO? Time to Factor in FASB Public Company Accounting Rules

IPO markets have seen a sharp downturn this year, although cautious optimism within the market could indicate an uptick during the end of 2023. However, before a private company expects to go public, one of the biggest obstacles is the transition from private to public company accounting. The conversion of a company's accounting can take between three and nine months, depending upon the experience of management and the CFO's understanding of public company rules.

“There have been recent news of potential large high-profile IPOs that may be on the horizon,” Partner Ro Sokhi said. “There is some cautious optimism; I don’t think that it’s in the clear that the market is definitely recovering, but there are encouraging signs.”

For private companies, determining “does it make sense” to file an IPO is a struggle for a lot of companies, Sokhi explained. “It’s not just the accounting standards; it’s having the folks in place because a lot of times private companies are very lean organizations who may have a CFO who is not really in the accounting world,” he said.

The next obstacle for companies is to form a team of legal, accounting, and advisory professionals necessary to gather the documentation for SEC registration statements and GAAP compliant financial statements. “But can they get that information? Do they have the skills and knowledge to put those documents together?” said Sokhi. “Then ultimately bandwidth is a huge one – you’ll know because you’ll be getting requests with incredibly tight timelines,” he said. “Sometimes the deals are killed right there because they just can’t get the information on time."

Read the full article published by Reuters.