5. The Going-Public Process 41

Financial information. The SEC has specific and sometimes complex rules regarding the content and age of the financial statements that must be presented in a registration statement, and your company’s accountants can be invaluable in helping you comply with these rules. In a Form S-1 registration statement, a company must generally present the items listed below:
Audited balance sheets as of the end of the two most recent fiscal years;
Audited statements of income, cash flows, and changes in stockholders’ equity for each of the past three fiscal years;
Selected financial information (summarized from the balance sheets and income statements) for the past five fiscal years;
Separate financial statements of businesses acquired or to be acquired. The financial statement requirements range from one to three years depending upon whether certain criteria are met;
Interim financial statements (also referred to as stub-period financial statements), required if the fiscal year-end financial statements are more than 134 days old at the expected effective date of the registration statement. Interim financial statements can be presented in a condensed format and generally are not audited. However, it is not unusual for an underwriter to request that a review of the interim financial statements be performed by your independent accountants and many accounting firms require such a review as a matter of policy.
It should also be noted that the latest audited financial statements can not be more than one year and 45 days old at the date the registration statement becomes effective; and
Pro forma financial information, i.e., financial statements or financial tables prepared as though certain transactions had already occurred. While the need for pro forma financial information most frequently occurs in connection with business combinations, the rule also applies to other events. For example, the disposition of a significant portion of a business
may also necessitate pro forma financial information. In addition, there could be other events or transactions for which pro forma financial information may be required if the pro forma financial information would be material to investors, including situations in which:
The registrant’s financial statements are not indicative of the ongoing entity (e.g., tax or cost-sharing agreements will be eliminated);
Dividends are declared by a registrant subsequent to the balance sheet date;
Redeemable preferred stock or debt converts to common stock at either the effective or closing date of an IPO;

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