IFRS advice key to your IPO process

BDO recently published an ASX Listing Guide (Guide) to assist entities embarking on their initial public offering (IPO) process in Australia. The Guide explains the IPO process in Australia and the associated regulatory environment.

Financial information is a key component of any prospectus

Potential investors rely on the financial information contained in the prospectus when deciding to invest in the IPO, which is usually prepared in accordance with Australian Accounting Standards, or International Financial Reporting Standards (IFRS).

Many entities undertaking an IPO process previously may not have been required to comply with Australian Accounting Standards or IFRS. This ‘transition stage’ to prepare your first set of financial statements that comply with Australian Accounting Standards or IFRS can take a long time because many decisions need to be made about the best transition approach, and additional information is required to restate previously reported financial information.

It is vital that management understands the extent of work required to comply with accounting standards, for example:

• Have you recognised revenue correctly?
• Have you recognised all your leases in your balance sheet?
• Have you recognised deferred tax?
• Are your intangible assets eligible for capitalisation?
• Have you consolidated all entities under your control, and equity accounted for all joint ventures and associates?
• Is all your equity really equity or should a portion be classified as debt?
• Have you recognised all your derivatives?
• Have you correctly presented your borrowings as current or non-current liabilities?
• Have you recognised all share-based payment awards?

These decisions and many more can have a significant impact on the health of your balance sheet and profit or loss statement, which could in turn affect whether you meet the ‘profits’ or ‘assets’ test for admission under Condition 9 of ASX Listing Rule 1.

Start your IFRS journey early

As emphasised in our Guide, it is wise to obtain IFRS advice early to ensure your financial statements comply with Australian Accounting Standards or IFRS. The timeline below (extracted from page 16 of the Guide) illustrates this point. IFRS transition should be complete at week two, which means your IFRS journey starts even before you commence your IPO process.

BDO IFRS/GAAP health check

We recommend undertaking our BDO IFRS/GAAP health check to ensure your IFRS transition process runs smoothly and you avoid unnecessary hurdles along the way. Our national IFRS & Corporate Reporting team can help guide you through your IFRS transition journey via our five-step process.

Please contact BDO’s IFRS & Corporate Reporting team if you require assistance.