Tag Archives: Business

Tips for Your Form 10-K Review

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Welcome to the last half of March! For all of us with 90 day deadlines for our Form 10-K, it is getting close to time to file!

As you prepare for the final reviews of your Form 10-K we thought we would share a list of “Hot-Button Topics” to make sure they are addressed appropriately in your filing.

We developed this list while presenting on-site workshops with CPA firms, and think it may be valuable for all of us who are preparers too.

Here are the topics:

1. SAB 74 Disclosures (see Topic 11M in the codification at: http://www.sec.gov/interps/account/sabcode.htm) – make sure your SAB 74 Recent Accounting Pronouncement disclosure for new standards includes all four points from the SAB and addresses all material new standards for your company, including revenue recognition.

2. Cybersecurity – Most likely almost every company should have a risk factor for cybersecurity, but perhaps more disclosure is appropriate for your company. Be sure to check out Corp Fin Disclosure Topic 2 (at http://www.sec.gov/divisions/corpfin/guidance/cfguidance-topic2.htm).

3. Take time now to be sure that your webpage and such other public disclosures are consistent with 10-K, 10-Q etc. (E.g. segment discussions)

4. Segments are always a big deal. Check out the speech by OCA Deputy Chief Accountant Dan Murdock (at: http://www.sec.gov/News/Speech/Detail/Speech/1370543611034#.VQn1sGd0yUk). And, don’t’ forget the PACCAR enforcement action related in part related to segment disclosure (http://www.sec.gov/litigation/litreleases/2013/lr22711.htm).

5. Item 1 – S-K Item 101(a) – Big changes in “mode of conducting business”, even significant strategic changes, should be discussed.

6. Item 1 – S-K Item 101(c) – The description of the business must be by segment.

7. Review Item 1 discussion of distributions channels and methods etc. for consistency with Rev Rec Accounting.

8. Item 1A – For risk factors assure major risks from a manager’s perspective are included.

9. Item 2 – Relate to impairment risk and possible capex in future as applicable.

10. Item 3 – Not the same as the footnotes to f/S. More factual details, plaintiff suits etc.

11. MD&A – Quantification of changes is a major theme in SEC Comment Letters.

12. MD&A – Known trends – things that could make past not predictive of the future – No surprise stock drops!!

Hope all this helps, and if you have ideas for more topics, let us know!

XBRL Taxonomy Developments – Usually two or perhaps three for a while?

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The SEC has formally approved the use of the 2015 XBRL Taxonomy. While this has not yet been generally announced in a press release it is highlighted with a “New” label on the SEC’s XBRL page at:

 xbrl.sec.gov

Generally, when a new taxonomy is approved the SEC discontinues use of the oldest taxonomy. They usually allow the use of two taxonomies, the newest year and the next newest year. (The FASB publishes a new taxonomy every year and submits it to the SEC who after review approves it for use by companies).

Now that the 2015 Taxonomy is approved for use the next earliest year, 2014 is also allowed, and the year before that, 2013, will be discontinued soon. Currently, as we approach quarter end, the SEC is allowing the use of all three of these taxonomies, 2015, 2014 and 2013. Likely the 2013 taxonomy will be discontinued soon, so if you are still using the 2013 Taxonomy it will be time to update soon. You should monitor the approved taxonomies at:

www.sec.gov/info/edgar/edgartaxonomies.shtml

As mentioned, the FASB is now responsible for maintaining the US GAAP Taxonomy. At the FASB’s webpage you can find out about their project to simplify the taxonomy. It would be hard to find anyone who would not support that project!

www.fasb.org/cs/ContentServer?c=Page&pagename=FASB%2FPage%2FSectionPage&cid=1176164001455

And, just in case you have not heard about them yet, you can also find several implementation guides for specific tagging issues at the FASB’s webpage also. Check out:

www.fasb.org/cs/ContentServer?c=Page&pagename=FASB%2FPage%2FSectionPage&cid=1176160665046

Hope all this helps, and as usual your thoughts and comments are welcome!

 

 

Cybersecurity – What the what??

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After all the chaos and drama surrounding the most recent cybersecurity hack at Sony, the focus on this area has become even more intense.

Clearly, the first priority is doing whatever is possible to manage cybersecurity risk. Action steps must depend on each company’s specific situation, and there is no one-size-fits-all solution. To help in this regard PLI is presenting a One Hour Briefing on February 18, 2015 titled “ Cyber Security After Sony: Practice Points and Risk Mitigation Strategies”. You can learn more about the program at:

www.pli.edu/Content/Seminar/Cyber_Security_After_Sony_Practice_Points/_/N-4kZ1z120mn?fromsearch=false&ID=247142

We also have archived the webcast of our one-day program on managing cybersecurity at:

www.pli.edu/Content/OnDemand/Cybersecurity_2014_Managing_the_Risk/_/N-4nZ1z12f7s?fromsearch=false&ID=178337

From a disclosure perspective, the issues and the high public profile of the Sony hack raise the question whether cybersecurity risk should be disclosed in more detail or depth in upcoming filings. As a reminder, the SEC’s current guidance for cybersecurity risk disclosures is in CorpFin Disclosure Guidance Topic 2 at:

www.sec.gov/divisions/corpfin/guidance/cfguidance-topic2.htm

A point to remember for now, which is brought out in the Disclosure Guidance Topic, is this area may not be just a risk factor disclosure. Depending on the nature of the cybersecurity risk your company faces and cybersecurity issues you have encountered, disclosure in:

The business section
Legal proceedings
MD& A, and
The financial statements

may be necessary.

As always, we welcome your thoughts and feedback!

IFRS – The SAGA Continues

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As most accountants have heard, Jim Schnurr, the new Chief Accountant at the SEC has been speaking about the SEC possibly continuing to consider the use of IFRS by domestic companies.

At the AICPA’s annual SEC/PCAOB conference in Washington, DC on Monday he delivered his latest update on the status of IFRS, and you can read that speech at:

www.sec.gov/News/Speech/Detail/Speech/1370543609306#.VIcHnYupqrI

In his speech he said “When I arrived at the Commission two months ago, Chair White asked me to take a hard look at where the staff had been on the issue and make a recommendation to her as to the path forward.”

While he did not say anything definite, it is clear the IFRS is no longer on the back burner!

He also said “Based on the progress of our collective efforts, I am hopeful to be in a position in the coming months to commence discussions with the Chair and the Commissioners about the different alternatives for potential further incorporation of IFRS and the related issues/concerns of each alternative with the objective of reaching a recommendation on what, if any, further incorporation or use of IFRS by US registrants would be permitted or required. And, of course, any rulemaking proposal that the Commission decides to consider would be subject to the normal notice and comment process.”

In the Q&A session Mr Schnurr elaborated on some ideas to incorporate, perhaps electively, IFRS information (in adition to US GAAP financial statements) into US registrant’s filings that would be useful for investors when comparing US registrants using US GAAP and those using IFRS. The ideas run the gamut of including IFRS measures in Selected Financial Data, IFRS data in MD&A, non-GAAP measures calculated using IFRS, and full financial statements in IFRS. He asked for feedback on these areas and input on additional ideas to consider.

So, this will not be a speedy process……

As always, your comments and thoughts are welcome!

When-fore art thou revenue recognition?

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With every revenue recognition workshop we have presented to date participants have had strong opinions on the new standard’s implementation date. (For public companies the new standard must be implemented for periods beginning after December 15, 2016, years after December 15, 2017 for non-public companies.)

The FASB and IASB put this date into the public discussion well before the final standard was issued. That said, as soon as the final standard was published late last May constituents began voicing concerns about the feasibility of meeting this date. (Yes, given the protracted timing building new accounting standards many of us still don’t pay attention to the standard setting process until the new standard is final!)

In June and July, after feedback from constituents about the effective date began to flow in, the board indicated that they would be listening and be ready to react to this feedback.

At the Transition Resource Group meeting on October 31, 2015, it became clear that, as they always do, the board is listening.   At this meeting of the FASB Vice Chair Jim Kroeker announced that the Board and the FASB Staff will conduct additional outreach with both public and private companies over the next several months to gauge their progress in preparing to implement the new revenue recognition standard.

Mr. Kroeker emphasized that the Board is considering whether or not to defer the effective date of the new revenue standard. He also said that a decision will be made no later than the second quarter of 2015.

You can check out the archived webcast of the entire TRG meeting at:

www.fasb.org/cs/ContentServer?c=Page&pagename=FASB%2FPage%2FSectionPage&cid=1176164066683

As always, your thoughts and comments are appreciated!

Do you think the date should be deferred? Lets us know, and we will summarize everyone’s thoughts!