SEC Officials Highlight Accounting Considerations For Warrants Issued By SPACs

SEC Division of Corporation Finance Acting Chair John Coates and SEC Acting Chief Accountant Paul Munter (the "officials") highlighted certain considerations in accounting for warrants issued by Special Purpose Acquisition Companies ("SPACs"). In a public statement, the SEC Division of Corporation Finance and the Office of the Chief Accountant staff ("staff") reviewed the potential accounting implications and "the financial reporting considerations that apply if a registrant and its auditors determine there is an error in any previously-filed financial statements." The staff determined that there were circumstances relating to indexation and tender offer provisions common in SPAC warrants that would require the warrants to be classified as "a liability measured at fair value," with changes in fair value reported each period in earnings.