The Securities and Exchange Commission (SEC) is moving full steam ahead on plans to finalize a controversial rule that would exempt more than 500 additional companies from the auditor attestation of financial controls. This attestation is required for most public companies under Section 404(b) of the Sarbanes-Oxley Act of 2002. Several large investor groups oppose expanding the exemption.
Audit season is right around the corner for calendar-year entities. Here’s what your auditor is doing behind the scenes to prepare — and how you can help facilitate the audit planning process.
The new requirement for auditors to report critical audit matters (CAMs) is the most significant change to the auditor’s report in more than 70 years. To support the implementation of the new requirement, the Public Company Accounting Oversight Board (PCAOB) has conducted extensive outreach to audit firms and other stakeholders as well as issued guidance and other resource tools. In 2019, we selected 12 audits of large accelerated filers with fiscal years ending on or after June 30, 2019, to specifically review how auditors of these filers implemented the CAM requirements. This Spotlight focuses on observations from our inspections of these new requirements and from our outreach and data analysis activities.
Debt-strapped private companies have been exploring ways to avoid having to use the lease accounting rules for new contracts. Why? Some fear that implementing the guidance would cause them to violate loan covenant agreements with lenders that limit the amount of liabilities they’re allowed to carry. But there are ways to safeguard against this potential pitfall.
Change-in-control events — like merger and acquisition (M&A) transactions — don’t happen every day. If you’re currently in the market to merge with or buy a business, you might not be aware of updated financial reporting guidance that took effect in November 2014. The changes provide greater flexibility to post-M&A accounting
Most businesses report financial performance using U.S. Generally Accepted Accounting Principles (GAAP). But the income-tax-basis format can save time and money for some private companies. Here’s information to help you choose the financial reporting framework that will work for your situation.
Business assets are generally reported at the lower of cost or market value. Under this accounting principle, certain assets are reported at fair value, such as asset retirement obligations and derivatives.
Fair value also comes into play in M&A transactions. That is, if one company acquires another, the buyer must allocate the purchase price of the target company to its assets and liabilities. This allocation requires the valuation of identifiable intangible assets that weren’t on the target company’s balance sheet, such as brands, patents, customer lists and goodwill.
The Securities and Exchange Commission (SEC) has issued Proposed Rulemaking Release No. 33-10668, Modernization of Regulation S-K Items 101, 103, and 105, which would amend the following Regulation S-K disclosure items: (1) Item 101, Description of Business, (2) Item 103, Legal Proceedings, and (3) Item 105, Risk Factors, to improve the information content of such items and simplify registrant compliance. The proposed amendments, which are part of the SEC’s broader Disclosure Effectiveness Initiative, reflect changes that have occurred in the capital markets and in the availability of information.
It’s important for franchisors to periodically audit individual franchisees. These routine “check-ups” are especially valuable in a store’s early years of operations or if performance starts to deteriorate. They can be used to detect symptoms of unhealthy performance and treat problems before they spiral out of control.
Focus on royalty payments
In July, the Public Company Financial reporting generally focuses on the results of continuing operations. But sometimes businesses sell (or retire) a product line, asset group or another component. In certain situations, such a disposal should be reported as a discontinued operation under U.S. Generally Accepted Accounting Principles (GAAP). Starting in 2015, the rules changed, limiting the scope of transactions that must comply with the complex rules for discontinued operations.
