Sometimes, even the most thought-out plans don’t work out. Organizations experienced this first-hand over the last two years with COVID-19. Almost overnight, everything changed: operating models, financial forecasts, and the labor market, to name a few of the biggest impacts. Even now, many Bay Area and California companies are grappling with the effects of an uncertain economy. External events, like the pandemic, have the potential to upset the typical financial reporting process. Questions remain about how to reflect external pressures on internal reporting; what needs to be adjusted and when, and how management can best respond to changing conditions while still meeting current compliance requirements. In other words, the pandemic and other events have made it difficult for management to make essential estimates required for financial reporting. Here are some key factors to consider during this time of uncertainty. (more…)
Starting in January 2023, businesses must conform to a new accounting standard for measuring expected credit loss. It’s perhaps one of the biggest accounting changes for financial institutions in a decade – but they’re not the only ones affected. Nonfinancial institutions may still have financial instruments and other assets that will require a different accounting approach and new internal controls. Implementing the current expected credit loss (CECL) accounting methodology takes a forward-looking approach to risk modeling and will be a significant undertaking for many. (more…)
Companies often need financial audits when they seek additional funds or have to satisfy the requirements of owners, creditors, investors and other outside parties who want a higher level of comfort on the accuracy of financial statements.
My experience auditing privately held companies has taught me that a few proactive measures can go a long way in avoiding audit delays, keeping you and your auditor on track, and ensuring a smoother audit process for all. So, let’s jump right into those tips, shall we? (more…)
No time like the present to prepare a game plan for the new revenue recognition standard. To ensure a smooth transition from your current approach, be sure to explore all available resources, read and review practical guidance to understand how these new standards affect your business practices and then develop your implementation strategy. A brief overview of this process is outlined here:
By Kay Filler, CPA, Principal
Historically originating through the lens of the independent auditor, whose auditing standards require the auditor to consider “going concern” matters and potentially include cautionary language in the auditor’s report, all companies that issue GAAP-based financial statements are now required to perform their own evaluation and provide explanatory footnote disclosures in defined circumstances. (more…)
As we enter into another audit busy season, I have started my standard exercise of compiling a list of frequently encountered audit and accounting issues that require research, additional analysis and often times detailed disclosures and even material adjustments to my client’s financials. An oft-recurring theme is the existence of related party transactions and how such transactions are recorded and disclosed.
Below are a few frequently asked questions on this subject that merit our attention: (more…)
Diversity in practice led the FASB to revisit the GAAP guidance for the Statement of Cash Flows that has been around since 1987 with the issuance FASB No. 95. Many people thought aspects of these rules were confusing (and contradictory, at times), or even missing entirely. In fact, restatements of public company financial statements often relate to issues with the Statement of Cash Flows (as noted in an earlier post).
Originally planned as a comprehensive project, the FASB altered course to focus efforts on just the most confusing areas, resulting in new guidance covering nine specific issues. The good news is that most of these issues rarely apply to nonpublic tech companies in the Silicon Valley. Eight issues are covered in ASU No. 2016-15 “Classification of Certain Cash Receipts and Cash Payments” issued in August 2016. Several of the issues that might be encountered include handling proceeds from insurance claims, distributions from equity method investees, and contingent consideration payments made after a business combination. Mid-sized companies outside of specific industries would rarely run into the remaining issues. (more…)
My first post about the FASB GAAP Simplification Initiative was in April 2015, and I have posted since then about specific GAAP changes under this umbrella that seemed to bestow the most widespread consequences for companies in Silicon Valley. Now seems like a good time to look back over the past year and a half for other GAAP simplification subjects you might not know about, but are not exactly esoteric topics. (more…)