Getting the Numbers Right: Accounting Essentials for US Companies Listing in London

London has long been a leading destination for companies, particularly growth companies, looking to go public. In this five-part series, we explore why US-incorporated and US-operated private companies would consider an initial public offering (“IPO”) on the London markets and the key considerations they need to evaluate when planning and preparing for such a listing.  

Co-authored by Mitesh Patelia, Partner, Corporate Finance at Crowe U.K. LLP

Embarking on an IPO in the UK requires meticulous preparation, especially when it comes to financial disclosure. Investors and regulators alike expect companies to present a robust and transparent financial narrative that reflects both past performance and future potential. 

As a result, the financial preparations constitute one of the key workstreams for a company considering a London listing, and one that will likely take a significant proportion of management time. The financial workstream will cover financial reporting, audit standards and the preparation of working capital forecasts, but there will also be a need for management to familiarise itself with governance requirements, internal controls and the ongoing disclosures that will need to be made following admission of the company’s shares to trading. There are additional considerations for US companies considering a London listing as, for example, they may also have to prepare a reconciliation of their existing financial statements with, or undertake a conversion of existing statements into, International Financial Reporting Standards (“IFRS”) if the holding company is a UK or EEA-domiciled issuer. This process can add time, costs and complexity to the listing process, which might not be present for US-incorporated companies listing directly on the London markets.

“Investors and regulators alike expect companies to present a robust and transparent financial narrative that reflects both past performance and future potential.”

Investors and regulators alike expect companies to present a robust and transparent financial narrative that reflects both past performance and future potential.

In this article we will discuss some of the key financial workstreams that will need to be undertaken by a US company pursuing a London listing.

What financial information will the company be required to publish?

The company is required to prepare Historical Financial Information (“HFI”), a core requirement for inclusion in the company’s listing document (the prospectus or admission document, depending on the market the company is seeking admission to and any fundraise being undertaken) as this provides insight into the company’s financial track record. Typically, companies must present three years of audited financial statements. However, if the company has not been incorporated for three years, audited accounts covering the period from the date of incorporation to the end of the financial year immediately preceding the listing date must be included. 

Interim financial information may be needed if the listing document is dated more than nine months after the most recent audited period. This information is generally unaudited. 

Where a material transaction has recently been undertaken, or is completing simultaneously with the listing, and this results in a “significant gross change” (typically a 25% shift in assets, revenues or earnings), pro forma financial information is required which simulates the company’s position as if the transaction had occurred earlier and must be reported on by a reporting accountant, who will confirm that it is properly compiled, arithmetically correct and that the basis of preparation is consistent with the company’s accounting policies. 

What amendments need to be made to the company’s US GAAP-compliant historical information? 

For companies listing on the UK market, the rules are generally quite flexible: UK or EEA-domiciled issuers must adopt IFRS, while non-EEA issuers may use IFRS, Generally Accepted Accounting Principles (United States) (“US GAAP”) or certain other internationally accepted accounting standards.

If a US company decides to incorporate UK or EEA-domiciled issuer but has financials for previous periods of the operating group prepared under US GAAP, a full conversion to IFRS is necessary for the financial information to be included in the listing document. In addition, with effect from admission of the shares of the company to trading on the LSE the company will be required to report its financial information in accordance with IFRS.

There are various differences between the reporting requirements under US GAAP and those under IFRS, including: 

• Financial statement presentation - IFRS mandates inclusion of a Statement of Changes in Equity (“SOCE”), which is optional under US GAAP. Additionally, IFRS requires classification of the income statement by either nature or function, whereas US GAAP does not prescribe a specific format.
• Leases - Accounting treatment for leases also differs substantially. IFRS 16 prescribes a single model for lease accounting, requiring assets leased for periods exceeding twelve months to be capitalised on the balance sheet, except for those of low value. In contrast, under US GAAP’s ASC 842, leases may be classified as either operating or finance leases.
• Development costs - Under US GAAP, development costs are expensed as incurred. In contrast, IFRS allows certain qualifying development costs to be capitalised and subsequently amortised over the estimated useful life of the related asset.

For companies pursuing a dual listing in both the US and the UK, additional reconciliation requirements arise. Dual listing can unlock broader access to capital and global exposure, but it also requires increased financial transparency across jurisdictions.

What is the role of the reporting accountant and the auditors in the IPO process?

The reporting accountant plays a central role in the financial workstream of an IPO. Unlike the company’s statutory auditor, whose role is to provide an independent opinion on the company’s annual financial statements, the reporting accountant is specifically engaged for the purposes of the listing. Their responsibilities include reviewing and reporting on the company’s HFI to be included in the listing document, ensuring it is prepared in accordance with the relevant standards. In addition, they provide assurance over forecasts and working capital statements, review the company’s financial procedures and controls, and deliver comfort letters and reports that support the due diligence undertaken by the company’s sponsor or nominated adviser (“Nomad”). Through these activities, the reporting accountant helps to validate the company’s readiness for admission to the London market.

Alongside this, it is important to note the independence requirements that apply to the company’s statutory auditor. Independence is governed by the FRC’s Ethical Standard (revised in 2024), the Companies Act and the FCA Handbook. Auditors are prohibited from providing certain non-audit services to their audit clients, particularly Public Interest Entities (“PIEs”), including internal audit, contingent fees, material valuations and legal or tax advice. PIEs are also subject to a cap on non-audit fees, set at 70% of the average audit fee over the previous three years. Rotation rules also apply to ensure independence is preserved, with the lead audit partner rotating every five years and the firm required to change no later than every twenty years.

How do the US and UK audit frameworks differ?

Audit requirements present another critical consideration for a company considering a London listing, with notable distinctions between UK and US audit frameworks. The UK adopts a principles-based approach, while the US framework, governed by the Public Company Accounting Oversight Board (“PCAOB”) and established under the Sarbanes-Oxley Act (“SOX”), is more rules-based and compliance-heavy. UK auditing standards are set by the Financial Reporting Council (“FRC”) and derive from International Standards on Auditing (“ISAs”), allowing auditors to exercise professional judgment. In many instances the PCAOB standard is, therefore, considered more restrictive in nature.

Key differences in standards and the regulatory framework can be considered with reference to the following key categories:

• Audit Reporting - Under PCAOB rules, auditors must disclose critical audit matters, being areas involving complex judgement. These are tailored to each engagement and aim to enhance transparency. Conversely, ISA (UK) audit reports include key audit matters which are similar but more principles-based, allowing greater flexibility in presentation.
• Internal controls - SOX requires an Internal Control over Financial Reporting (“ICFR”) opinion to be issued by auditors in the US, providing an evidence-based opinion on the effectiveness of internal controls. Under UK standards, there is no such requirement for a separate opinion. Instead, auditors may use professional judgement to evaluate controls as necessary, typically considering controls in respect of material disclosures or judgemental areas of the financial statements.
• Going concern - Under UK standards, auditors will consider periods beyond 12 months encompassing broader viability considerations whereas PCAOB standards tend to focus on a period of up to 12 months only. 
• Fraud risk - UK standards (specifically ISA 240) emphasise a holistic approach to be adopted by auditors, engaging with governance bodies and to continuously consider indicators of fraud risk throughout the audit. The PCAOB (AS 2401) adopts a more prescriptive stance, requiring specific procedures like journal entry testing to address management override risks.
• Documentation and retention - PCAOB requires audit workpapers to be retained for seven years, while the Companies Act 2006 (the “Companies Act”) mandates a six-year retention period.

Ethics and independence - Other key differences include restrictions on the provision of non-audit services. Once more, a principles-based approach is adopted under UK audit standards, in accordance with the FRC’s Ethical Standard. However, under PCAOB and SEC Rules, non-audit services are strictly prohibited for audit clients. Auditor tenure must be disclosed in the audit report under US PCAOB transparency rules. There is no such requirement under UK audit standards and regulation.

What other financial information is the company required to prepare? 

In addition to the HFI and pro forma financial information, the company is also required to prepare a working capital model (“WCM”) and a financial position and prospects procedures memorandum (“FPPP Memorandum”) and a long form report. These are all private documents which are not included in the listing document but are nevertheless crucial in aiding the sponsor or Nomad and regulatory authorities in assessing the suitability of the company for listing in London. 

• Long form report – this is a detailed due diligence report prepared by the reporting accountant which provides a comprehensive review of the company’s financial and business affairs, covering areas such as historical trading, accounting policies, financial controls, tax and treasury management, and key judgements applied by management.
  
  
• Working capital – the directors must declare in the listing document whether the company has sufficient working capital to cover its needs for, typically, a 12-month period post-admission (the “Working Capital Statement”). This declaration serves as a ‘clean’ or ‘unqualified’ assessment that the business can meet its short-term financial obligations, or a ‘qualified’ statement explaining why it cannot meet the obligations and outlining a plan to resolve the shortfall. A WCM model, which sets out the trading, balance sheet and cash flow forecasts of the company, is required to be prepared by the directors and reviewed by the reporting accountant and Sponsor or Nomad. 
  
  To mitigate the risk of the working capital statement being challenged, directors are required to assess and prepare a “reasonable worst-case scenario.” This scenario should reflect their judgment and may include controllable mitigating actions. If the assessment indicates that available funding is insufficient to cover this scenario, or if a breach of loan covenants is anticipated, a qualified Working Capital Statement is required.
  
  The role of the reporting accountant is to review the preparation of the WCM and provide an independent private opinion to the company and the Sponsor or Nomad as to reasonableness of the Working Capital Statement.
  
  
• FPPP Memorandum – this is a comprehensive internal document that outlines the procedures a company has in place to monitor and assess its financial health and future prospects. Its primary purpose is to demonstrate that the company’s directors have implemented robust systems that allow them to evaluate and forecast the financial performance and position of the company on an ongoing basis, to respond to risks and uncertainties through effective governance and control mechanisms and to comply with regulatory obligations. The reporting accountant will conduct a detailed review of the FPPP Memorandum and the underlying procedures and provide assurance to the Sponsor or Nomad and the company that the procedures are sufficient for the directors to make informed judgments about the company’s financial position and prospects.

Key differences between the FCA and the FRC, and their roles as part of the IPO process

The Financial Conduct Authority (“FCA”) is the UK’s primary independent regulator for financial services firms and markets. While it does not set audit standards, it supports the FRC in overseeing audit conduct and governance, including monitoring audit committee effectiveness and enforcing sanctions for misconduct or governance failings.

The FCA publishes a handbook covering governance, risk management, and audit committee responsibilities (the “FCA Handbook”). As part of its supervisory role, it may conduct site visits and interview senior leadership to assess sector risks, confirm compliance and explore broader issues such as customer care and the treatment of vulnerable customers; an area of increasing regulatory focus.

As primary regulator for UK listings, the FCA is directly involved in the IPO process for Main Market companies, reviewing and approving listing documents and ensuring candidates meet eligibility criteria under the UK Listing Rules. By contrast, companies seeking admission to AIM are not reviewed by the FCA directly; instead, their admission documents are vetted and approved by a Nomad. 

“As primary regulator for UK listings, the FCA is directly involved in the IPO process for Main Market companies … The FRC is the UK’s regulator for accounting, auditing, and corporate governance.”

The FRC is the UK’s regulator for accounting, auditing, and corporate governance. It sets UK auditing standards, monitors audit quality, and enforces compliance through inspections and statutory powers to investigate and discipline auditors. It also reviews financial statements for compliance with UK standards and the Companies Act.

Together, the FCA and FRC provide a dual layer of oversight that promotes transparency, enforces high standards and safeguards the independence of audit practices across UK markets.

Following admission, what corporate governance rules will be applicable?

For companies listing on the LSE’s Main Market, the applicable corporate governance rules are set out in the UK Corporate Governance Code (“UKCGC”). The UKCGC applies to all companies listed in the commercial companies category or the closed-ended investment funds category, regardless of where they are incorporated, so will apply to US companies considering a primary listing. 

The UKCGC was revised in 2024, with the updated rules applying to financial years beginning on or after 1 January 2025, and the updated code strengthens expectations around transparency, board accountability, and oversight of internal controls. While not legally prescriptive, the UKCGC acts as a guiding framework for best practice, granting companies flexibility to depart from specific provisions so long as they offer clear and reasoned explanations for such deviations.

Companies listed on AIM generally follow the Quoted Companies Alliance’s Corporate Governance Code (“QCA Code”) rather than the UKCGC. The QCA Code is tailored to suit the needs and scale of small and mid-sized enterprises, taking into account their size and stage of development. 

“…both the UKCGC and the QCA Code promote core principles of governance, board stewardship and investor engagement which will apply to a US company listing on the London”

Regardless of the listing segment the company is applying to enter, both the UKCGC and the QCA Code promote core principles of governance, board stewardship and investor engagement which will apply to a US company listing on the London markets. The board should therefore ensure that they are familiar with the requirements of the code that will apply to the company following listing.

How do corporate governance rules apply to the finance function of the company?

Companies are expected to establish boards comprising a balance of executive and non-executive directors, with a clear delineation between the roles of Chair and Chief Executive Officer. At least two independent non-executive directors must also be appointed to support objective oversight. One of the key roles on the board will be that of the finance director, who will typically be responsible for overseeing all financial aspects of the company, providing strategic financial guidance, managing budgets, monitoring performance and ensuring financial stability. To the extent that the company does not have a dedicated finance director, or if the existing finance director is not sufficiently familiar with the requirements of IFRS or the London markets, a new appointment may need to be considered ahead of the listing. We will cover the requirements for the constitution of the board in more detail in article 4.

To ensure proper functioning, the QCA Code also recommends that companies establish separate Audit, Remuneration, and Nomination Committees. Although the creation of a Risk Committee is not mandated by the QCA Code, many companies elect to form one in alignment with market best practice sometimes combined with the Audit Committee.

The committees are considered vital components of effective governance in relation to finance controls. The Audit Committee is responsible for overseeing the company's financial reporting, internal controls and risk management processes. The Remuneration Committee determines the compensation of executive directors and ensures it is aligned with company performance and long-term objectives. The Nomination Committee oversees the process for appointing new directors and ensuring the board has the right skills, experience and independence, whilst the Risk Committee manages and oversees the company's risk profile.

What disclosure obligations apply to executive compensation and risk management with effect from admission?

The UKCGC provides that executive remuneration should be aligned to the strategy and long-term success of the company and should be transparent. This includes clearly disclosing base salary, bonuses, other incentive plans and pension contributions as well as a justification for performance-based rewards. The Remuneration Committee is generally responsible for setting remuneration for executive directors and senior management, and the Committee includes disclosures on the relevant points in its report in the company’s annual report and accounts. Companies are also encouraged to engage with shareholders when setting remuneration policies and this engagement is commonly undertaken at the company’s annual general meeting. 

“ Executive remuneration should be aligned to the strategy and long-term success of the company and should be transparent. This includes clearly disclosing base salary, bonuses, other incentive plans and pension contributions as well as a justification for performance-based rewards”

From a risk management perspective, disclosure obligations are primarily addressed in Section 4: Audit, Risk and Internal Control of the UKCGC. The Board is now expected to make a formal declaration of the effectiveness of material internal risk controls for inclusion in the annual report, which sit to be approved by the Board, cover the design and effectiveness of the controls following a structured assessment. The UKCGC also requires companies to disclose principal risk and uncertainties facing the business. This would include their potential impact, mitigation strategies and any changes from the previous year. 

What internal controls and risk management frameworks would a US company need to implement?

For US companies considering an IPO on the LSE, particularly AIM, adapting internal control and risk management frameworks is a critical part of the listing journey. While AIM offers a more flexible regulatory environment than the Main Market, investors still expect demonstrable discipline in financial controls, governance, and risk oversight, especially from overseas issuers.

What internal controls audit requirements will be applicable?

Unlike the US, where SOX Section 404 imposes rigorous internal control certification requirements for listed companies, AIM companies are not subject to SOX. There is no formal internal controls audit requirement under the AIM Rules for Companies (“AIM Rules”). However, companies must ensure they have appropriate systems and controls in place to meet the expectations of a public company and to satisfy their Sponsor (for Main Market listings) or Nomad (for AIM listings), who is responsible for assessing their appropriateness for listing.

On the Main Market, companies are expected to comply or explain non-compliance with the UKCGC, which places a stronger emphasis on formal internal control reviews, risk management procedures, and board accountability. 

What risk management frameworks will be required?

Boards of London-listed companies, particularly those with US origins, are expected to take a proactive role in defining and overseeing risk management frameworks. While AIM Rules are more principles-based, investors and Nomads alike will expect clearly documented processes around:

• Financial reporting and approval procedures;
• Risk registers and internal audit functions;
• Cybersecurity governance; and
• ESG risk monitoring and disclosure.

Establishing a formal risk committee is not required on AIM, but many overseas companies implement one to demonstrate their commitment to governance best practices. For Main Market listings, a formal risk and audit committee is standard and expected.

US companies listing in London, especially those accustomed to SOX, should view AIM’s lighter regulatory burden as an opportunity rather than a relaxation. In practice, strong internal controls not only support accurate reporting and regulatory compliance but also build investor confidence and can differentiate companies from peers post-admission. Many companies find that adopting a scaled-down but structured internal controls framework, supported by an internal audit function or third-party risk advisor, provides the necessary credibility during investor due diligence and beyond.

What are the expectations from an ongoing reporting and market communication perspective?

Once admitted to trading on the LSE, US companies must be prepared to meet ongoing reporting and disclosure obligations that are central to maintaining investor confidence and regulatory compliance. While the demands differ between the Main Market and AIM, effective communication with the market is essential on both venues. We will cover the communication requirements in more detail in article 5 but from a financial perspective, companies listed on the London markets are required to publish audited financial statements annually as well as unaudited half-yearly reports. Noting the quarterly reporting requirements of the US markets, some companies with a US investor base voluntarily provide more regular updates than the LSE rules require in order to meet shareholder expectations. Disclosures are also required if there are significant changes in financial position, amongst other events. 

What happens next?

US companies considering a listing on the LSE, whether AIM or the Main Market, must prepare thoroughly to meet UK expectations across financial reporting, audit standards, governance, internal controls, and ongoing disclosure. 

Early conversion to IFRS, clear reconciliation of accounting standards, and robust historical and pro forma financials are fundamental to a smooth IPO process and should be key considerations for any US company considering a London listing. Understanding the UK’s principles-based regulatory environment, particularly in audit and corporate governance, will help the company to establish credibility and investor trust at an early stage. Adapting internal control frameworks and embracing effective risk oversight are equally important, even on AIM where flexibility exists. 

Post-admission, transparent communication and timely reporting are vital to sustaining market confidence and we will cover more on this in article 5. US companies that approach a London listing with clarity, structure and strong governance will not only meet regulatory expectations but also differentiate themselves in a competitive capital markets landscape.

For the first article in this series, ‘Crossing the Pond: Why US Companies Should Consider London Listings’, please see here.

For the second article in this series, ‘Guiding the Deal – The Role of a Corporate Finance Adviser’, please see here.