From the Lab to Accounting – Expertise is Key
Author: Elizabeth Johnson, Accounting & CFO Advisory Partner
The importance of accounting expertise within Life Sciences companies cannot be overstated, particularly when gearing up for an IPO. In the dynamic realm of Life Sciences, where professionals delve into research, conduct clinical trials, and forge partnerships, specialized skills are paramount. Just as you wouldn’t entrust specialized roles in the lab to generalists, having accounting experts on your team is essential.
Here are a few of the reasons why accounting expertise is critically important for any Life Science company preparing for an IPO.
1. Complex Transactions: Life science companies often engage in complex transactions, such as licensing agreements, research collaborations, and acquisitions, which can have significant accounting implications. Accounting expertise is necessary to properly account for these transactions in accordance with relevant accounting standards and principles.
2. Financial Reporting & Requirements: Before an IPO, the SEC mandates 2 years of audited financial statements for Emerging Growth Companies (EGCs) and 3 years for non-EGCs. Compliance involves producing accurate, and transparent financial statements following generally accepted accounting principles (GAAP). The auditor’s report assures investors and regulators of financial statement accuracy. Expertise in accounting is crucial for collaborating with auditors, meeting audit standards and addressing findings.
3. Internal Controls and Governance: Strong internal controls are essential for ensuring the integrity of financial reporting and safeguarding company assets. Accounting expertise helps companies establish and maintain effective internal control systems that mitigate the risk of errors and misstatements in financial reporting and fraud. Furthermore, accounting professionals play a key role in corporate governance by providing oversight and guidance on financial matters to the board of directors and senior management.
4. Investor Confidence and Credibility: Accurate and transparent financial reporting is crucial for building investor confidence and credibility in the capital markets. Accounting expertise helps companies communicate financial results effectively, address investor concerns, and maintain trust with stakeholders.
Accounting expertise is key for life science companies preparing for an IPO. It ensures compliance with financial reporting standards, facilitates audit processes, addresses complex accounting issues, strengthens internal controls, and enhances investor confidence. Engaging qualified accounting professionals and advisors can help companies navigate the complexities of financial reporting as they position themselves for success in the public markets.
About the Author Elizabeth Johnson, Partner
Life Sciences / LinkedIn / E-mail
Lizzie Johnson is a partner in the Accounting and CFO Advisory practice at Frank, Rimerman + Co. She works with early and mid-stage venture-backed companies serving as a finance leader. Lizzie is also a leader in the firm’s Life Science practice, which serves a variety of companies in the sector, including biopharma, biotech and medical device companies. Her expertise includes startup operations, financial planning, and risk management, with a strong focus on GAAP compliance, metrics, investor and board of director reporting, equity management and international matters.
Disclaimer: The material appearing in this communication is for informational purposes only and should not be construed as legal, accounting, tax, or investment advice or opinion provided by Frank, Rimerman + Co. LLP or its subsidiaries or affiliates. This information is not intended to create, and receipt does not constitute, a legal relationship, including, but not limited to, an accountant-client relationship. Although these materials have been prepared by professionals, the user should not substitute these materials for professional services and should seek advice from an independent advisor before acting on any information presented. Frank, Rimerman + Co. LLP and its subsidiaries or affiliates assume no obligation to provide notification of changes in tax laws or other factors that could affect the information provided.