August 12 is the birthday of the scientist who gave us the most famous cat in quantum mechanics: Erwin Schrödinger. And every five years or so August 12 is also when Q1 financials go stale for calendar-year US companies that are doing an IPO.

The date moves around a little from year-to year (if it falls on a weekend or holiday), but for this WoW we’ll stick with the 12th. The topics are also covered in the SEC Staff’s Financial Reporting Manual (FRM) at Section 1220. You can get staleness dates for the current year on the Desktop Staleness Calendar that we jointly prepare annually with KPMG or use our online calculator.

Here’s a guide to some of the questions that can arise.
Can an IPO registrant file a registration statement just before August 12 with Q1 numbers only?

Yes. The SEC Staff will not review a registration statement if the financial statements are stale (or otherwise do not comply with the Rules for financial statement age and audits) at the date of filing. The Staff will, however, review the filing if the financials are current when filed, even if they go stale after filing. See FRM Topic 1210.

Having said that, it won’t hurt to acknowledge to your SEC Staff reviewer that you will include Q2 numbers in an amendment when they become available.
Can a registration statement be declared effective with stale numbers?

No. The financial statements must meet the staleness requirements as of the effective date, so you will need to update the financial statements in the registration statement before the SEC Staff will declare it effective.

What happens if my registration statement is declared effective on August 12? Can I still close the deal with Q1 numbers?Yes, with caveats. Regulation S-X looks to the age of the financial statements as of the effective date. S-X Rule 3-12; see also FRM Topic 1220.1. But, you will want to ensure the auditors are on board and that there are no unusual disclosure issues or other concerns. Our client alert has more on using flash numbers and related topics. If you find yourself in this position, let’s talk.