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MDM- taking a company public reg/ind req and prospectus
MDM- taking a company public

Additional Accounting Flashcards




Advatages of going public
1- objectives and goals: allign with user objective and goals
2- Financing: additional capital and financing
3- Debt Financing: may result in easier access to debt financing due to disclosure requirments
4- Expansion: facilitate mergers and acquisitions
Disadvantages of going public:
1- more owners:
2- controlled interest: alterned ownership structure, and company decision making
3- decision making: less flexability in decision making, formalizes and longer process
5: More FS users: higher overall FS risk, more sensitive to users
6- More FS disclosures: requires enhanced disclosures esp. under IFRS
7- FS deadline and reporting (must report by April 1, must report op segments,EPS)
8- More costs: admin of IPO, audit and legal, additional compliance and financial reporting result in more salary costs
Regulatory and indpendence requirments
-public co req to file statments on SEDAR accompanied by "particiapating audit firm" auditors reported in compliance with CPAB
"particiapating audit firm"
public accounting firm that has entered into written agreemetn with CPAB and has good standing
Canadain Public Accountability Board- oversees auditors of CND public co's through inspections and specific req that aduitors must follow
Specific independece requirments for auditors of public companies (ruls of professional conduct 204)
-cannot perform audit engagment if:
accpeted employment in a financial reporting oversight role with the enetity within a period of 1 year from which the FS were filed
-serve as an officer or director of the entity
-lead engagment partner or QRCP on an engagment for more than 7 years in total in which 5 yrs must laps
-registrant provides more than ten hours of assurances services in connection with the FS ob the reporting issuer
-see pg 52 for more
-firm provides a valuation service to the client unless reasonable to conclude that the results of that service will not be subject to audit procedures during the audit
Prospectus requires
-several years of FS included
-annual audited FS for each of the three most recently completed years ended more than 90 days before the proespectus
-BS at the end of the 2 most recent completed years per the date above
-interim statements unaudited
-subsequent to the most recent FS year of which the annual FS are included if any
-has to be more than 45 days before the proepectus or 60 if venturer
-FS complete all YTD interim period and comparative of same period in PY
-also requires notes to all FS noted above
Filining deadlines
audited annuals required to be filed on or before the 90th day after the end of the most recently completed financial year - 120 for venturer
-interims must be filed by the 45th day after the end of the interim period, 60 for venture issuers
Required in FS
-aduited annual FS and comparitive year+notes
-must file interim for each interim period ended after company became public
-interim FS report must disclose if reveiwed by auditor or not
tax considerations
- Loose Small business deduction
- loose GRIP which porduces lower rate taxable dividends (eligible div)
-CDA balanace lost when company goes public, so co. should pay out any dividends before hand.
-demmed yr end immediately before the change in staus occurs and new taxation year end deemed to begin immediatley after status change
-coporate tax return to be filed within 6 months of deemed yr end
-balance owing to be paid by deadline 3 months after deemed year end
-overall many tax advantages lost when tansistion to a public company
Personal tax considerations
-demmed to dispose of shares = to greater of ACB and lesser of FMV of shares and amount designated
-must file election by personal tax filing deadline of year following transaction
-election must be done prior to IPO
available on gains resulting from dispoistion of shares of a qualified SBC
-would only apply before IPO, therefore should use before IPO a public co would bot qualify as QSBC shares
Best approach to minimize taxes when company goes public
-apply ITA S 48.1 election allowing for deemed disposition prior to IPO
-dispose at prescribed amont to use LCGE
-reacquaire shares right after at ACB = to amount of IPO deemed proceeds
-Per ITA S 48.1 adjusted cost based at time of disposal after holding period can be bumped up to proceeds noted in elected
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