Being Public and Reporting

Quarterly Reporting

Quarterly reporting is critical for public companies. Learn the requirements and best practices for efficient quarterly reporting in your S-1 and 10Q.

Nov 9, 2018
June 13, 2023

In the first quarter after an IPO, approximately one-third of companies will miss a Wall Street earnings estimate, and half will miss estimates in the first year. For these companies, it can take up to two years to regain lost market cap.1 Quarterly reporting is clearly a high-stakes challenge for new public companies. Consider, for example, the following headlines:

"SNAP crashes to a record low after its earnings disaster"

"Spotify stock falls after earnings miss in the first quarter"

"Fitbit Stock Plummets on Q4 Earnings Miss, Poor Guidance"

"Square stock falls after first-quarter earnings "

One of the most difficult aspects of financial reporting for companies, both before and after an IPO, is effective quarterly reporting. In order to go public, your company will need to file a Form S-1, which will include quarterly results from the eight most recent quarters. Then, once your company is public, you will be required to file quarterly financial statements with the SEC using a Form 10-Q.

The purpose of this article is to help pre-IPO companies prepare for the demands of quarterly reporting. This article will review the requirements of a 10-Q filing, discuss the quarterly requirements within an S-1, and present best practices for quarterly reporting. The article will also discuss how to approach the S-1 if quarterly financial records have not been kept.

S-1 Quarterly Requirements

The S-1 includes financial results from a company’s last eight quarters (for a broader discussion of the S-1, please read our article Drafting an S-1). These quarterly results are marked as unaudited in the S-1; however, a company’s auditors still conduct a review of the quarterly information. The intensity of this review depends on how much testing the auditors have previously conducted on quarterly information and their level of confidence in the company’s reporting processes and accounting information system. If your company’s quarterly information is well organized and your yearly financial statements have already been audited, then this should be a straightforward process. However, if you are not organized, quarterly reviews can quickly increase in complexity.

The most recent of the eight quarters included in the S-1 must not be “stale.” Quarterly financial data is considered stale if it no longer provides an accurate picture of a company’s financial position—usually around 135 days after the end of the quarter presented.2 The following table demonstrates the approximate date when quarterly results become stale:

For example, if a company files its S-1 on or after 8/14/20X7, then the quarter ending on 3/31/20X7 will have gone stale, meaning that the company will need to include results for the quarter ending on 6/30/20X7.


Quarterly results can be presented in the following format:

After presenting the quarterly results, companies generally analyze the performance of each line item over the eight-quarter period. The analysis focuses on identifying and explaining trends with an emphasis on the causes of the trends. Our article Flux Analysis provides guidance on communicating fluctuations in financial reporting.

10-Q Reporting

Once a company has gone public, it is required to file a 10-Q for the first three quarters of the fiscal year. Results for the last quarter are included in the Form 10-K. While a 10-Q has fewer reporting requirements than a 10-K, preparing quarterly financial results and disclosures can still be time-consuming and complex. Additionally, public companies have a small window of time during which to file a 10-Q.

As shown in the table below, a 10-Q is due either 40 days or 45 days after the last day of the quarter, depending on the company’s filer status.

Because of the quick turnaround needed to file a 10-Q and the requirements for quarterly results in the S-1, pre-IPO companies should ideally begin preparing for quarterly reporting at least 18 months before going public.

Pre-IPO Best Practices: Operate Like a Public Company

Because private companies are not generally required to prepare the robust quarterly financial statements required for public companies, they usually lack the processes and controls necessary to provide them. Many pre-IPO companies fail to prepare for the quarterly reporting requirements imposed on public companies, which can dramatically increase the cost of preparing the S-1 and can cause complications once company shares are traded in public markets. The key to preparing for quarterly reporting is for your company to act like a public company long before an IPO. An extended “rehearsal” as a public company will help you identify and correct problems that arise before the stakes are high.

Your quarterly close is key to providing accurate information in a timely manner. Executives and other company personnel need this information to make informed decisions, and regulators require you to provide the information to investors within a 40- or 45-day window. An efficient quarterly close will also allow finance personnel to spend more time on value-adding activities. The following best practices will help ensure that your company is prepared for the demands of quarterly reporting.

Commit to Hard Quarterly Closes

Before going public, it may be tempting to leave the books open at the end of the quarter in case adjustments need to be made; however, this is not an option once your company is public. Correcting errors from previous quarters can decrease investor confidence in your financial reporting and drive down your stock price. Although a hard close will make the quarterly close process more complicated and time-consuming, practicing a hard close will increase your experience and decrease the likelihood of more costly errors once your company becomes public.

Receive Quarterly Reviews from Your Auditor

Your auditors will need to review the quarterly information in your S-1 before you file it. If your auditor has not reviewed any of the information before you draft your S-1, it will be a time-consuming and expensive process. To avoid this issue, your auditor should begin conducting quarterly reviews at least one year before your IPO. Earlier reviews will decrease the difficulty of the final S-1 review, help your team identify issues when the stakes are lower, and help you know what to expect from quarterly reviews once your company becomes public.

Create and Refine Close Processes

Efficient processes will help decrease the time it takes to close the books each month and quarter. You should focus on the following actions to improve the close process:

  • Thoroughly document procedures
  • Standardize and simplify activities
  • Sequence activities appropriately
  • Identify bottlenecks
  • Automate repetitive tasks
  • Eliminate duplicate efforts
  • Create reasonable deadlines
  • Promote accountability

Improving the efficiency of your quarter-close process will allow finance personnel to spend more time on other quarterly reporting complexities that may arise. While it may take more time during a quarter close to find areas of improvement, continuous improvement will be worth the effort in the long run.

Invest in a Close-management Software

Quarterly reporting can be complex, but a close-management software can assist you in the process. A close-management software will help keep team members accountable for their work, ensure that all necessary activities are completed on time, assist you in identifying areas that need improvement, and provide clear documentation of all quarter-close processes. A variety of close-management software programs, such as Floqast, Blackline, and Vena, can help your company increase the efficiency of your quarterly close.

Recruit and Train Finance Personnel

Although efficient controls and a close-management software can assist your company in quarterly reporting, your finance team will be putting in the necessary hours to accomplish the task. While your finance team members will give much of their attention to other IPO preparation, they must also keep the financial reporting processes of the company operating effectively. Skilled and experienced finance and accounting personnel will find ways to improve processes and increase the efficiency of quarterly reporting.

Improve Forecasting Ability

Because a company’s ability to meet forecasts and analyst estimates can have a significant impact on stock price, your company’s financial planning team should practice its quarterly forecasting abilities before going public. Starting early in the process will help the team identify errors and necessary improvements to the process before mistakes become costlier in public markets. The team should evaluate the quality of past forecasts and improve future forecasts by investigating factors that were not anticipated. The team will need to communicate with departments that missed their budget to evaluate the cause and stress the importance of accurate forecasting.

Practice Earnings Calls

The quarterly earnings call is an important opportunity to communicate directly with investors about your company’s performance and strategy. An added benefit of an efficient quarterly close is that it will give executives more time to identify key information for investors, consider questions that investors might bring up, and do a dry run of the earnings call. Earnings calls can have a dramatic impact on share price. For example, Facebook’s share price dropped almost 24 percent during its Q2 2018 earnings call. Clearly, an ineffective earnings call can cause investor panic and decrease your company’s share price. On the other hand, an effective earnings call can build investor confidence in company management, create reasonable expectations, and address investors’ concerns. In order to ensure that your earnings calls are effective, your company should practice earnings calls with key early investors for at least four quarters before going public. Practicing earnings calls in a lower-stakes scenario will help executives identify areas of improvement and allow them to receive feedback from investors.

Quarterization Complications

Ideally, your company will already have quarterly results that have been reviewed by your auditors, but many companies will not have the clean quarterly results needed for the eight quarters reported on the S-1. If clean quarterly results do not exist, you will have to prepare quarterly financial statements in a process known as quarterization.


Quarterization is the process of using audited annual financial statements to create historical quarterly financial statements. Quarterization ensures that all transactions, including year-end adjustments and accruals, are recorded in the proper quarter. While quarterization can vary between companies, it includes the following basic procedures:

  • Cut-off Testing. Cut-off testing is used to determine if a transaction has been recorded in the correct period. Because the purpose of quarterization is to divide annual financial results into quarters, cut-off testing is a critical component of the process. For example, revenue could be tested by comparing sample invoices near the end of Q3 with the associated shipping documents to ensure that revenue was not recorded in Q3 for products that were not shipped until Q4.
  • Accrual Estimate Consistency. Because accruals require a degree of estimation and a small change in inputs can lead to a large change in the accrual estimate, it is important that estimation methods are consistent across quarters. The quarterization process will include a review of the finance policies related to accounting estimates and will ensure that those policies were applied consistently across quarters. Completing this process well after the quarter has ended can be advantageous because finance personnel will have the power of hindsight. Additionally, if true-up journal entries are made quarter-end or year-end, you should ensure that the true-ups are applied to the appropriate period.
  • Flux Analysis. An overall flux analysis should be performed to identify any areas that may require further investigation. If an account line-item has a higher-than-expected fluctuation, then you should determine the cause of the difference and, based on that investigation, determine whether any adjustments need to be made. Please see our article Flux Analysis for more information.


Because quarterization can cover up to eight quarters in the past, it may be challenging to access and analyze past data, and employees that were involved in the transactions may no longer be with the company. Overall, quarterization can be costly and time-consuming, taking time and resources away from value-adding activities.

Potential Move to Semi-Annual Reporting

Public companies in the U.S. have been required to report quarterly results since the passage of the Securities Exchange Act of 1934. A wide range of opinions exist on how frequently companies should report earnings; however, a move to semi-annual reporting has recently gained traction. In fact, on August 17, 2018, President Trump announced that he was asking the SEC to study the possibility of moving from quarterly to semi-annual reporting.

In speaking with some of the world’s top business leaders I asked what it is that would make business (jobs) even better in the U.S. “Stop quarterly reporting & go to a six month system,” said one. That would allow greater flexibility & save money. I have asked the SEC to study!
— Donald J. Trump (@realDonaldTrump) August 17, 2018

President Trump and others claim that semi-annual reporting will allow executives to focus on long-term growth, while many investors argue that semi-annual reporting will deprive investors of important information and increase the cost of capital.

Currently, it is unclear whether the SEC will make any changes to interim reporting; however, the general guidance offered in this article can be applied to any frequency of interim reporting.


Because the SEC requires companies to report quarterly results in the S-1 and file 10-Qs after becoming public, quarterly reporting should be a high priority for pre-IPO companies. While the challenges of quarterly reporting can be daunting, your company can take steps to be prepared for the change, such as receiving quarterly reviews from your auditors, improving quarterly close processes, and practicing earnings calls. If your company has not kept quarterly records, you will have to divide your annual financial records into quarters before filing an S-1. Because this process, known as quarterization, can be costly and time-consuming, it is important to begin implementing quarterly processes as you work towards an IPO.

Resources Consulted

  • FASB Accounting Standards Codification 270-10
  1. According to a Connor Group study.
  2. SEC Financial Reporting Model Topic 1, Section 1200.4