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…)
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…)
It’s all but official. On October 16th, the FASB voted to approve delays for private companies on three new accounting standards, one of which is Leases. The expected Accounting Standards Update (ASU), on which FASB voting will be the official action to implement the deferrals, is expected in November. By the way, the other two standards deferred under this vote are “credit losses” (or CECL) and “hedging”. As the effective date draws closer, we will certainly be posting about CECL, since some aspects apply to all companies. (more…)
Outsourcing can cover a myriad of business activities, but those most frequently considered are the back-office functions of accounting, IT and Human Resources/Recruiting, especially at micro to mid-sized companies. A quick study of Deloitte’s “Global Outsourcing Survey” for 2016 and 2018 demonstrates the maturation of outsourcing strategy. While these surveys include mostly very large participant companies, it is clear that outsourcing is now seen as a vehicle for significant strategic advantage by “buying” available capabilities to realize advantages faster than developing strategic “assets”. (more…)
Well…it’s all but HERE! For those of you who were hoping it wouldn’t come, it is best to switch gears and consider how to best harness the change to your advantage. The alternative is to risk being left behind in a world where accountants become less known for routine detailed tasks and are more often thought of as insightful, intuitive and forward-thinking strategic assets.
Sound like hyperbole? Read on… (more…)
Challenges in keeping up with GAAP have never been greater, with pervasive changes in revenue recognition requirements set to hit most private companies this year, to be closely followed next year by getting most leases on the balance sheet for the first time. These confusing standards, along with the usual host of less widespread financial reporting changes, are daunting (to say the least). (more…)
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…)
The state’s popular California Competes Tax Credit program continues to be available during the 2019-2020 fiscal year. The state has allocated approximately $237 million to be awarded to both small and large business taxpayers. In June, the final award period of last fiscal year, approximately $55 million of tax credits were granted to twenty taxpayers. (more…)
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…)