Which item relates to underwriter compensation in the IPO registration?

• A. Balance Sheet
• B. Underwriter's commissions or discounts
• C. Promotion expenses
• D. Expected use of net proceeds

Answer: (B)

The item that directly reflects what underwriters are paid is the underwriter's commissions or discounts. In an IPO, the issuer pays the underwriters a gross spread for their services in marketing and selling the shares, which is shown as commissions or discounts in the registration materials. This amount is part of the offering costs and is used to compute net proceeds to the issuer (net proceeds = gross proceeds minus underwriting discounts and selling concessions).

Balance sheet items show the company’s financial position, not issuer compensation for the offering. Promotion expenses relate to marketing costs but aren’t the specific compensation paid to underwriters. The expected use of net proceeds describes how the funds will be allocated, not how the underwriters are compensated.