The Securities and Exchange Commission will require SPACs to restate their financial results because they incorrectly followed accounting rules on how to classify certain shares they offer to investors, according to auditors and advisers of those companies, Bloomberg reports.
The errors mark the latest regulatory intervention that could affect hundreds of SPACs.
The issue has been bubbling for months, but most audit firms considered the errors small enough to be fixable with a revision, a minor correction that gets disclosed in the next period’s financial statement. The SEC, however, told firms that such a correction isn’t enough, said David Bukzin, vice chairman of Marcum, the firm that’s audited the most SPAC IPOs in 2021.
SPACs must instead call attention to the past error with a so-called “big R” restatement — a more serious kind of correction that requires a company to file an 8K form spelling out that prior financial statements can’t be relied on. The errors could temporarily pause the market as SPACs deal with a paperwork backlog. Read more.
