CAQ Alert 2021-01: Auditor and Audit Committee Considerations Relating to Special Purposes Acquisition Company (SPAC) Initial Public Offerings and Mergers
Monday, May 3, 2021
Special purpose acquisition companies (SPACs) have been used for decades as a mechanism for private companies to access capital markets. Recently, SPACs exploded in popularity from just 59 SPAC IPOs in 2019 to more than 300 SPAC IPOs in the first few months of 2021. The creation of a SPAC and subsequent merger of a SPAC and a target company often raises complex accounting, financial reporting and governance issues. This Alert provides an overview of what a SPAC is and some key considerations for auditors and audit committees related to the unique risks and challenges of a private company entering the public markets through a merger with a SPAC. The lists of considerations in this alert are not intended to be all inclusive. In addition, while these considerations are intended for auditors and audit committees, members of management may also find them helpful.
This Alert was updated on May 11, 2021 to reference the FASB’s recently issued Accounting Standard Update (ASU) No. 2021-04, Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40: Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (A Consensus of the Emerging Issues Task Force).