Implications of going for IPO
Many time students are required to identify the competency of going for equity finance option. Students are required to be very careful reading the case facts, environment and circumstances presently face by the company. Examine all relevant indicators like consistent profitability and growth factors related to previous years. Students should go in more depth of the issue and discuss all relevant factors before jumping to go for the decision. See the following possible factors from Accounting, Finance, Audit and Taxation perspectives.
Look into the existing business environment, bottom line and future prospectus for the company, SWOT analysis and or MD & A will be useful tools for managerial decision. Examine the implication form long term and short term point of view
Need to check about loss of control on account of issue of new shares
From audit perspective, audit cost will increase on account of more users and reporting of extra requirement due to IFRS. This is also on account of preparation of prospectus and consent of auditor before publishing interim financial statements. More accurate and reliable
financial information is required due to more users. IT system may need to be updated
and or revised.
High cost of underwriter, advertisement, and cost related with listing requirement
Applicability of IFRS, comparative information for earlier year and requirement of additional
information in the notes to Financial Statements
Option for fair valuation of Property, Plant and Equipment and its impact on financial statements and on share price
Tax payable method of accounting is not allowed in IFRS, and as such future lax assets/liability will be worked out and recorded in FS
Small business deduction will not be available which may impact higher income tax rate