Comfort Letters and Post-Year-End Offerings

When an issuer files a registration statement or undertakes an offering after its fiscal year-end but before the issuance of its annual audited financial statements, difficulties may arise as to the level of comfort that an issuer's accountant may provide. Registration statements that are filed after a fiscal year-end but before the annual audited financial statements are issued often include or incorporate by reference so-called "capsule financial information" for the fourth quarter and/or the full year. Underwriters will generally request a comfort letter with respect to the capsule information as part of their due diligence procedures. Accountants are often reluctant to provide certain comfort procedures relating to such capsule information, as the financial statements underlying the information have not been issued and the information is therefore subject to change. This article provides guidance for underwriters with respect to comfort letter procedures relating to