Successfully Leading the Finance Function through Upcoming IFRS and SEC Changes
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Video & Presentation: http://www.proformative.com/events/successfully-leading-finance-function-through-upcoming-ifrs-sec-changes Navigating the ever changing regulatory landscape, specifically around IFRS and SEC related changes, the CFO is seen as the lead and in-house content expert on how these changes will affect the business. Learn how to stay well informed on the changes and utilizing the different resources available, to make sure your company is successful in managing these changes. Speaker: Mark Cheffers, Founder & CEO, Ives Group, Inc. Presentation delivered at CFO Dimensions 2013 - http://www.cfodimensions.com Track: Governance, Risk, Compliance | Session: 2
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Successfully Leading the Finance Function through Upcoming IFRS and SEC Changes
- 1. 1© 2013 Successfully Leading the Finance Function through Upcoming IFRS and SEC Changes
- 2. 2© 2013 IFRS Adoption: Current SEC Activities Mark Cheffers, CEO, Ives Group, Inc.
- 3. 3© 2013 Roadblocks to IFRS Adoption SEC abdication of legislative mandate Public interest – IASB vs. FASB/SEC Wholesale discarding of 75 years of deliberation Comparability vs. most truthful translation Greater comparability is an undeliverable promise
- 4. 4© 2013 Current IFRS-related SEC Activities RIAs Broker Dealers Ratings Agencies Financial Institutions Other
- 5. 5© 2013 SEC Corporate Finance – Comment Letters FV measurement, estimates, use (incl. VSOE) Fin. statement segment reporting ((FAS 131) subcategory) Tax expense/benefit/deferral/other (FAS 109) Revenue recognition (incl. deferred revenue) Contingencies & Commit., legal, (FAS 5 or IAS 37) accounting Acquisitions, mergers, & business combinations Foreign (affiliate or subsidiary) Debt, quasi-debt, warrants & equity (BCF) security PPE issues - Intangible assets & goodwill Inventory, vendor and/or cost of sales Tax rate disclosure Accounts receivable & cash reporting Deferred, stock-based and/or executive comp Consolidation (Fin 46, variable interest, SIV, SPE & off-B/S) EPS, ratio & classification of income statement Investments (SFAS 115) & cash/cash equivalents Cash flow statement (FAS 95 or IAS 7) classification errors Liabilities, payables, & accrual estimate PPE fixed asset (value/diminution) Percentage of completion Top 20 Accounting Rule/Disclosure Issues (1/12-Present) Source: Audit Analytics database download from July 8, 2013 for US based entities with SEC Division of Corporation Finance Assistant Director's office number 10. Office number 10 reviews comment letters for the Electronics & Machinery office.
- 6. 6© 2013 SEC Corporate Finance – Comment Letters (Cont.’d) Results of Operations Liquidity Business overview Executive compensation plan disclosure Critical Accounting Policies & Estimates Proforma financial information reporting Confidentiality in filing content sought Family/related party transaction disclosure Non-GAAP measures (incl. EBIT, EBITDA) Materiality - questions about disclosure decisions Disclosure Control reporting Internal Control (404) Over Financial Reporting Terrorist Nation Sponsor Reporting Third party expert input/consulting/advice Intellectual Property risk & disclosure Trade Restrictions - TSRA & OFAC financial disclosure Valuation of assets, liabilities or equity Website of registrant/website review by SEC Director compensation & options incentives-- Benchmark Contractual obligations Top 20 Non-Accounting Rule/Disclosure Issues (1/12-Present) Source: Audit Analytics database download from July 8, 2013 for US based entities with SEC Division of Corporation Finance Assistant Director's office number 10. Office number 10 reviews comment letters for the Electronics & Machinery office.
- 7. 7© 2013 Quality of Financial Reporting – Total Restatements 584 641 737 852 1389 1550 1091 827 668 765 742 713 620 692 794 931 1539 1771 1213 922 715 803 820 768 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Unique filers Restatements 2012 Restatements • 713 Unique Filers • 768 Restatements Source: 2012 Financial Restatements; A Twelve Year Comparison published March 2012 by Audit Analytics.
- 8. 8© 2013 Quantity of Restatements – U.S. Accelerated Filers has Increased for the Third Straight Year Source: 2012 Financial Restatements; A Twelve Year Comparison published March 2012 by Audit Analytics. 209 304 510 453 283 219 153 158 202 245 434 465 692 865 622 468 397 459 396 386 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 US Accelerated filers US Non-accelerated filers Restatement Count From 2009 to 2012 • U.S Accelerated Filers Increased from 153 to 245 • U.S Non-Accelerated Filers Decreased from 397 to 386
- 9. 9© 2013 Restatements – Breakdown by Market Source: 2012 Financial Restatements; A Twelve Year Comparison published March 2012 by Audit Analytics. Restatement Breakdown by Market (Unique Registrants Restating) Disclosure Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Amex 9 7 10 25 35 42 28 30 24 22 33 23 NASDAQ 61 67 80 115 194 224 145 138 113 112 125 153 NYSE 32 59 82 104 176 155 116 70 62 90 111 138 OTC 11 9 13 21 24 49 40 41 54 71 85 74 Not listed 471 499 552 587 960 1080 762 548 415 470 388 325 Total 584 641 737 852 1389 1550 1091 827 668 765 742 713
- 10. 10© 2013 Restatement Analysis – Largest Negative Restatement by Year Source: 2012 Financial Restatements; A Twelve Year Comparison published March 2012 by Audit Analytics. $4,513 $3,465 $6,335 $5,193 $2,377 $341 $671 $357 $717 $1,557 $459 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (U.S. $ in Millions)Largest Negative Restatements
- 11. 11© 2013 Restatement Analysis – Largest Negative Restatement by Year (Cont.’d) Source: 2012 Financial Restatements; A Twelve Year Comparison published March 2012 by Audit Analytics. Largest Negative Restatements by Year Disclosure Year Company Market Impact on Net Income (U.S. Dollars) 2002 Tyco International Ltd. NYSE -4,512,700,000 2003 HealthSouth Corp. NYSE -3,465,294,000 2004 Federal National Mortgage Association NYSE -6,335,000,000 2005 American International Group Inc. NYSE -5,193,000,000 2006 Navistar International Corp. NYSE -2,377,000,000 2007 General Electric Co. NYSE -341,000,000 2008 TMST, Inc. NYSE -670,730,000 2009 UBS AG NYSE -357,210,000 2010 Telecom Italia S.p.A NYSE -716,971,200 2011 China Unicom (Hong Kong) Ltd. NYSE -1,556,743,500 2012 JPMorgan Chase NYSE -459,000,000
- 12. 12© 2013 Restatement Analysis – Top Issues by Year
- 13. 13© 2013 Reissuance Restatements Source: 2012 Financial Restatements; A Twelve Year Comparison published March 2012 by Audit Analytics. 2005 2006 2007 2008 2009 2010 2011 2012 32.80% 42.15% 41.52% 50.18% 48.10% 53.65% 57.30% 64.69% Percentage Revision Note: A registrant is required, within four business days, to disclose in an 8-K, Item 4.02 when it is determined that a past financial statement should no longer be relied upon.
- 14. 14© 2013
- 15. 15© 2013 Going Concerns – Number of Auditor Opinions Uncertain of its Going Concern Assumption Note: The value for 2012 is estimated, based on audit opinions filed with the SEC on or before July 8, 2013 (about 98.5% of the opinions expected and 93.2% of the GCs expected). Source: Going Concern Review published September 2013 by Audit Analytics. 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012* 2827 2998 2817 2552 2554 2712 2878 3309 3352 3103 2978 2644 2517 Number of Going Concern Uncertainty Auditor Opinions
- 16. 16© 2013 Going Concerns – Number of Auditor Opinions Uncertain of its Going Concern Assumption (Cont.’d) Note: The value for 2012 is estimated, based on audit opinions filed with the SEC on or before July 8, 2013 (about 98.5% of the opinions expected and 93.2% of the GCs expected). Source: Going Concern Review published September 2013 by Audit Analytics. Going Concern Twelve Year Review (Fiscal Year 2012 Estimated) Fiscal Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Going Concerns 2,827 2,998 2,817 2,552 2,554 2,712 2,878 3,309 3,352 3,103 2,978 2,644 2,517 Total Auditor Opinions 20,009 18,907 17,194 17,765 16,795 16,788 16,548 16,631 15,885 15,592 15,668 14,958 14,404 % of All Opinions 14.13% 15.86% 16.38% 14.37% 15.21% 16.15% 17.39% 19.90% 21.10% 19.90% 19.01% 17.68% 17.47%
- 17. 17© 2013 Going Concerns – Percentage Breakdown by Market Status Note: The market designation is based on the company’s status as of 7/8/13. As compared to last year's slide, a number of going concerns shifted from OTCBB to Non-Tickered. This shift, in part, was due to the efforts of the SEC's Microcap Fraud Working Group to suspend the trading of registered shell companies. For example, this working group suspended 379 shells in May 2012 and an additional 61 in June 2013. Not all suspended shells filed a going concern, but this effort would also discourage the creation of new shells. Source: Going Concern Review published September 2013 by Audit Analytics. Fiscal Year Total Going Concerns NYSE NASDAQ AMEX OTCBB Non-Tickered Going Concerns % Going Concerns % Going Concerns % Going Concerns % Going Concerns % 12 (Partial) 2345 11 0.47% 99 4.22% 24 1.02% 620 26.44% 1591 67.85% 2011 2644 8 0.30% 78 2.95% 21 0.79% 595 22.50% 1942 73.45% 2010 2978 12 0.40% 78 2.62% 28 0.94% 510 17.13% 2350 78.91% 2009 3103 21 0.68% 108 3.48% 31 1.00% 390 12.57% 2553 82.28% 2008 3352 27 0.81% 101 3.01% 41 1.22% 330 9.84% 2853 85.11% 2007 3309 9 0.27% 60 1.81% 29 0.88% 271 8.19% 2940 88.85%
- 18. 18© 2013
- 19. 19© 2013 Going Concerns – New GCs and Repeated GCs Note: The value for 2012 is estimated, based on audit opinions filed with the SEC on or before July 8, 2013 (about 98.5% of the opinions expected and 93.2% of the GCs expected). Source: Going Concern Review published September 2013 by Audit Analytics. 1816 1879 1889 1828 1888 1976 2140 2312 2392 2273 2126 1974 1182 938 663 726 824 902 1169 1040 711 705 518 543 0 500 1000 1500 2000 2500 3000 3500 4000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012* New GC Repeated GC from Year Prior
- 20. 20© 2013 Going Concerns – Subsequent Improvement Or Disappearance Note: The values for 2011 (GCs in 2011 that were not repeated in 2012) is based on audit opinions filed with the SEC on or before July 8, 2013 (about 98.5% of the opinions expected and 93.2 of the GCs expected). Therefore, the 729 figure is inflated slightly because other opinions will come in for 2012. Source: Going Concern Review published September 2013 by Audit Analytics. 760 854 554 378 378 405 485 797 694 553 645 624 251 265 374 346 288 331 253 200 266 277 207 140 0 200 400 600 800 1000 1200 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011* Those that Disappeared Those that Improved
- 21. 21© 2013 SOX 404 – Adverse Mgmt-Only Assessments & Number of Material Weaknesses Noted Note: Year 7 is defined as annual reports for fiscal years ending Nov. 15, 2010 to Nov. 14,2011, inclusive, to be consistent with the SEC requirement that accelerated filers comply with Section 404 annual reports for fiscal years ending on or after Nov. 15, 2014. Source: Audit Opinions of Financial Controls: Ten Years after Sarbanes-Oxley Act of 2002, A Section 404(b) Review, published June 2013 by Mark Cheffers 629 431 387 355 218 153 141 1607 1030 954 700 465 332 286 Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Total # of Adverse Disclosures Total # of MWs
- 22. 22© 2013 SOX 404 – Adverse Mgmt-Only Assessments & Number of Material Weaknesses Noted (Cont.’d) Note: Year 7 is defined as annual reports for fiscal years ending Nov. 15, 2010 to Nov. 14,2011, inclusive, to be consistent with the SEC requirement that accelerated filers comply with Section 404 annual reports for fiscal years ending on or after Nov. 15, 2014. Source: Audit Opinions of Financial Controls: Ten Years after Sarbanes-Oxley Act of 2002, A Section 404(b) Review, published June 2013 by Mark Cheffers SOX 404 Year SOX 404 Auditor Attestations Total Auditor Attestations Material Weaknesses (MWs) Noted in Adverse Disclosures Total # of Adverse Disclosures Total # of MWs Yr. 1 3,789 629 1,607 Yr. 2 3,916 431 1,030 Yr. 3 4,316 387 954 Yr. 4 4,576 355 700 Yr. 5 4,430 218 465 Yr. 6 4,275 153 332 Yr. 7 4,019 141 286
- 23. 23© 2013 SOX 404 – Adverse Mgmt-Only Assessments & Number of Material Weaknesses Noted (Cont.’d) Note: Year 7 is defined as annual reports for fiscal years ending Nov. 15, 2010 to Nov. 14,2011, inclusive, to be consistent with the SEC requirement that accelerated filers comply with Section 404 annual reports for fiscal years ending on or after Nov. 15, 2014. Source: Audit Opinions of Financial Controls: Ten Years after Sarbanes-Oxley Act of 2002, A Section 404(b) Review, published June 2013 by Mark Cheffers 1402 1474 1521 1519 2999 3536 3549 3361 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Total # of Adverse Assessments Total # of MWs
- 24. 24© 2013 SOX 404 – Adverse Mgmt-Only Assessments & Number of Material Weaknesses Noted (Cont.’d) Notes: 1) Year 7 is defined as annual reports for fiscal years ending Nov. 15, 2010 to Nov. 14,2011, inclusive, to be consistent with the SEC requirement that accelerated filers comply with Section 404 annual reports for fiscal years ending on or after Nov. 15, 2014. 2) Non-accelerated filers were required to provide a management assessment (but not an auditor attestation) in their annual reports for the fiscal years ending on or after December 15, 2007. Year 4 is from Nov. 15, 2007 to Nov. 14, 2008, so Year 4 above is shortened by one month. Source: Audit Opinions of Financial Controls: Ten Years after Sarbanes-Oxley Act of 2002, A Section 404(b) Review, published June 2013 by Mark Cheffers
- 25. 25© 2013 Thank You! IFRS Adoption: Current SEC Activities
- 26. 26© 2013 Thank You Sponsors! PLATINUM GOLD SILVER DIAMOND