CPAs Talk Tech Biz

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October 12, 2021

Are You Ready for the New Lease Accounting Standard?

The COVID-19 pandemic created unique conditions for businesses in the Bay Area and across California. The combination of forced business closures and stay-at-home orders left many companies in uncharted waters. Some were forced to close while others had to find new ways to deliver products and services to customers. At the same time, many were searching for new lines of credit, business loans, or other ways to access working capital. It was against this backdrop that FASB made the decision to delay the implementation of ASC 842 (new lease accounting rules) by one year, starting with reporting periods after December 15, 2021. Although early adoption was permitted, many decided to delay implementation to focus on pandemic-related issues. As the recovery continues and year-end is just a few months away, businesses need to re-examine the new lease accounting rules to ensure compliance.

On November 10, 2021, the FASB Board decided not to provide a third effective date deferral of Topic 842 for entities within the scope of paragraph 842-10-65-1(b) (generally private companies and certain not-for-profit organizations). (more…)

Categories: Updates & Alerts

Tags: ASC 842, Finance lease, Lease Accounting, Operating lease, Steve Carter,

By Jeff Faust

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February 11, 2020

U.K. Share Schemes vs. U.S. Stock Option Plans

ASL’s Valuation Team recently prepared 409A valuations of VC funded biotech companies located in the U.K. We would like to share some insight into U.K. share schemes and compare them to U.S. stock option plans. To start with, in the U.S., they are called plans whereas in the U.K., they are called schemes. (more…)

Categories: Valuation Services, Winter 2020

Tags: 409A valuations, Jeff Faust, U.K. Share Schemes, U.S. Stock Option Plans,

By Deepa Bhat

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November 20, 2019

Getting Ready for an External Audit? Five Tips to Make the Process Easier on You and Your Auditor

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…)

Categories: Audit & Accounting Errors, Myths & Guidelines, The Musings of our Authors

Tags: Business processes, Deepa Bhat, External audit, Financial audits,

By Jeff Faust

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November 6, 2019

Secondary Transactions and 409A Valuations – Part 2: FF Preferred Stock

In Part 1 of this series (Secondary Transactions and 409A Valuations – Part 1: The Potential Impact), we discussed secondary transactions and their impact on 409A Valuations. To recap, the liquidity that some founders and early employees receive from their company or outside investors, considered secondary transactions, can sometimes re-establish the price per share for stock option grant (409A) purposes at the same price as the secondary transaction. Secondary transactions are often done in conjunction with a funding round so they are often at the same price as the round’s preferred stock. If common stock was sold in the secondary transaction, future option grants may have to be granted at this higher price, which is not ideal for new employees receiving options based on the latest preferred stock price. (more…)

Categories: Valuation Services

Tags: 409A Valuation, ASL Valuation, Jeff Faust, Preferred Stock, Secondary Transactions,

By Jeff Faust

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August 6, 2019

Secondary Transactions and 409A Valuations - Part 1: The Potential Impact

As VC-backed companies mature, they may not be ready for an IPO or a sale, but private secondary transactions on common stock are a way to get some liquidity for the founders prior to an exit.

Any secondary transaction with the Company’s common stock should be carefully evaluated to determine the relevance and the potential impact on the common stock price for 409A Valuation purposes. The AICPA guide: Valuation of Privately-Held-Company Equity Securities Issued as Compensation establishes a clear set of rules regarding this issue. (more…)

Categories: Summer 2019, Valuation Services

Tags: 409A Valuation, Jeff Faust, Secondary Transactions, VC-backed companies,

By Kay Filler

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March 1, 2019

Non-Employees Stock Compensation Accounting Aligned with Employee Rules

The recent changes in stock compensation for non-employees will reduce complexity and should also smooth volatility in recognizing associated compensation costs in the income statement. These changes were issued in June 2018 and are first effective for private companies with calendar year 2020, although early adoption is permitted. (more…)

Categories: The Musings of our Authors, Updates & Alerts

Tags: Share-based awards, Stock awards, Stock compensation,

By Abraham Livchitz

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February 13, 2019

Tax Reform…. Not in California

UPDATED JULY 18, 2019: At Last…Partial Conformity…

In December 2017, Congress passed the Tax Cuts and Jobs Act (TCJA) which was the most significant tax reform legislation enacted since the 1980s. In July 2019, 18 months later, the California legislature acted and the governor signed Assembly Bill 91 that contained a select number of conformity provisions. These provisions will simplify tax compliance for California taxpayers as differing federal and California tax reporting for certain transactions will no longer be required. Unfortunately, California has yet to conform to most of the changes enacted by the TCJA.

The conformity changes included in AB 91 are highlighted below.

However, in an act of “reverse conformity,” the legislature passed Senate Bill 78. Originally, the federal Affordable Care Act imposed a “penalty tax” on taxpayers who did not have qualifying health insurance coverage. Congress repealed this “tax” effective January 1, 2019. But due to an act of reverse conformity, a “penalty tax” will once again be imposed on California taxpayers that do not have qualifying health insurance, effective January 1, 2020. (more…)

Categories: Tax Reform, The Musings of our Authors, Updates & Alerts

Tags: Abe Livchitz, California, Tax Cuts and Jobs Act, Tax Reform,

By ASL Guest

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February 6, 2019

ASC 842 - Leases, the OTHER New ASC

By Patrick Ngai, CPA, Audit Manager
ASL Technology Group

When ASC 842 – Leases (“ASC 842”) was first published in 2016, the effective date for non-public entities was scheduled for 2020. The date seemed so far away that most people took the, “we will cross that bridge when we come to it” approach. To be fair, most people were too concerned about the new revenue recognition standard (ASC 606) to worry about anything else. (more…)

Categories: The Musings of our Authors, Updates & Alerts, Winter 2019

Tags: ASC 842, Lease Accounting, Leasing Standard, Patrick Ngai,

By Kay Filler

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December 6, 2018

Cloud Computing – Customer Accounting for Implementation Costs

“Clean up” of accounting guidance is always needed to adapt to changing times. Businesses enter into transactions, both on the initiation and the receiving end, not envisioned decades ago. Computer hosting arrangements (“cloud computing”) is one such example. This post deals with only the customer end of a cloud computing arrangement. (more…)

Categories: The Musings of our Authors, Updates & Alerts

Tags: Capitalized costs, Cloud Computing, Computer hosting arrangements,