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Warrants are frequently issued in connection with the formation and initial registered offerings of SPACs, but apparently there have been some problems with accounting for some of these warrants, or at least, so it appears from this Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) from Acting Corp Fin Director John Coates and Acting Chief Accountant Paul Munter. The Statement is intended to “highlight the potential accounting implications of certain terms that may be common in warrants included in SPAC transactions” and to discuss what needs to be done if this Statement leads a company and its auditors to determine there is an error in any previously filed financial statements. The primary issue identified in the Statement is whether these warrants should be classified as equity or liabilities, which depends largely on the specific
Jan. 26, 2021
A company has just released its quarterly earnings. Another company has auditor news that could raise a red flag, and a third company is filing for bankruptcy. Where can you find more facts? Information about these events and many more are found in a document called a current report on Form 8-K.
Form 8-K provides investors with current information to enable them to make informed decisions. The types of information required to be disclosed on Form 8-K are generally considered to be “material.” That means that, in general, there is a substantial likelihood that a reasonable investor would consider the information important in making an investment decision.
Crimson Wine Group will be restating “unreliable” financial results for three fiscal years ended December 31, 2017, 2018 and 2019 after an independent review is completed, according to the company’s SEC 8-K Report of Dec. 22, 2020
According to the 8-K, the reviews “relate to the allocation of costs to bulk wine inventory, which, in turn, affect the Company’s reported cost of sales.”
The 8-K further notes that the Crimson Wine”Audit Committee will retain independent accounting advisors to assist in the review process. The Company cannot quantify the amount of the corrections until the Audit Committee has concluded its independent review. ”
The results of the review, according to the 8-K, “will result in a decrease in the Company’s net earnings for the periods discussed above as well as an adjustment to increase the opening accumulated deficit balance as of January 1, 2017.”