A PDF version of this publication is attached here: Domestic SPAC mergers - financial reporting and accounting considerations (PDF 428kb)
At a glance

Special purpose acquisition companies (SPACs) provide an alternative way for management teams and sponsors to take companies public. A SPAC raises capital through an initial public offering (IPO) with the intention of acquiring a private operating company (“private company” or “target company”). When a private company is acquired by a publicly traded SPAC, it effectively becomes a public company without executing its own IPO.
The merger of a SPAC with a target company presents several challenges. This In depth highlights several of the financial reporting and accounting considerations and our responses to frequently asked questions on the SPAC merger process, “Super 8-K” reporting, and the ongoing reporting requirements subsequent to the SPAC merger.
We plan to update this In depth as additional guidance, financial reporting, or accounting considerations are identified.
This In depth was updated on March 11, 2021 to include new sections on Up-SPAC transactions and EPS considerations for certain earnout provisions in SPAC mergers, and to update the discussion of transaction costs.
This In depth was updated on April 27, 2021 to add additional guidance related to earnouts and warrants, and to reflect recent guidance from the SEC staff.
This In depth was updated on September 26, 2022 to reflect recent guidance from the SEC which changed the EGC revenue threshold from US$1.07 billion to US$1.235 billion.

A SPAC is created with capital from its initial investors and undergoes an IPO to raise additional capital, with the intention to acquire one or more unspecified private companies. Following the IPO, proceeds are placed into a trust account and, based on the terms of its governing documents, the SPAC typically has 18-24 months to identify and complete a merger with a target company, sometimes referred to as “de-SPACing.” After being acquired, the private company becomes a public company (or a subsidiary of a public company). If the SPAC does not complete a merger within the specified time frame, absent an extension, the SPAC will liquidate and return the remaining IPO proceeds to its shareholders. The IPO proceeds will be impacted by interest income on the cash balances held in trust and expenses incurred related to identifying a target and operating as a public company.
The SPAC merger presents several challenges, including having policies and processes in place to perform as a public company, including assessing complex accounting considerations and various financial reporting and SEC filing requirements.
This In depth addresses several key accounting issues for the SPAC merger, common questions related to various SEC reporting requirements, as well as other questions regarding the SPAC merger transaction and ongoing reporting requirements in domestic transactions.

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