Financial statement auditing standards: Change is in the air
Don't be surprised if your auditor does some things differently when auditing your financial statements this year. The Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants issued "clarified and converged" standards in Statement on Auditing Standards No. 122 in 2011. This statement requires auditors to follow new standards for audit of financial statements for periods ending on or after Dec. 15, 2012.
New statement issued amending clarified auditing standards
The Auditing Standards Board (ASB) issued Statement on Auditing Standards No. 127 in January 2013 to amend the auditing technical literature in two areas. The amended guidance for both the audits of group financial statements and the audits of financial statements prepared using special purpose frameworks is effective on or after Dec. 15, 2012. (4/1/2013)
Private Company Council concentrates initially on four areas
The newly created Private Company Council identified four areas in December 2012 that will serve as its initial focus in working with the Financial Accounting Standards Board to improve the standards-setting process for private companies. After the identified items are discussed further, a decision will be made as to whether the projects will be added to the Private Company Council (PCC) agenda. (4/1/2013)
Proposed: Special-purpose financial reporting framework
The American Institute of CPAs released an exposure draft of the much-anticipated private company financial reporting framework on Nov. 1, 2012. As proposed, it is a self-contained special-purpose framework intended to be available for use in preparing financial statements for privately held smaller and medium-sized entities. (1/28/2013)
Valuations and independence: An increasingly difficult question for CPAs
Accountants and valuations analysts are often asked by clients to prepare a valuation of their business, but sometimes they have to pass on the work. Why? If the CPA or analyst's firm also performs audit engagements for the company, there could be what is called a lack of independence, which is required for all firms performing audits. (1/28/2013)
Watch for hidden liabilities when you're selling your company
You are ready to put out feelers for selling your company. Perhaps you have contacted your CPA to have some preliminary due diligence begun. As you prepare to finalize your asking price, issues arise that you hadn't planned on. Hidden liabilities - those unplanned nuisances that can depress the value of your company - can put a real damper on your plans. (1/28/2013)
Limited liability entities: Some special considerations
Reporting entities frequently are formed as limited liability entities, particularly limited liability companies and limited liability partnerships. LLCs have characteristics of both corporations and partnerships, but these types of entities also are dissimilar in many respects. (11/21/2012)
Analyzed your company's cash flow lately? Why it's important
We've all heard the age-old expression: "Cash is king." No other place is this more true than in business. Cash is the key component that makes any business function. (11/21/2012)
Update addresses impairment of certain intangible assets
The Financial Accounting Standards Board issued guidance in July 2012 that applies to all reporting entities - public, private and not-for-profit - for testing impairment of indefinite-lived intangible assets. (11/21/2012)
How to account for deferred compensation arrangements
Preparers of financial statements - and practitioners who perform attest engagements on those statements - often ask questions about how deferred compensation arrangements should be properly reflected in reporting entities' financial statements. In most practice situations, the Financial Accounting Standards Board’s Accounting Standards Codification (FASB ASC) Topic 710, Compensation - General, provides the relevant guidance for accounting for these types of arrangements.
A smooth audit takes thoughtful consideration
It may seem like much ado about nothing, but the truth of the matter is that planning counts. Being well prepared for your external audit team is critical to ensuring an efficient audit. Beyond providing adequate workspace and access to information and personnel, there is advance groundwork to consider. (9/28/2012)
Some retirement plans need an audit: Determining when it's appropriate
How can a retirement plan administrator know that a plan is subject to an audit? The general rule prescribed by the Department of Labor says a large plan needs to have an audit. It's imperative to understand the two most important concepts to classify a plan properly as "small" or "large." (9/28/2012)
What if management doesn't evaluate variable interest entities?
Consolidation issues continue to pose challenges for preparers of financial statements and practitioners performing attest engagements on the financial statements. In the world of private company financial reporting, the guidance associated with whether reporting entities are considered to be primary beneficiaries of variable interest entities has proven to be particularly problematic in practice. To address one area of concern the staff of the American Institute of CPAs released new technical practice aid guidance in April 2012. (8/2/2012)
Business owners play important fraud prevention role
Small businesses usually have limited resources when it comes to implementing fraud prevention controls. A substantial number of them have a single owner and fewer than 25 employees. These businesses usually have been passed down from generation to generation and employ a couple of long-term, highly trusted employees - many times hired by an owner from the previous generation. How can a small business, with a single owner and a small number of trusted employees, put fraud prevention controls in place without spending thousands of dollars?
Nonprofit expenses: Correct coding prevents problem
Failing to categorize or allocate expenses properly is a common accounting mistake some nonprofits make. All money coming in and going out of your organization must be assigned to the appropriate category. Proper assignment is particularly important if you accept donations that may be earmarked for certain projects or programs. (8/2/2012)
OCBOA financial statements: a refresher
With the increasing complexity of addressing accounting and reporting matters to comply with accounting principles generally accepted in the United States (U.S. GAAP), many financial statement preparers often look for less complicated, less time-consuming and less costly alternatives for their financial reporting needs. When acceptable from the perspective of financial statement users, one widely used alternative is to prepare financial statements using an "other comprehensive basis of accounting" (OCBOA).
Decode financial statements to benefit your business
In any business, chief executives often focus on the product or service being offered and rely on others to manage the finances. Bank balances, receipts and payments are easily understood, but things like accrual basis accounting, ratios and working capital can be confusing to nonaccountants. Certain financial statement indicators can alert management to potential issues that need to be addressed.
Three methods to account for treasury stock transactions
The accounting and financial reporting guidance addressing treasury stock transactions isn't anything new. But preparers of financial statements raise questions when addressing measurement and disclosure requirements associated with these transactions. Questions arise about how the preparers should consider the authoritative accounting technical literature and various state laws and regulations so that financial statements are prepared properly. (6/6/2012)