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Transactions With Public Markets

Transactions With Public Markets. Accounting and tax considerations. Types of Transactions. IPO’s Acquisition by public company Reverse takeover Certain private placements (OM). Financial Statements.

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Transactions With Public Markets

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  1. Transactions With Public Markets Accounting and tax considerations

  2. Types of Transactions • IPO’s • Acquisition by public company • Reverse takeover • Certain private placements (OM)

  3. Financial Statements • Securities legislation prescribes an array of financial information to be disclosed in a prospectus including: • Previously audited financial statements • Unaudited interim financial statements • Audited annual and unaudited interim financial statements of an acquired business • Pro-forma financial statements

  4. Financial Statements • General rule for financial statements previously reported on included in a long form prospectus • Two audited balance sheets • Three audited statements of operations, retained earnings (deficit) and cash flows • Full note disclosure • For years ended more than 90 days before the date of the prospectus – generally if audited statements are otherwise required

  5. Financial Statements • Generally unaudited interim financial statements for period ended more than 60 days of filing date of the prospectus - generally if quarterly statements are otherwise required • Interim period is defined as a completed three, six or nine month period that commence immediately following the end of the the most recently completed financial year • Comparative statements required for preceding year • Limited note disclosure

  6. Financial Statements • Financial statements of an acquired business • Required if acquisition meets certain thresholds of significance (Assets, Revenues, Investments) • < 20% - 0 • > 20% - 40% - 1 year • > 40% - 50% - 2 years • > 50% - 3 years • Comparative statements required for preceding year • Limited note disclosure

  7. Financial Statements • Pro forma financial statements are required to assist investors understand the impact of a business combination • Pro forma balance sheet (sometimes) • Pro forma income statement for the year-to-date interim period covered by the issuer’s most recent interim financial statements • Pro forma income statement for the most recently completed financial year (of the issuer) • Limited note disclosure

  8. Tax Issues • CCPC status • Impact on SR&ED claim for current year • Loss of refundable ITC • Reduction of ITC in future years • Change in control triggers tax year end • Restriction on losses and SR&ED pools going forward • Loss of capital losses

  9. Tax Issues • Loss of CCPC Status has the following impacts to shareholders: • Loss of QSBC exemption • Option holders – effects ability to apply certain deductions which are beneficial to option holders • Acquisitions require comprehensive tax planning, especially when there is foreign share holder involved (acquirer or seller)

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