Everyone knows the importance of post-mortems but something seems to be keeping your team from actually doing them. Whether it’s a question of psychology or sociology, our guide provides six reasons why your post-mortem process might be failing. Read more to see how you can stop making these mistakes!
The document discusses conducting a post-project review for a landscaping project between ACME Fabricators and Arbor Landscaping. It provides guidance on how to structure the review report and conduct the review process. Key points include assessing what aspects of the project went well and could be improved, documenting lessons learned, and formulating recommendations to apply to future projects. Having a project manager involved may have improved communication and coordination between the two companies during the project.
The document summarizes a project retrospective meeting held by Dennis Stevenson on April 23, 2008. The meeting involved exercises to identify key events that led to the project outcome, determine root causes, and develop a shared action plan to monitor risks and improve outcomes for future projects. Participants analyzed events from a neutral perspective, prioritized critical factors, and identified ways to detect risks so issues can be addressed promptly. The retrospective concluded by summarizing what was achieved.
The SEC staff issued 90 comments to 50 companies related to stock compensation between July 2015 and June 2016. The majority of comments (78%) related to financial statement presentation and disclosure. Over half (51%) of the comments were on S-1/DRS filings. The comments primarily focused on disclosure (49% of comments), accounting recognition (27%), and valuation (24%). Common disclosure issues included lack of transparency around valuation assumptions and changes. Recognition comments often addressed complex areas like expense recognition, tax accounting, and equity vs liability classification.
The Society of Actuaries (SoA) released updated mortality projection scales called MP-2016 which incorporate newer mortality data from 2012-2014. For employers using SoA mortality assumptions, adopting MP-2016 is expected to lower pension benefit obligations by 1-3%. Employers using alternative projections should consider whether the new data and model refinements impact their assumptions. Financial statements issued after October 20, 2016 should consider the new MP-2016 scales when determining benefit obligations.
The document summarizes IRS rules regarding tax withholdings for stock compensation and how they compare to new FASB rules. There are three main methods for withholding taxes on supplemental wages like stock compensation: mandatory flat rate of 39.6% for amounts over $1 million; optional flat rate of 25%; or aggregate method using Form W-4. While FASB allows withholding up to maximum tax rates, IRS rules currently only permit the three specified methods. Employers should consider implications of any changes to withholding practices.
The document presents the findings of PwC's 2016 study analyzing stock compensation assumptions and disclosures of large non-high tech and high tech US public companies. It finds that in 2015, both groups continued to rely heavily on the Black-Scholes option pricing model for valuing awards. While large companies saw a shift towards restricted stock, high tech companies maintained a balance between stock options and restricted stock. The study also analyzes trends in various assumptions like expected term, volatility, and post-vesting restrictions used in these companies' stock compensation programs.
Everyone knows the importance of post-mortems but something seems to be keeping your team from actually doing them. Whether it’s a question of psychology or sociology, our guide provides six reasons why your post-mortem process might be failing. Read more to see how you can stop making these mistakes!
The document discusses conducting a post-project review for a landscaping project between ACME Fabricators and Arbor Landscaping. It provides guidance on how to structure the review report and conduct the review process. Key points include assessing what aspects of the project went well and could be improved, documenting lessons learned, and formulating recommendations to apply to future projects. Having a project manager involved may have improved communication and coordination between the two companies during the project.
The document summarizes a project retrospective meeting held by Dennis Stevenson on April 23, 2008. The meeting involved exercises to identify key events that led to the project outcome, determine root causes, and develop a shared action plan to monitor risks and improve outcomes for future projects. Participants analyzed events from a neutral perspective, prioritized critical factors, and identified ways to detect risks so issues can be addressed promptly. The retrospective concluded by summarizing what was achieved.
The SEC staff issued 90 comments to 50 companies related to stock compensation between July 2015 and June 2016. The majority of comments (78%) related to financial statement presentation and disclosure. Over half (51%) of the comments were on S-1/DRS filings. The comments primarily focused on disclosure (49% of comments), accounting recognition (27%), and valuation (24%). Common disclosure issues included lack of transparency around valuation assumptions and changes. Recognition comments often addressed complex areas like expense recognition, tax accounting, and equity vs liability classification.
The Society of Actuaries (SoA) released updated mortality projection scales called MP-2016 which incorporate newer mortality data from 2012-2014. For employers using SoA mortality assumptions, adopting MP-2016 is expected to lower pension benefit obligations by 1-3%. Employers using alternative projections should consider whether the new data and model refinements impact their assumptions. Financial statements issued after October 20, 2016 should consider the new MP-2016 scales when determining benefit obligations.
The document summarizes IRS rules regarding tax withholdings for stock compensation and how they compare to new FASB rules. There are three main methods for withholding taxes on supplemental wages like stock compensation: mandatory flat rate of 39.6% for amounts over $1 million; optional flat rate of 25%; or aggregate method using Form W-4. While FASB allows withholding up to maximum tax rates, IRS rules currently only permit the three specified methods. Employers should consider implications of any changes to withholding practices.
The document presents the findings of PwC's 2016 study analyzing stock compensation assumptions and disclosures of large non-high tech and high tech US public companies. It finds that in 2015, both groups continued to rely heavily on the Black-Scholes option pricing model for valuing awards. While large companies saw a shift towards restricted stock, high tech companies maintained a balance between stock options and restricted stock. The study also analyzes trends in various assumptions like expected term, volatility, and post-vesting restrictions used in these companies' stock compensation programs.
The document analyzes pension and other post-employment benefit (OPEB) assumptions and disclosures from 100 large companies' 2015 year-end reports. Key findings include:
- 25 companies adopted a multiple discount rate approach for pension costs, up from none in 2014. 12 companies adopted a mark-to-market approach for gains/losses, up from none.
- Median pension discount rate was 4.3%, up from 4.0% in 2014 but down from 6.25% in 2007. Median expected return was 7.25%, down from 7.35% in 2014 but also down from 8.3% in 2007.
- Median pension plan was 82% funded in 2015 and 2014
The FASB finalized changes to simplify stock compensation accounting. Key changes include requiring excess tax benefits and deficiencies to be recognized in income, allowing a policy election to account for forfeitures as they occur or estimate them, and permitting equity classification for net share settlements up to the maximum statutory tax rate. The changes aim to reduce complexity but may increase earnings volatility and effective tax rates. Early adoption is permitted for annual periods beginning after December 15, 2016 for public companies and after December 15, 2017 for others.
The FASB proposed two changes to financial reporting of pension and other postretirement benefits: 1) Separating the reporting of pension costs into a service cost component and other components, presenting service cost with compensation costs and other components outside of operating results. 2) Eliminating some disclosure requirements deemed not useful while adding requirements to provide additional useful information about defined benefit plans. Comments on the proposals are due by April 25, 2016. The changes aim to improve transparency around pension reporting.
Using multiple discount rates to develop benefit plan cost
The document discusses alternative approaches companies have considered for determining discount rates to calculate interest and service costs for defined benefit plans, including using multiple discount rates. The SEC would not object to companies changing to an approach using individual spot rates from the yield curve. Companies considering a change need to evaluate accounting implications, such as whether it is a change in estimate. Recent SEC guidance indicates such a change could be treated as a change in estimate with certain disclosure requirements.
This document summarizes the findings of PwC's 2015 Stock Compensation Assumption and Disclosure Study. Some key findings:
- Large companies rely heavily on the Black-Scholes model for stock option valuation, while high tech companies rely almost exclusively on it.
- Both groups saw decreases in stock price volatility assumptions and increases in risk-free interest rate assumptions from 2013 to 2014.
- The mix of equity awards has shifted from stock options to restricted stock over time for both groups. Restricted stock now makes up a larger proportion of total grant value.
- Median stock compensation expenses as a percentage of income decreased for both groups from 2013 to 2014.
The document discusses recent SEC comment letter trends related to employee stock compensation. Some key points:
- 52% of comments related to disclosure issues, 30% to valuation, and 18% to accounting recognition.
- Most comments (65%) were in the MD&A section and related to S-1 filings (81%). Pharma/life sciences received the most comments (47%).
- Disclosure comments focused on valuation information and IPO-related details. Valuation comments centered on "cheap stock" issues around options granted at prices below expected IPO prices.
- The SEC has emphasized providing transparent disclosures and evaluating stock compensation valuations leading up to an IPO.
This document discusses pension buy-in arrangements, which are similar to annuities but do not transfer responsibility for pension obligations from the employer to an insurer. Under a buy-in, the pension plan purchases a contract from an insurer to generate returns to cover future benefit payments, but the plan remains responsible for payments. The document explores accounting implications, noting buy-ins do not qualify for settlement accounting and should be recorded as a plan asset at fair value.
The document summarizes new accounting guidance from the National Association of Insurance Commissioners (NAIC) for pensions and other postretirement benefits for insurance companies. The new guidance adopts many of the provisions of ASC 715, such as including nonvested benefits in obligations, using fair value of plan assets to determine costs, and recognizing unfunded obligations on the balance sheet. However, it differs from ASC 715 in some areas like the treatment of gains/losses and transition rules. The guidance is aimed to simplify accounting compared to prior statutory standards, but recognizing unfunded obligations may burden some companies.
This document summarizes a study by PwC analyzing clawback policies disclosed in proxy statements of 100 large public companies from 2009 to 2012. The most common clawback triggers were restatements of financial results, either with or without employee involvement, and misconduct. Restatements and misconduct remained the top triggers across industries. While policies were in place, clawbacks have rarely been enforced in practice. The study examined features of clawback policies like covered compensation, lookback periods, and disclosure trends over time.
The document summarizes the findings of PwC's 2014 pension and OPEB assumption and disclosure survey. Key findings include:
- The median pension discount rate increased 80 basis points from 2012 to 4.8% in 2013, while the expected return on pension assets decreased 23 basis points to 7.5%.
- Median pension plan funding levels increased significantly from 77% in 2012 to 90% in 2013 due to higher discount rates and asset returns.
- For OPEB plans, the median discount rate increased 76 basis points from 2012 to 4.65% in 2013, while the expected initial healthcare trend rate decreased 50 basis points.
This document summarizes the key findings of PwC's 2014 Stock Compensation Assumption and Disclosure Study. The study analyzed stock compensation disclosures of 100 large companies and 100 high-tech companies. Some of the main findings include:
- For large companies, the mix of equity awards granted was nearly 50/50 between stock options and restricted stock in 2013. For high-tech companies, restricted stock awards comprised 59% of grants on average.
- Median stock compensation expense as a percentage of income was 3.27% for large companies and 9.18% for high-tech companies.
- The Black-Scholes option pricing model remained the dominant method used, adopted by 85% of large companies
The document analyzes pension and other post-employment benefit (OPEB) assumptions and disclosures from 100 large companies' 2015 year-end reports. Key findings include:
- 25 companies adopted a multiple discount rate approach for pension costs, up from none in 2014. 12 companies adopted a mark-to-market approach for gains/losses, up from none.
- Median pension discount rate was 4.3%, up from 4.0% in 2014 but down from 6.25% in 2007. Median expected return was 7.25%, down from 7.35% in 2014 but also down from 8.3% in 2007.
- Median pension plan was 82% funded in 2015 and 2014
The FASB finalized changes to simplify stock compensation accounting. Key changes include requiring excess tax benefits and deficiencies to be recognized in income, allowing a policy election to account for forfeitures as they occur or estimate them, and permitting equity classification for net share settlements up to the maximum statutory tax rate. The changes aim to reduce complexity but may increase earnings volatility and effective tax rates. Early adoption is permitted for annual periods beginning after December 15, 2016 for public companies and after December 15, 2017 for others.
The FASB proposed two changes to financial reporting of pension and other postretirement benefits: 1) Separating the reporting of pension costs into a service cost component and other components, presenting service cost with compensation costs and other components outside of operating results. 2) Eliminating some disclosure requirements deemed not useful while adding requirements to provide additional useful information about defined benefit plans. Comments on the proposals are due by April 25, 2016. The changes aim to improve transparency around pension reporting.
Using multiple discount rates to develop benefit plan cost
The document discusses alternative approaches companies have considered for determining discount rates to calculate interest and service costs for defined benefit plans, including using multiple discount rates. The SEC would not object to companies changing to an approach using individual spot rates from the yield curve. Companies considering a change need to evaluate accounting implications, such as whether it is a change in estimate. Recent SEC guidance indicates such a change could be treated as a change in estimate with certain disclosure requirements.
This document summarizes the findings of PwC's 2015 Stock Compensation Assumption and Disclosure Study. Some key findings:
- Large companies rely heavily on the Black-Scholes model for stock option valuation, while high tech companies rely almost exclusively on it.
- Both groups saw decreases in stock price volatility assumptions and increases in risk-free interest rate assumptions from 2013 to 2014.
- The mix of equity awards has shifted from stock options to restricted stock over time for both groups. Restricted stock now makes up a larger proportion of total grant value.
- Median stock compensation expenses as a percentage of income decreased for both groups from 2013 to 2014.
The document discusses recent SEC comment letter trends related to employee stock compensation. Some key points:
- 52% of comments related to disclosure issues, 30% to valuation, and 18% to accounting recognition.
- Most comments (65%) were in the MD&A section and related to S-1 filings (81%). Pharma/life sciences received the most comments (47%).
- Disclosure comments focused on valuation information and IPO-related details. Valuation comments centered on "cheap stock" issues around options granted at prices below expected IPO prices.
- The SEC has emphasized providing transparent disclosures and evaluating stock compensation valuations leading up to an IPO.
This document discusses pension buy-in arrangements, which are similar to annuities but do not transfer responsibility for pension obligations from the employer to an insurer. Under a buy-in, the pension plan purchases a contract from an insurer to generate returns to cover future benefit payments, but the plan remains responsible for payments. The document explores accounting implications, noting buy-ins do not qualify for settlement accounting and should be recorded as a plan asset at fair value.
The document summarizes new accounting guidance from the National Association of Insurance Commissioners (NAIC) for pensions and other postretirement benefits for insurance companies. The new guidance adopts many of the provisions of ASC 715, such as including nonvested benefits in obligations, using fair value of plan assets to determine costs, and recognizing unfunded obligations on the balance sheet. However, it differs from ASC 715 in some areas like the treatment of gains/losses and transition rules. The guidance is aimed to simplify accounting compared to prior statutory standards, but recognizing unfunded obligations may burden some companies.
This document summarizes a study by PwC analyzing clawback policies disclosed in proxy statements of 100 large public companies from 2009 to 2012. The most common clawback triggers were restatements of financial results, either with or without employee involvement, and misconduct. Restatements and misconduct remained the top triggers across industries. While policies were in place, clawbacks have rarely been enforced in practice. The study examined features of clawback policies like covered compensation, lookback periods, and disclosure trends over time.
The document summarizes the findings of PwC's 2014 pension and OPEB assumption and disclosure survey. Key findings include:
- The median pension discount rate increased 80 basis points from 2012 to 4.8% in 2013, while the expected return on pension assets decreased 23 basis points to 7.5%.
- Median pension plan funding levels increased significantly from 77% in 2012 to 90% in 2013 due to higher discount rates and asset returns.
- For OPEB plans, the median discount rate increased 76 basis points from 2012 to 4.65% in 2013, while the expected initial healthcare trend rate decreased 50 basis points.
This document summarizes the key findings of PwC's 2014 Stock Compensation Assumption and Disclosure Study. The study analyzed stock compensation disclosures of 100 large companies and 100 high-tech companies. Some of the main findings include:
- For large companies, the mix of equity awards granted was nearly 50/50 between stock options and restricted stock in 2013. For high-tech companies, restricted stock awards comprised 59% of grants on average.
- Median stock compensation expense as a percentage of income was 3.27% for large companies and 9.18% for high-tech companies.
- The Black-Scholes option pricing model remained the dominant method used, adopted by 85% of large companies
1. Insights
from Human Resource Services
www.pwc.com
FAS 123(R) post-implementation review report issued
September 2, 2014
In brief
The Financial Accounting Foundation (FAF) recently issued their Post-Implementation Review (PIR) Report on FASB Statement No. 123(R), Share-Based Payment1 (FAS 123(R) or the Standard). Overall, the PIR team concluded that FAS 123(R) is meeting its objectives and there have not been significant unanticipated consequences related to the Standard. However, certain elements of FAS 123(R) were found to be difficult or costly for companies to apply, particularly for nonpublic entities due to the complexity of the instruments used in share-based payment awards.
In detail
Background
The FAF is the oversight body of the Financial Accounting Standards Board (FASB or the Board). In 2010, the FAF implemented a PIR process as part of their FASB standard- setting oversight responsibilities. The objectives are to improve the standard- setting process, in part, through a robust, independent and credible PIR process.
The three primary PIR objectives are to: 1) determine whether a standard is accomplishing its stated purpose, 2) evaluate its implementation and continuing compliance costs and related benefits, and 3) provide feedback to improve the standard-setting process (as opposed to recommending standard-setting actions).
Generally, FAF will review significant standards that have been used in practice long enough for the FASB to have had time to address implementation issues. Procedures include reviewing the FASB’s project archive files; obtaining feedback from subject-matter experts who are part of a resource group; conducting stakeholder surveys; reviewing academic, industry and user publications; and reviewing financial statements (including footnote disclosures) and other information for selected public and nonpublic entities.
The FAF has previously completed PIRs related to income taxes, business combinations, fair value measurements, and segment reporting (among others).
Post-implementation review of FAS 123(R)
There were several key observations from the PIR Report of FAS 123(R):
The Standard addressed the concerns of users and others that entities were not recognizing in earnings the cost of employee services received in exchange for share-based payment awards, increased comparability and simplified accounting for share-based payment transactions by eliminating alternative accounting methods previously allowed and
2. Insights
2 pwc
converged, to a large extent, the accounting for share-based payment transactions with IFRS.
FAS 123(R) is often more difficult for nonpublic entities to understand and apply as intended than public entities primarily due to complexity of the financial instruments they use for share- based payment awards and their lack of internal expertise.
Both public or nonpublic entities have some level of difficulty understanding and/or applying the Standard’s requirements related to:
o accounting for APIC pools (public and nonpublic),
o liability versus equity classification (public and nonpublic),
o minimum tax withholdings (public),
o estimated expected forfeitures (nonpublic), and
o measuring share-based payment transactions (nonpublic).
FASB response In the FASB’s response letter to the FAF, the Board noted the PIR process has provided important stakeholder feedback on the benefits and costs of FAS 123(R) in light of actual experience with using and preparing the information for an extended period of time.
Based on the overall findings of the PIR team, the FASB does not plan to undertake a comprehensive review of the Standard. However, the Board recognized that the PIR team reported some areas within FAS 123(R) that may be difficult or costly for entities to apply. This feedback is consistent with input the FASB previously received directly from stakeholders through outreach performed for the FASB’s Simplification Initiative and for pre- agenda research performed for the Private Company Council (PCC). FASB staff outreach on improvements to accounting for share-based payment transactions is ongoing. The FASB staff will bring the results of their outreach to the Board and the PCC later in 2014 to consider whether certain narrow-scope projects should be undertaken to address certain specific areas.
The takeaway
No standard-setting process recommendations resulted from the PIR team’s review. FASB does not plan to undertake a comprehensive review of FAS 123(R). The FASB staff’s outreach on improvements to accounting for share-based payment transactions is ongoing and will include identifying potential cost- effective solutions for areas that could be considered in potential narrow- scope projects.
1The FAF has previously completed PIR’s related to income taxes, business combinations, fair value measurements, and segment reporting (among others).