Your essential early-stage IPO checklist

• Assess your team’s skills and experience. If you’ve never been through the IPO process before, your business might lack the requisite resources and knowledge – and in fact, this process requires a specific, specialized set of skills that can be hard to find. You might consider augmenting your team from the outside with a third party or consultant. Team members should have knowledge of:
  • Securities and Exchange Commission (SEC) reporting requirements for public companies
  • U.S. generally accepted accounting principles (GAAP) applicable to public companies, including how Private Company Council (PCC) elections and certain areas of GAAP, including recently adopted standards like leases and current expected credit losses (CECL), differ for public companies
  • Income taxes
  • Valuations
• Measure your IT system capability and alignment against public company requirements. Implementing a new system is a significant investment of both time and money – but the sooner you start, the better. Consider your:
  • Enterprise resource planning systems and any ancillary or additional systems that feed your financial statements
  • Level of security and access controls
  • Reporting capabilities to capture disclosure requirements
  • Data integrity
• Align your governance and internal controls to industry and stock exchange requirements, and document your processes and controls. While it can be difficult for small companies to ramp up policies and procedures, it’s vital to do so while getting ready to go public (not after) in order to avoid heightened scrutiny and potential material weaknesses. Consider your:
  • Application of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework
  • Delegation of authority
  • Segregation of duties
  • IT security
  • Sufficiency of internal control processes and documentation
  • Industry and regulatory compliance requirements (SOX 302, 404, and 906)

• Reassess materiality, and plan for any changes. When you go public, the users of your financial statements change. The SEC has additional guidance on evaluating misstatements, which means some items previously deemed not material might need to be reconsidered.
• Review public company adoption dates for new standards and determine a plan to meet those dates.
• Identify any PCC alternatives and re-record under GAAP applicable to public companies.
• Evaluate any additional required GAAP changes for public companies.
• Determine if your financial reporting conforms to SEC requirements, including:
  • An audit must be performed by a firm registered with the Public Company Accounting Oversight Board (PCAOB).
  • The initial registration statement of a domestic emerging growth company (EGC) must include a minimum of two years of financial statements audited under PCAOB standards.
  • Domestic companies that are not either an EGC or a smaller reporting company must include three years of financial statements audited under PCAOB standards.
  • Financial statements for interim periods also might be required, depending on the timing of the registration statement.
  • The form and content of financial statements must follow Regulation S-X.
  • Financial statements and pro forma financial information for significant acquisitions must be included.

It’s easy to get overwhelmed in the early stages of an IPO, but following this IPO checklist can help you set up your business for success.