We understand If the SPAC is determined to be the accounting acquirer, purchase accounting will apply and the target company’s assets and liabilities will require a valuation to be stepped-up to fair value (i.e., a forward merger). Finding an available target can be challenging, but the work doesn’t end there. If a SPAC transaction is treated as a reverse merger, a determination must be made as to whether the SPAC meets the definition of a “shellcompany”under Rule 12b-2 of the Exchange Act and Rule 405 of Regulation C. Accounting and reporting complexities A SPAC transaction may result in a change in control. However, SPAC IPO activity came to an almost complete halt after the great recession, with only 1 SPAC IPO occurring in 2009, raising $36 million in capital. • SPAC organizers economic terms and accounting • IPO, warrant and PIPE accounting & dilution • Accounting vs. legal acquirer • Jurisdictional issue and international real estate company acquisition by a SPAC • Is the SPAC or target the acquirer for accounting purposes? If the SPAC is determined to be the accounting acquirer, purchase accounting will apply and the target company’s assets and liabilities will require a valuation to be stepped-up to fair value (i.e., a forward merger). Pro forma financial statements are typically required and will provide a comprehensive view of the SPAC merger. On the heels of a record-breaking year in 2020, special-purpose acquisition company (SPAC) initial public offerings (IPOs) surpassed that annual record in … ... To add a layer of complexity, in the case of a reverse merger or acquisition, while the SPAC is the legal acquirer and the target business the legal acquiree, for accounting purposes, these roles are reversed. In recent years, SPACs have reemerged and are gaining momentum. SERVICES. Regardless of the phase, to ensure a successful transaction when forming a public entity, finance and accounting leaders must implement the necessary processes, create the appropriate documentation, and mobilize the right team members at the proper … Is the nature of the transaction an acquisition or recapitalization? What kind of other legal complexities come out during the merger stage? It focuses on the information required in SEC filings for a private company being acquired by a SPAC, and also covers some of the key accounting considerations for the combined entity’s financial statements. The determination of the accounting acquirer has The fair value of equity consideration issued in a merger involving a public company is generally calculated as the product of the quoted price for the individual equity instrument times the quantity issued (commonly referred to a “P times Q”). We embrace their acceptance and are ready to use our … Draft pro-forma financial statements reflecting the appropriate accounting based on the terms of the deal. However, our efforts to facilitate capital formation are not carried out in isolation since each tenet of the U.S. Securities and Exchange Commission’s (“SEC”) three-part missio… special accounting and financial reporting requirements. A SPAC is typically established by a small group of experienced managers (the sponsors), who rely mainly on their reputation to raise capital by creating a … Determine the impact of historical acquisitions and dispositions, which may involve additional financial reporting requirements, and consider potential consultation … Identifying the Accounting Acquirer. If the target company is determined to be the accounting acquirer, the transaction will be treated similar to a capital raising event (i.e., a reverse recapitalization). The right acquisition can complement an organization’s organic growth by broadening its existing customer and contract base and providing access to new distribution channels and product offerings. A special purpose acquisition company (SPAC) is a publicly traded company created for the purpose of acquiring or merging with an existing company. SPAC (Special Purpose Acquisition Company) Statistics. Special Purpose Acquisition Companies (“SPACs”) accounted for 40% of IPOs and 33% of IPO proceeds in the first half of 2020 according to PWC’s “2020: The Halftime Report." acquirer. Although 2020 was a record-breaking year for SPACs, as of April 2021, the U.S. has already seen over 300 SPAC IPOs … Our professionals have deep experience, as principals and as advisors, acquiring, exiting, and restructuring fund assets across most asset types and industries. Alternatively, if the SPAC is determined to be the accounting acquirer, the SPAC would account for the acquisition as a business combination resulting in valuing and recording the assets acquired and liabilities assumed at fair value, and only the historical results of the SPAC … While certain aspects of a SPAC merger may vary, many of the fundamental processes are similar to a traditional IPO. One likely reason for the diminished activity – and the dates certainly line up – is a statement made by the SEC on April 12. This must be done to be stepped up to a fair value. The Interpretations Committee concluded that, regardless of the level of monetary or non-monetary assets owned by the non-listed operating entity, the entire difference should be considered to be payment for a service of a stock exchange listing for its shares, and that no amount should be considered Financial statements of the accounting acquirer (the legal acquiree) and S-X Article 11 pro forma financial information giving effect to the reverse acquisition should be filed in an Item 9.01 Form 8-K when available, but no later than 71 calendar days after the date that the initial Form 8-K reporting the transactions must be filed (that is, the date which is 4 business days after the transaction is … Is the nature of the transaction an acquisition … While the SPAC management team and advisors will direct the process, most of the work will fall on the target company’s … To add a layer of complexity, in the case of a reverse merger or acquisition, while the SPAC is the legal acquirer and the target business is the legal acquiree, for accounting … In this case, Topps is the acquiree and Mudrick Capital Acquisition Corporation II (Nasdaq: MUDS) is the SPAC. Given that the SPAC has limited operating activity, upon acquisition, the operating company will be the predecessor2 to the registrant. The SPAC and the target must work through the accounting for the transaction to determine (1) whether the SPAC or the target is the acquirer for accounting purposes (the “accounting acquirer”) and (2) whether the nature of the transaction is an acquisition or recapitalization. However, in substance the transaction might be the other way around if the SPAC issues equity, or a combination of cash and equity, to legally acquire the OpCo. The result is a publicly traded company. SPACs: Understanding financial reporting considerations. In recent years, SPACs have reemerged and are gaining momentum. The SPAC and the target must work through the accounting for the transaction to determine (1) whether the SPAC or the target is the acquirer for accounting purposes (the “accounting acquirer”) and (2) whether the nature of the transaction is an acquisition or recapitalization. • Determining the accounting acquirer ... Overview 3. Anchor - The easiest way … Apply online instantly. accounting acquirer. In light of the incredible volume of SPAC deals, on Wednesday, the staffs of Corp Fin and the OCA issued special guidance for SPACs. This is true even if the operating company is not the acquirer for accounting purposes. The current SPAC boom is eerily similar to the shale boom, until 2016 when energy sponsors raised record funds in search of acquiring hydrocarbon assets following the successful traditional IPOs. • Jurisdictional issue and international real estate company acquisition by a SPAC • Rep & warranty insurance Josh Sherman and Lynn Loden, Opportune LLP. The determination of the accounting acquirer has a significant impact on the basis of the financial statement presentation and which company’s financial statements are required to be reported at fair value in accordance with ASC 805 on the date of the De-SPAC transaction. However, if the SPAC is determined to be the accounting acquirer, purchase accounting will apply. However, if the merger involves a special purpose acquisition company (SPAC… Wed, … Even seemingly straightforward transactions can have complex accounting … If the SPAC is the accounting acquiree, the transaction might not be a business combination, because the SPAC generally would not meet the definition of a business. If the guidance in IFRS 10 does not clearly indicate the acquirer, the factors in paragraphs IFRS 3.B14-B18 are also considered (IFRS 3.7 … These statements address shell company, financial reporting, accounting, internal control, governance and auditor considerations in connection with a de-SPAC … Therefore the merchant would receive $97.76 from the acquirer & the acquirer has $2.24 to distribute between the issuer and … Identifying the accounting acquirer The guidance in IFRS 10 should be used to identify the acquirer, ie the company that obtains control of the acquiree (IFRS 3.7 and B13). If it does, the transaction is accounted for as a business combination and the SPAC recognizes the target’s assets and liabilities in accordance with the guidance in ASC 805-10, ASC 805-20, and ASC 805-30, generally at … • Is the SPAC or target the acquirer for accounting purposes? accounting acquirer. Target business historical audits. While this is generally a merger, this is not your typical public company merger. If the target company in an UP-C structure meets the definition of a variable interest entity (VIE)2 with the SPAC as the primary beneficiary, this would make the SPAC the accounting acquirer. In 2015, 19 SPACs completed IPOs … • Determining the accounting acquirer ... Overview 3. If the transaction is accounted for as a business combination (i.e., the SPAC is the accounting acquirer), the guidance in ASC 805 applies. accounting acquirer Is the transaction a business combination? If a SPAC transaction is treated as a reverse merger, a determination must be made as to whether the SPAC meets the definition of a “shellcompany”under Rule 12b-2 of the Exchange Act and Rule 405 of Regulation C. Special-purpose acquisition corporation (SPAC) transactions Business combination-related accounting considerations Page 8Page 8 Accounting acquirer is the entity that obtains control of another entity First consider whether the variable interest model applies If acquiree is a VIE, the primary beneficiary is always the accounting acquirer operating company would be considered the accounting acquirer (even though the SPAC is the legal acquirer). Our Viewpoint on SPACs, Merging with a special purpose acquisition company (SPAC), focuses on accounting and reporting considerations related to such transactions. Determining the predecessor entity. Pro forma financial statements will typically be required to provide If the transaction is between entities under common control (for example, the same entity or individual controls the target company and the … This is because the determination of the accounting acquirer is driven off of “control” of the post combination company, regardless of … Includes a summary of total SPAC IPO transactions by year, $ volume, IPO count, total gross proceeds and average IPO size. Since a SPAC does not have substantive operations before an acquisition has been completed, the target becomes the predecessor of the SPAC upon the close of the transaction, and the operations of the target become those of a public company. Posting id: 633690588. While the SPAC is ordinarily the “legal” acquirer in the combination, it does not always meet the criteria to … SPAC Is the Accounting Acquirer If the SPAC is determined to be the accounting acquirer, the acquisition should be accounted for as a business combination if the target company—accounting acquiree—meets the definition of a business. Identifying the Accounting Acquirer. A SPAC uses capital raised from investors to legally acquire an existing privately-held company (Opco). Form and content of financial statements of target business. Nonetheless yesterday the Series A closed at $33.31 per share, while the Series B closed at $78, for a premium of $44.69. In many … A target company’s management and advisors will need … The U.S. capital markets are often described as the envy of the world, and we in OCA continue to promote healthy public markets. The SPAC is the legal acquirer, and the OpCo is the legal acquiree. Generally Accepted Accounting Principles (GAAP) or in accordance with International Financial Reporting Standards. It seems on its face that the SPAC, a publicly traded blank-check company created to merge with a private company, is the entity controlling the other entity, Robottom, a CPA, said. A SPAC IPO refers to the process of a SPAC acquiring or merging with a private company. Anna T. Pinedo. An SPAC is a form of reverse merger in which a private operating company merges with a listed shell to go public without the rigors of a traditional IPO. SPAC Talk: Important Considerations for Private Companies Evaluating a SPAC Going-Public Transaction. In the third episode of our knowledge series, we discuss the key financial reporting aspects that operating companies need to bear in mind while planning a ‘de-SPAC’ transaction. This post provides an update to SPAC … A SPAC is a blank-check company formed to raise funds in a public stock offering for the sole purpose of purchasing an operating business. This determination often depends on which entity is identified as the accounting acquirer. For accounting purposes, the acquirer is the entity that has obtained control of another entity (the “acquiree”) and consummated a business combination. The Weaver team has experienced the times of novelty and wide acceptance of the go public strategy. As the De-SPAC transaction is similar to a merger, target founders only need to negotiate with the acquirer instead of conducting negotiations with different groups of investors in a roadshow. On the matter of the Topps SPAC IPO, Eisner commented… In certain instances, the tax rules allow the acquirer and seller to elect to treat the purchase of the target’s stock as an asset transaction. • Acquirer acquires Target two years after the employment contract was signed with Target and on the acquisition date, enters into a new employment contract with the executive which significantly reduces the executive’s salary. ... To add a layer of complexity, in the case of a reverse merger or acquisition, while the SPAC is the legal acquirer and the target business the legal acquiree, for accounting purposes, these roles are reversed. De-SPACing—Accounting and Securities Law Considerations. It’s not necessarily the SPAC. operating company would be considered the accounting acquirer (even though the SPAC is the legal acquirer). The assessment of the accounting acquirer in a SPAC merger should be performed prior to the evaluation of earnout provisions. SPAC Acquisition Concerns Loom Despite Growing Popularity. This discussion assumes that the SPAC is the legal acquirer in the transaction. A SPAC … This is a growing niche in the big 4 accounting … Reverse mergers can be excellent opportunities for companies and investors, but there are still risks. • SPAC organizers economic terms and accounting • IPO, warrant and PIPE accounting & dilution • Accounting vs. legal acquirer • Jurisdictional issue and international real estate company acquisition by a SPAC • Is the SPAC or target the acquirer for accounting purposes? They can consult companies on how to be targets of SPACs. Procida Funding & Advisors advises funds and investors on all aspects of restructurings. Find out the pros and cons … Apply for a Beech Valley Solutions Consultant, IPO/SPAC Accounting Advisory job in Newark, NJ. In recent years, we have seen significant market developments and innovation in our capital markets, with a variety of structures being utilized to raise capital and facilitate taking private companies public. Like most financial instruments, SPACs present risks and rewards, and require due diligence from accounting firms to help avoid landmines, Accounting Today reports. If the guidance in IFRS 10 does not clearly indicate the acquirer, the factors in paragraphs IFRS 3.B14-B18 are also considered (IFRS 3.7 and B13). and. Concern #2: SPAC Accounting Is Complicated. Reverse mergers are acquisitions, and the timing of an acquisition is an important factor that drives the timing of ICFR compliance and related disclosures under … • The SPAC and the target must work through the accounting for the transaction to determine (1) whether the SPAC or the target is the acquirer for accounting purposes (the “accounting acquirer”) and then (2) whether the nature of the transaction is an acquisition or recapitalization (as discussed in the Identifying the Accounting The Wall Street Journal has dubbed 2020 a record year for SPACs. recession, with only 1 SPAC IPO occurring in 2009, raising $36 million in capital. the SPAC is ordinarily the “legal” acquirer in the combination, it does not always meet the criteria to be classified as the accounting acquirer. The application of Accounting Standards Codification 805, Business Combinations, (ASC 805) to the De-SPAC transaction requires the accounting acquirer to be identified, which may be a difficult process requiring substantial judgment. Additional stats include an Annualized Rate of Return for both the share and the sum of the unit securities. Therefore, in general, the disclosures required … The pre-tax income test, which compares the acquirer’s equity in the acquired business’s income from continuing operations before income taxes, extraordinary items, and cumulative effect of a change in accounting principles compared to the income of the acquirer. Special-purpose acquisition corporation (SPAC) transactions Business combination-related accounting considerations Page 8Page 8 Accounting acquirer is the entity that obtains control of another entity First consider whether the variable interest model applies If acquiree is a VIE, the primary beneficiary is always the accounting acquirer There are several issues to consider:Identifying the accounting acquirer. This structure is preconditioned on many factors that go into the evaluation of the accounting acquirer, which could be the SPAC itself or the target entity. For accounting purposes, the acquirer is the entity that has obtained control of another entity (the “acquiree”) and consummated a business combination. However, if the SPAC is determined to be the accounting acquirer, acquisition accounting in accordance with FASB ASC 805 will apply and the target company’s assets and liabilities will require a valuation to be stepped-up to fair value. Is the nature of the transaction an acquisition or recapitalization SPAC or a special purpose acquisition company is a shell company listed on a stock exchange with the purpose of acquiring a private company and, therefore, making it public without going through the traditional IPO process. The SPAC is determined to be the accounting acquirer — The entities must assess whether or not the target meets the definition of a business in accordance with U.S. GAAP. In the last few years, SPAC mergers have become something of a trend in the financial world. If the target company is determined to be the accounting acquirer, the transaction will be treated similar to a … SPACs surge • US-listed SPAC volumes rose 275% year over year to all-time high of $51.5 billion in 2020 4 50 100 150 200 250 300 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 ... the SPAC elected the option to transition to new accounting standards at the non … A special purpose acquisition company (SPAC) is a publicly traded company created for the purpose of acquiring or merging with an existing company. KPMG explores an RMT’s financial reporting effects as well as relevant IRS and SEC filing requirements. This course will help legal and accounting professionals anticipate and avoid problems in SPAC accounting and SEC reporting. The fair value of equity consideration issued in a merger involving a public company is generally calculated as the product of the quoted price for the individual equity instrument times the quantity issued (commonly referred to a “P times Q”). In 2020, for instance, there were close to 250 SPAC IPOs completed in the U.S., raising over $80 billion. Special Purpose Acquisition Companies (“SPACs”) continue to be increasingly popular vehicles for entities or individuals to raise capital to pursue merger opportunities, and for private companies seeking to raise capital, obtain liquidity for existing shareholders and become publicly traded. There are a number of technical accounting complexities associated with a SPAC IPO and the subsequent De-SPAC process. A SPAC’s initial business combination is often referred to as a de-SPACing transaction. • What is accounting pre and/or post combination? These are IPOs where the money raised in the IPO is used for an acquisition of a target entity. This results in “business combination” accounting, adjusting the target company’s assets, liabilities and noncontrolling interests to fair value. And there was quite a bit of SPAC activity last year. Specifically, the accounting acquirer is the entity that has obtained control of the other entity, which might be different from the legal acquirer (which is generally the SPAC). Various accounting determinations are required such as is the target of an ‘accounting acquirer,’ if it qualifies as an emerging growth company (ECG), or if the transaction is an acquisition or recapitalization; Post-transaction Internal Controls over Financial Reporting (ICFR) requirements; Timing: The merger needs to occur … In 2015, SPACs raised a significant … Public company disclosure requirements.

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