US capital market reporting driven by need for transparency

How US Generally Accepted Accounting Principles (GAAP) impacts UK companies

Companies operating in the US capital markets need to be more transparent than ever before. Increased regulation and stricter governance are driving the need for more transparency in their corporate behaviour.

Navigating the multiple reporting requirements of the US capital markets can be daunting. But our team of specialists have extensive experience in regulatory and accounting matters.

We can help you:

  • Understand the impact of US GAAP or International Financial Reporting Standards (IFRS) on your operations and transactions
  • Convert financial statements to or from US GAAP or IFRS including project management support
  • Prepare for an Securities and Exchange Commission (SEC) filing, whether a new debt or equity listing, acquisition or disposal
  • Understand the requirements of special purpose or pro-forma financial statements
  • Assess and advise on improvements to your control environment

The diagram below illustrates the issues impacting UK companies operating in the US capital markets. See below for more detail.

US capital markets

GAAP conversions

  • Converting financial statements to and from US GAAP (in anticipation of a transaction or capital raising in the US), can stretch the transaction timeline and resources.
  • Understanding US GAAP implications is vital in dual reporting environments and where a US accounting basis may be required in future.

Capital raising

  • A US listing can provide access to long-term capital, enhance a company’s reputation and profile, lower the cost of capital and provide a foundation for share option reward programs.
  • Investor relations need to consider reported performance measures and whether profit is likely to differ under US GAAP.

Ongoing reporting

  • Specific disclosures and additional comparative periods are required for SEC filings. Collection and presentation of this data and maintaining sufficient evidence for audit purposes, can be challenging.
  • SEC registrants' filings are reviewed at least every three years. Comments typically reflect global economic conditions and emerging trends in US GAAP. These may need explanation or remediation in current or future financial reporting.

Transactions

  • There are complex reporting requirements for US listed companies making acquisitions.
  • SEC-compliant pro forma financial information or special purpose financial statements may be needed for the business acquired.

Regulatory

  • The US regulatory environment is continually changing. An awareness of of the legal, regulatory and capital impacts of business decisions is needed.
  • The Sarbanes-Oxley Act introduced requirements around internal controls over financial reporting and corporate governance that include: annual internal control assessments; management representations on internal controls and fraud; and an annual audit on the effectiveness of internal controls over financial reporting.

Changes to US GAAP

  • The International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) continue to work together to develop new standards. However, differences will remain on many key accounting areas.
  • FASB pronouncements are typically more prescriptive than IFRS. Recent updates have focused on enhanced disclosures.