Not too long ago, the Association of Certified Fraud Examiners (ACFE) released their Report to the Nations, a publication on worldwide occupational fraud based on real life fraud cases and it was certainly a telling study in fraud. As an auditor for private companies, it hit very close to home to learn that the median loss experienced by companies with fewer than 100 employees was $200,000! And nearly half of these fraud cases were the result of a lack of internal controls. (more…)
Red Flags on a Contractor’s Work in Progress Schedule
By Deepa Bhat, CPA, Principal
ASL Construction Group
It is a well-known fact that best in class contractors prepare a work in progress (WIP) schedule on a regular basis. Not only does this practice allow the users of the financials, such as lenders and bonding companies, identify early warning signs, it enables contractors to better measure their progress on jobs and be proactive in seeking change orders and contract revisions. As a constant reviewer of contractor financials, I have found the following most common red flags on WIP schedules that are worth mentioning: (more…)
Look Before You Leap - Understanding Some Unique Accounting Rules
In the last couple of years, I have witnessed several of my private company clients reorganize their operations, through either a merger, an acquisition or a significant management member buyout. While such situations provide a great stage for all to display their accounting chops, they also present us an opportunity to consult with our clients and help them avoid an accounting faux pas or burdensome and unnecessary disclosures caused by an inadvertent accounting election. So, in no specific order, I thought I would summarize some of the unique accounting issues I’ve encountered in such situations and how to navigate them: (more…)
Revenue Recognition Update – Step 4: Allocating Transaction Price to Performance Obligations
If you have been following Steps 1 (Identify the Contract with the Customer) through 3 (Determining a Transaction Price), of the revenue recognition update as eagerly as I have, then I am sure that you keenly await the discussion on Step 4 about the allocation of the transaction price to the performance obligations in a contract. The wait is over as we explore Step 4 in this blog post. A couple key concepts that we need to understand in this process: the allocation objective and standalone selling price. (more…)
FAQs on Related Party Transactions
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…)
Abbott, Stringham & Lynch Announces Deepa Bhat and Rachel Gillespie as new Principals
San Jose, CA (November 17, 2016) – Abbott, Stringham & Lynch, one of the largest local CPA firms in the Silicon Valley, is proud to announce that Deepa Bhat has been promoted to Audit Principal and Rachel Gillespie has been promoted to Tax Principal, effective January 1, 2017.
In making the announcement, Abbott, Stringham & Lynch’s Principal-in-charge of the Assurance and Accounting Department, Carol Wagner, said, “We are pleased to welcome Deepa and Rachel to the partnership group. These exceptional leaders have the experience and proven skills to take on their new responsibilities that will considerably contribute to our growth and build our reputation for providing remarkable client service.” (more…)
Common Errors Encountered in Consolidation of Foreign Operations
It is that time of the year again when I am working on audits of U.S. companies with significant international operations, either in the form of wholly owned subsidiaries or branch offices. And my observations while performing these audits have resulted in this compilation of common errors while accounting for foreign currency, recording translation adjustments and finally the culmination into consolidated financials.
4 Steps to Reduce Risks Associated with Related Party Transactions
Recently, I’ve come across various instances of related party transactions with several of my clients, such as stockholder notes to or from the company, a stockholder leasing office space to a company at favorable rates, forgiveness of compensation or reduced compensation for the initial startup period, and favorable credit terms to another entity with common ownership to name a few examples. And it worries me sometimes when companies enter into these transactions without thinking through the accounting ramifications, which can be problematic. What could the risks of related party transactions be?…
Step by Step Approach to the VIE Conundrum
Over the past several years, it has become common for companies to control businesses without a majority voting interest while avoiding consolidations, and I have several clients involved with related entities requiring the regular assessment of Variable Interest Entities (VIEs) and its varied implications. This year I had the pleasure of working with San Jose State University students on a project to analyze the provisions of U.S. GAAP as it relates to determination VIEs and primary beneficiaries and the consolidation considerations for such entities. It is certainly not a straightforward topic, and their step-by-step explanation, with the aid of a flowchart, broke down the requirements into layman’s terms that quite succinctly highlighted the salient characteristics of a VIE and when to consolidate. You may find our analysis from the project helpful as…