SPACs must comply with SEC accounting rules for warrants
On April 12, 2021, the Securities and Exchange Commission (SEC) set forth its views on the accounting for warrants containing certain specific features that, for most special purpose acquisition companies (SPACs), were previously classified and accounted for as equity instruments. The new interpretation will in many cases require SPACs to classify these warrants as liabilities and report them at their estimated fair values at each reporting period, with corresponding adjustments reflected in the SPAC’s Statements of Operations. The SEC’s announcement may necessitate restatements of previously filed financial statements.
CohnReznick has started assisting our SPAC clients with reevaluation of their previous accounting positions, valuations of warrants based on the revised positions, and performing SAB 99 analysis to evaluate materiality considerations to address the SEC’s new guidance.
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