Michael Doan

Archive for the ‘Accounting’ Category

Bond rating disclosure law: SEC grants six month deferral

Now that the Dodd-Frank bill has been signed into law, issuers of asset-back bonds are required to disclose their credit rankings in their regulatory filings. Credit rating agencies like Moody’s are not happy about this because it subjects them to expert liability , “meaning that they would face the same legal risks as accountants and other parties that participate in bond sales.” Issuers were not able to obtain ratings for inclusion in their flings wit the SEC so the SEC granted issuers a waiver for six months which allows time for implementation of the law.

The article briefly mentions that issuers will consider an alternatives to this a law by using Rule 144a but doesn’t adequately explain what 144a is. A good explanation of 144a is here.

23 July 2010

Posted in Accounting,Business

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Dell pays $100MM to SEC for lack of disclosure

Financial statement disclosures in a public filing should allow an investor to see the company through the “eyes of management”. Dell’s management and the investors were seeing different things:

SEC said [Dell] also failed to disclose to investors large payments it received from Intel Corp. in exchange for not using central processing units made by Intel’s main rival, Advanced Micro Devices Inc

22 July 2010

Posted in Accounting,Business

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Proposed Accounting Standards Update may make it more difficult to get a bank loan

In the current economic environment, its difficult to obtain a bank loan or a line of credit. Businesses fortunate enough to have a line of credit worry about having their line pulled as bank credit managers continually tighten their lending requirements to keep their reserve ratios up with regulatory demands. A recently proposed Accounting Standards Update (ASU) No. 1810-100 (PDF) issued by the Financial Accounting Standards Board (FASB) could make it more difficult to obtain a bank loan.

ASU No. 1810-100, Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities — Financial Instruments (Topic 825) and Derivatives and Hedging (Topic 815) would, according to the FASB, result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRS, including word changes to describe the principles and requirements.

The impairment test and expanded use of fair value measurements in the proposed ASU 1810-100 has caused a stir in the banking industry. Banks say that changes in the accounting standards will require them to beef up their reserves and scale back loan originations. If this happens, businesses may find it even more difficult to get a line of credit.

Comments on this proposed standard is due September 7, 2010

6 July 2010

Posted in Accounting

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Say-on-Pay Provision of Wall Street Reform Bill affects Company Reporting

The Dodd-Frank Wall Street Reform and Consumer Protection Act, will have an impact on public companies. 

The bill, if passed, calls for shareholder votes (PDF) on executive compensation. The “say-on-pay” provision of the bill may alter the annual proxy process. The bill calls for hareholder votes on executive pay to take place within six months of the bill’s enactment. The SEC will have to act quickly to implement the bill.

A “say-on-pay” rule already applies to recipients of government aid under the Troubled Asset Relief Program. The current bill extends it to all public companies; however, it does allow the SEC to exempt an issuer or class of issuers. 

The bill also require public companies to: 

  • hold shareholder votes every three years on executive compensation
  • consider increasing the frequency to annual or bi-annual votes every six years 

Shareholders may make proposals, independent of management, on executive compensation practices. These proposals may be off-cycle; that is, they don’t have to fall within the three year and six year cycles noted above. 

The bill also requires that compensation committee members be independent. 

Posted via email from Michael Doan

6 July 2010

Posted in Accounting

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Interesting PCAOB fact

The Public Company Accounting Oversight Board is not formally a government agency. As such, they don’t have to adhere to government pay schedules. This means that board members are paid more that $500,000 per year. Not a bad job if you can get it.

Posted via email from Michael Doan

6 July 2010

Posted in Accounting

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SEC takes criticism for shell company filings

Imagine a public company, registered with the SEC, that has no revenues and limited assets (if any). That’s a fair description of your typical public shell company. According to a WSJ article, the SEC is getting heat for allowing these types of companies become registered in the first place but insists that it has “limited powers when it comes to blocking an initial public offering of stock—no matter how flimsy a company may look on paper.”

In a statement, the SEC said it has begun asking new shell companies how they plan to meet federal requirements for preparing audited financial statements. The agency said it also is looking more closely at the role of outside auditors at such companies.

Posted via email from Michael Doan

6 July 2010

Posted in Accounting

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Supreme Court says PCAOB is Valid

The Supreme Court unanimously upheld the constitutionality of the Public Company Accounting Oversight Board which was established with the passing of the Sarbanes-Oxley Act of 2002. However, the court was concerned with the tenure of the board members and in a 5-to-4 split decision, it gave the Securities and Exchanged Commission the authority to fire any of the PCAOB board members without cause. Before the ruling, the SEC could only fire a board member when there was good cause.

Posted via email from Michael Doan

6 July 2010

Posted in Accounting

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