Q1
The decision by the E-centives to raise capital and list on the Swiss Exchanges New Market was correlated to the following factors. First, the E-centives was attracted by the future plans of the Swiss Exchanges New Market to expand its business territories and start its operations in United Kingdom, Switzerland and Germany. Secondly, the E-centives realize that it was easy for it to raise capital and make profits from its partnering with the Swiss Exchange New Market because its listing requirements were clear and easy to meet. Thirdly, the E-centives market’s regulatory environment and its operation language were similar to those of Swiss Exchanges New Market; which created a friendly environment for business.
Q2
The E-centives opted not to raise public equity in the US because there was an ease of raisng higher capital due to the simple listing requirements formulated by Swiss Exchange’s New Market and which are friendly to upcoming companies. The Swiss Exchange also has a higher market reputation than that of the US, thus its operations would be more efficient in Switzerland than in the US. Another reason why the E-centives decided not raise public equity in the US is because the Swiss Exchange is known to provide a high quality and a friendly market. The disadvantages out of this decision by E-centives not to raise public equity in the US include the inability of the E-centives to get individual investors from the US and the lack of following by US investment analysts.
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Q3
By using the US GAAP, the E-centives will be able to enjoy high credible and well known accounting standards from the US qualified auditors (Majaski, 2019). The E-centives will also be able to fetch more returns for its services because of the well-established and regulated US market and which attracts more international investors. The use of US GAAP will also eliminate any suspicions of the company’s operations to its investors because the US GAAP ensures that quality and standards are adhered to. One disadvantage of using the US GAAP is that its formulation and application only favors big and established companies but does not favor small and upcoming companies like the E-centives (Majaski, 2019). Another disadvantage of using US GAAP is that it’s not flexible and does not allow for bargaining.
Q4
It is necessary for the Swiss Exchange to incorporate the E-centives in preparing its financial statements using the Swiss accounting standards. The E-centives is mainly involved with online marketing by linking customers or investors to different companies which offer different type of services. There is need of transparency in any company’s operations to its customers; including its accounting statements and any other operations within the company. Therefore, the Swiss Exchange will rely on E-centives; which links the Swiss Exchange to its customers, to provide its financial statements to the customers.
Q5
The listing requirements for a new market that are accepted by the Swiss Exchange are; accounting standards which may either be IFRS or US-GAAP, a clear track record which is between 2 to 3 years, a free float, a minimum market cap free float and an equity capital. All these listings requirements are subdivided into four standard categories; main standard, domestic standard, standard for investment companies and standard for real-estate companies. The financial reporting requirements accepted by the Swiss Exchange are; correct tax year and accounting standards which are in line with Swiss GAAP FER, IFRS, or US GAAP. E-centives clearly fits the profile of a typical new market company because it’s still new in the market and is in the process of stabilizing itself through venturing into new market zones.
References
Majaski, C. (2019). IFRS vs. U.S. GAAP: What's the Difference? (Online). Retrieved from https://www.investopedia.com/ask/answers/09/ifrs-gaap.asp
