7 Changes New Revenue Standard May Bring

by Steven Sodini 27. January 2014 14:48
As we have recently entered into the first quarter of 2014, companies should start planning for a new converged revenue recognition standard that’s currently in the final stages of development by FASB and the International Accounting Standards Board, which will lead to changes in financial reporting for almost all entities that operate under U.S. GAAP or IFRS. The standard is set to be released this quarter. Companies should begin, if they have not already done so, to take inventory of major revenue streams to prepare for the implementation of the standard. The seven major changes companies should expect to deal with include the following: 1. Updated criteria for contract determination Companies may need to adjust their accounting policies and begin to review their current arrangements for meeting contract criteria to establish the new standards to be considered a contract.  Under the new contract guidance the following must exist:  Commercial substance, or changes to cash flows  Approval and commitment by both parties Identification of rights and payment terms by both parties 2. New depictions of contract modifications In addition to new criteria related to contract arrangements, companies will face a contract modification changes. This will be a large undertaking for companies who retrospectively adopt the new standard because they will need to consider past contract modifications in determining their contract balances. 3. Identifying different performance obligations A new recognition method for contract components or components that companies will now need to identify separately is a change from contract accounting under the AICPA Statement of Position 81-1, where companies generally view the contract as the unit of account. 4. Judgment in selling price estimate Furthermore, it will be import for companies’ management to be on top of, as well as thoroughly document the estimation of the selling prices. Companies should build an infrastructure to support the estimates that will recognize credits. Some credits companies should pay close attention to include, rebates and returns and price protections. 5. New depiction of transfer over time The new standard will cause companies to shift to the “cost-to-cost” approach to show the transfer of goods and services to the customer, which will display the ratio of cost already incurred compared to the expected total cost of completing a project. This will be a change for many companies currently using the “units-of-delivery” method. 6. Change in performance incentives With the change in revenue recognition companies may need to adapt different employee incentives. For example, changing policies to avoid employees engaging in channel stuffing will need to be address. 7. New Disclosures Brought on by all the changes from the new standard, there will be significant adjustments to disclosure requirements as well. Disclosures will need to include, disaggregation of reported revenue, narrative explanations of changes in balances, information about performance obligations, judgments about the timing and allocation of performance obligations, and the determination of transaction price.     Due to the vast changes companies will start to face, as the new revenue recognition standard is put into effect, “It’s going to be a significant implementation effort,” GE Technical Controller Russell Hodge, CPA said. Hodge followed up by saying contracts will need to be looked at in a whole new way. 
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Categories: Advisory | Tax

Financial Reporting Framework for Small and Medium Sized Entities-New Option

by Hiller Hardie 9. September 2013 12:20
The AICPA recently released a new reporting framework for Small and Medium Sized entities (“SME”). This is a special purpose framework, not to be confused with the Private Company Council initiative, which will provide GAAP based guidelines for private companies. This is a key distinction-the SME framework is another comprehensive basis of accounting (“OCBOA”), which is non-GAAP. Other OCBOA’s include cash basis, income tax basis and regulatory basis.   The SME framework may be attractive to smaller companies interested in providing meaningful financial data to owners and other users, without the more onerous and rigorous requirements imposed by traditional GAAP. For example, the SME framework simplifies accounting for goodwill, but preserves the pillars of good accounting such as the accrual basis and historical cost.   Small business owners should evaluate the merits of the SME framework, as well as the needs of the financial statement users. Loan covenants and lender requirements will be a key factor in determining their suitability.
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Categories: Advisory | Assurance

Captive Insurance Benefits: They may be more attractive and available than you think!

by Hiller Hardie 26. August 2013 14:47
When non traditional risk management programs are discussed, most of our eyes gloss over and we quickly lose interest. However, establishing a captive insurance company is a way to formalize self insurance that may provide significant benefits to the business owner. These benefits include the ability to: ·         Insure risks not economically insured in traditional markets;  ·         Stabilize the cost of insurance; ·         Create possible estate planning, business succession and tax planning opportunities; and ·         Enhance cash flow and wealth preservation/accumulation. The ideal captive candidate is the owner of a business with strong cash flow (>$450,000 per year), a history of steady profitability and uninsured risk(s) with in the business. Business owners who meet these criteria would be well advised to consult a knowledgeable professional to determine if they are a good candidate for establishing a captive. A feasibility study can be performed at little to no cost.
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Categories: Advisory | Assurance

Should You File a VDA for Your AUP?

by Heather Vanderborg 8. May 2013 16:38
  What, Who, Where, Why and When? Following are answers to some basic questions about Abandoned and Unclaimed Property (AUP), an issue that many companies don’t know quite what to do with (hint: it is NOT a tax). What: is a Voluntary Disclosure Agreement? Companies need to understand the advantages of being proactive and filing a Voluntary Disclosure Agreement (VDA) for their AUP, because experience shows that you don’t want to wait to be audited!  In short, a VDA is a piece of paper that represents a contractual agreement once signed.  It asserts that a company is entering into a review process, compiling and examining all potentially outstanding liabilities that are due to others (e.g. Vendors, Customers, former employees, etc).  The company will then report its findings, all truly past due liabilities, and agrees to be compliant with its yearly filings going forward.  Who: should be filing?  It is important to identify whether your company is a good candidate for the VDA process. Prime candidates are those Companies who have no previous filing history and who have not been under audit.  It’s also important to keep in mind that newly formed companies may not have dormant property, so the process is for those that have been in business since the early-mid 1990’s.  Where: should companies file? A company should first and foremost file in their State of Incorporation.  A company’s State of Incorporation is the beneficiary of the extrapolated amount calculated when actual information is not available.  After applying addressable information and quantifying a true liability on a state by state basis, the company may identify a threshold amount that it would use to classify additional states where it may be beneficial to file a VDA, in order to avoid penalties and interest on a “first time filing”. Why: should a company file a VDA? There are benefits when it comes to being proactive and filing a VDA.  In addition to avoiding penalties and interest, the company may limit the look-back period  up to 10 report years, vs. up to more than 30! For example, an audit in Delaware could go look back to 1981, while a VDA in that state will limit the review to 1991.  Other benefits  include less of a resource strain, less stress than being under audit, and the ability to research and review at the company’s pace (within the time period alotted). When: should a company file? Because audit activity from all of the top states of incorporation is increasing in frequency, there is no better time than the present  to file a VDA – once a company understands its liability. If a company doesn’t know its AUP liability, we highly recommend that you consider retaining a qualified third-party consultant such as UP Advocates, Urish Popeck’s affiliated AUP consulting group.  UP Advocates is experienced with assisting companies with every aspect of the AUP process.
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Categories: Advisory

Trends Bode Well for Q2 IPOs

by Ken Urish 11. April 2013 12:13
Normal 0 false false false false EN-US X-NONE X-NONE There were 31 IPOs in the U.S. in Q1 of 2013 vs. 42 in Q1 2012* - statistics that taken alone would indicate a poor start for this year. However, there are positive trends that indicate we could see significant growth in activity for Q2 and beyond in 2013. Although the number of deals was down, IPO proceeds are up 28% vs.Q1 2012. Offerings have averaged $245 million thus far in 2013, an increase of 75% from the average deal size of Q1 2012. Benefiting from the strength of the overall stock market, the average IPO in 2013 has returned almost 18% from its offer price. In addition to the increased proceeds, another positive trend is the breadth of industries represented in offerings thus far this year. Technology companies traditionally lead in bringing offerings to market – they represented almost 30% in 2012. But Q1 of 2013 saw multiple offerings from numerous industries, led by the financial, healthcare, real estate, energy and technology sectors. Even offerings from industrial companies have been well received. Broad industry participation, combined with stock market and other economic indicators, creates a promising outlook for IPO activity for the balance of the year. As Brian Eccleston of the Capital Markets practice of our Alliance partner BDO notes, “the breadth of industries represented among Q1 offerings bodes well for the economy and the U.S. IPO market moving forward.” *Renaissance Capital is the source of this historical data related to the number, size and returns of U.S. IPOs.    
Categories: Advisory

SEC: Social Media can be "perfectly suitable"

by Tom Current 8. April 2013 09:44
  As the importance of social media use by business continues to grow, it has become clear that guidelines need to be established, as they have been for traditional media, regarding fair disclosure. As of April 2, that process has started - the SEC has issued its first regulatory guidance on the subject.  It released a report that makes it clear that companies can use social media outlets such as Facebook and Twitter to announce key information in compliance with Regulation Fair Disclosure (Regulation FD), as long as investors have been alerted about which social medium the company will use to report the information. The SEC’s report is based on findings in its investigation of Netflix CEO, Reed Hastings. According to the SEC’s report, on July 3rd, Hastings used his personal Facebook page to announce that Netflix had streamed 1 billion hours of content in June. The company’s stock rose from $70.45 at the time of Hastings’ Facebook post to $81.72 at the close of the following trading day, according to the SEC. “One set of shareholders should not be able to get the jump on other shareholders just because the company is selectively disclosing important information,” George Canellos, the acting director of the SEC’s Division of Enforcement said, in a news release. “Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don’t know that’s where they need to turn to get the latest news.”  
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2013 IPO Outlook - The Glass is at Least Half Full

by Ken Urish 8. February 2013 14:20
Compared to 2012, the outlook for IPO activity in 2013 is a mixed bag – some headwinds, but also reasons for cautious optimism. Those are conclusions of a survey of 100 executives from the nation’s leading investment banks, conducted on behalf of the Capital Markets practice of our alliance partner BDO. Private equity portfolios are expected to continue as the leading source for IPOs in 2013. VC portfolios, owner managed privately-held businesses, and spinoffs and divestitures are other sources anticipated by respondents to drive the market. When asked what offering attributes will be most valued by the investment community in 2013, 38% cited long-term growth potential and approximately a third cited stable cash flow. Certain industries stood out to a majority of the bankers for their promise of growth. Approximately two-thirds of respondents are predicting an increase in IPOs for 2013 (vs 2012) in healthcare, technology, biotech, and energy verticals. Other than real estate, no other industry is predicted to achieve an increase in IPOs by a majority of respondents. As far as headwinds, more than one-third of the execs cite the threat of tax increases and government spending cuts. A similar number foresee global political and financial instability as a detriment to 2013 offering activity.Please click this link to read or download a detailed analysis of the survey.
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Categories: Advisory

2013 COLAs for Retirement Plans

by Michael Popeck 7. November 2012 09:13
Each year, the IRS announces cost-of-living adjustments affecting limitations for pension plans and other retirement-related items. For 2013, many of the statutory thresholds that trigger increases in the cost-of-living index were met, while other limitations will remain unchanged. Some of the key highlights include the elective deferral (contribution) limit for employees that participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan increased from $17,000 to $17,500; catch-up contribution limit for employees aged 50 and over in 401(k), 403(b), most 457 plans and Thrift Savings Plan remains unchanged; Individual Retirement Arrangement (IRA) limit increases from $5,000 to $5,500, among other important changes. You can see the full list of changes in the chart below. If you have any question regarding any possible changes to your retirement plan contact a Urish Popeck retirement plan specialist, or take a look at how we can help you successfully manage your retirement plan. Code Section 2013 2012 2011 2010 401(a)(17)/404(l) Annual Compensation        $255,000        $250,000        $245,000        $245,000 402(g)(1) Elective Deferrals          17,500          17,000          16,500          16,500 408(k)(2)(C) SEP Minimum Compensation                550                550                550                550 408(k)(3)(C) SEP Maximum Compensation        255,000        250,000        245,000        245,000 408(p)(2)(E) SIMPLE Maximum Contributions          12,000          11,500          11,500          11,500 409(o)(1)(C) ESOP Limits  1,035,000 205,000  1,015,000 200,000  985,000 195,000  985,000 195,000 414(q)(1)(B) HCE Threshold        115,000        115,000        110,000        110,000 414(v)(2)(B)(i) Catch-up Contributions             5,500             5,500             5,500             5,500 414(v)(2)(B)(ii) Catch-up Contributions             2,500             2,500             2,500             2,500 415(b)(1)(A) DB Limits        205,000        200,000        195,000        195,000 415(c)(1)(A) DC Limits          51,000          50,000          49,000          49,000 416(i)(1)(A)(i) Key Employee        165,000        165,000        160,000        160,000 457(e)(15) Deferral Limits          17,500          17,000          16,500          16,500 1.61-21(f)(5)(i) Control Employee        100,000        100,000          95,000          95,000 1.61-21(f)(5)(iii) Control Employee        205,000        205,000        195,000        195,000 219(b)(5)(A) IRA Contribution Limit             5,500             5,000             5,000             5,000 219(b)(5)(B) IRA Catch-up Contributions             1,000             1,000             1,000             1,000 Taxable Wage Base for Social Security        113,700        110,100        106,800        106,800
Categories: Advisory

Global Investment Opportunities and Risks

by Ken Urish 30. October 2012 08:29
Global Opportunities, the 2012 BDO Ambition Survey, is very timely reading. It offers valuable perspective on global investment opportunities and risks overseas, from the perspective of CFOs of $50M - $2B companies. This year’s findings reflect the general climate of economic and political uncertainty that prevails today, as the focus is on threats presented by currency fluctuations and geopolitical risk. Executives polled indicate that current ‘safe haven’ markets include not only the US, UK and Germany, but also the BRIC countries of Brazil, Russia, India and China. Businesses in North America, Europe, the Middle East, Africa, Asia Pacific and Latin America were interviewed. Respondent companies were sampled from consumer, manufacturing, natural resources, real estate/construction, professional services and technology sectors. The report looks at where CFOs are focusing their international investment, what their mood is, and asks for their practical advice on the primary success factors when expanding overseas. This survey is a good reminder of why Urish Popeck has aligned with BDO for more than 18 years. As one of the Top Six global accounting organizations, BDO offers superb global resources that provide benefits to our clients that other regional firms cannot match. BDO brings local knowledge and expertise from 1,100+ offices in 138 countries worldwide. Local knowledge is critical because CFOs the world over are finding it more difficult to conduct business abroad, given the poor economy, increased regulation and greater competition. Almost half the CFOs surveyed said that good advice from reliable people on the ground is a key to successful international expansion. As Martin Van Roekel, CEO of BDO International states, “we know that our clients expect more and are seeking a tailored approach which reflects the culture they work in, and the kind of business they are.” Check out the 2012 BDO Ambition survey. We believe you will find it interesting and the experience of your peers useful.
Categories: Advisory

10 Years of Sarbanes-Oxley

by Dennis Stuchell 23. October 2012 09:45
It may be hard to believe, but the Sarbanes-Oxley Act and the Public Company Accounting Oversight Board (PCAOB) have been with us now for ten years. And the PCAOB inspections of audit issuers continue to find serious deficiencies. During a recent keynote address at the American Law Institute (ALI) CLE conference in Chicago, Board Member Jeanette M. Franzel spoke to some of the common areas of audit deficiencies, which include revenue recognition, fair value of financial instruments, management estimates, testing and evaluating internal controls, related party transactions, and the auditor’s assessment and response to fraud risk. The full text of the speech  is available on the PCAOB website. Urish Popeck has signficant experience with revenue recognition, valuation, and other critical assurance and accounting advisory issues. We would be pleased to assist you in these areas and other public company accounting needs. And let us know if you have any questions regarding SOX or PCAOB oversight.
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Categories: Advisory