I.T. MANAGEMENT FINANCIAL REPORTING
TAX M&A REGULATORY REPORTING
June 2012 Essential Briefings SEC ISSUES GUIDANCE ON THE
IMPLEMENTATION OF THE JOBS ACT
RESOURCE MANAGEMENT ____________________________________________________________ An Effective People Management Culture is Imperative to Success in Business
FINANCIAL REPORTING ____________________________________________________________ Specific Procedures and Processes are Foundational to the Audit Committee’s Execution of its Responsibility Over Risk Management
I.T. MANAGEMENT ____________________________________________________________ ERP Software Implementations Consider Among the “7 Habits” to Ensure Success
Contents June 2012
ESSENTIAL BRIEFINGS 2 SE C IS SUE S GUIDA N C E O N T HE IMP L E ME N TAT IO N OF T HE JOB S AC T On May 3, the staff of the SEC updated its FAQ, Generally Applicable Questions on Title I of the JOBS Act. The following is a brief summary of some of the key provisions.
RESOURCE MANAGEMENT 4 A N E F F E C T I V E P E OP L E M A N AG E ME N T C ULT UR E IS IMP E R AT I V E T O SUC C E S S I N BUS I N E S S People are the driver of the business success. Any organization’s biggest and one of the most valuable assets are its employees. How to manage valuable employees effectively is a difficult and challenging issue to deal with on your daily operation.
FINANCIAL REPORTING 6 SP E C IF IC P ROC E DUR E S A N D P ROC E S SE S A R E F OUN DAT IO N A L T O T HE AUD I T C OMMI T T E E ’S E X EC U T IO N OF I T S R E SP O N S IBIL I T Y OV E R R ISK M A N AG E ME N T Since the SEC first recommended that publicly held companies establish audit committees in 1972, the responsibilities and authority of the audit committees have increased tremendously through the additional rules and recommendations issued by the National Commission on Fraudulent Financial Reporting, Blue Ribbon Committee and Sarbanes-Oxley Act.
I.T. MANAGEMENT 9 E R P S OF T WA R E IMP L E ME N TAT IO N S – C O N S ID E R A MO NG T HE “7 H A BI T S” T O E N SUR E SUC C E S S CFOs, you are well aware of the emotional response that the letters “ERP” can bring to executives and board members. The response is often not pleasant. That does not have to be the case.
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SEC ISSUES GUIDANCE ON THE IMPLEMENTATION OF THE JOBS ACT BY JIM PITRAT, CPA | CO-MANAGING PARTNER email@example.com | 310.477.3924
On May 3, the staff of the SEC updated its FAQ, Generally Applicable Questions on Title I of the JOBS Act. The following is a brief summary of some of the key provisions: • Generally, all non-convertible debt securities issued over the prior three-year period must be counted against the $1 billion debt limit, in determining whether a company has lost its EGC status. -- The Staff will not object if a company does not count debt securities in which securities issued in a private placement and therefore subject to restrictions on resale are exchanged for newly registered non-convertible debt securities having terms identical to the original restricted securities. • The Staff at the SEC believes view that Asset Backed Securities issuers do not qualify for EGC status. • The Staff of the SEC generally believes that investment companies also do not qualify as
securities occurred on or before December 8, 2011, the successor company also would not qualify.
Even if gross revenues exceeded $1 billion in prior years, a company could qualify as an EGC EGCs, but a business development company may qualify as an EGC. • Even if gross revenues exceeded $1 billion in prior years, a company could qualify as an EGC, even if gross revenues exceeded $1 billion in the most recent year. • The Staff believes that it would be appropriate for financial institutions to use the same approach in calculating gross revenue as that used by financial institutions to determine their status as a “smaller reporting company.” • If a predecessor company did not qualify as an EGC because its first sale of common equity
• Staff comment letters and issuer responses thereto on confidential draft submissions will be publicly released on EDGAR no earlier than 20 business days following the effective date of the registration statement • The Staff will not object if an EGC presents the ratio of earnings to fixed charges in a registration statement for the same number of years for which it is required to provide selected financial data under the JOBS Act’s. • EGCs must comply with XBRL.
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• The effective date for the definition of an EGC applies only to whether the first sale of common equity securities pursuant to an effective registration statement occurred on or before December 8, 2011. A company, therefore, otherwise eligible for EGC treatment would not be disqualified if it issued only debt securities on or before that date. • An EGC not qualifying as a smaller reporting company is required to include three years of audited financial statements in its Form 10-K. • An entity that has lost its EGC status because of a disqualifying event established by the JOBS Act may not regain its EGC status. • The Staff will deem the EGCs to be public entities (i.e., because they qualify as “issuers” under Section 2(a) of the Sarbanes-Oxley Act), and thus not excluded from compliance with the provisions of the FASB ASC applicable to public entities. 3 | SingerLewak
• If an EGC initially chooses to take advantage of the extended transition period for complying with new or revised financial accounting standards, the Staff will not object if the entity later decides to opt out of the extended adoption and transition period.
An EGC not qualifying as a smaller reporting company is required to include three years of audited financial statements in its Form 10-K • If an EGC discovers a material error in its financial statements after initial submission of a draft registration statement on a confidential basis, then the EGC may elect to submit a confidential draft amendment to the registration statement that corrects the error.
• While EGCs are required to furnish only the disclosures concerning executive compensation that are required of smaller reporting companies, EGCs are not permitted to follow the provisions applicable to smaller reporting companies in management’s discussion and analysis (MD&A), which limits the discussion to the latest two years. The discussions in filings on Form 10-K, would have to cover the three-year period. This PCEB constitutes a summary of some key provisions of the FAQ addendum, and not a full analysis. We recommend a full and thorough review of the FAQ.
AN EFFECTIVE PEOPLE MANAGEMENT CULTURE IS IMPERATIVE TO SUCCESS IN BUSINESS BY KEVIN YEH | MANAGER, ASSURANCE & ADVISORY firstname.lastname@example.org
People are the driver of the business success. Any organization’s biggest and one of the most valuable assets are its employees. How to manage valuable employees effectively is a difficult and challenging issue to deal with on your daily operation. Managing people effectively means motivating and engaging them so they feel valued and important. Team leaders first have to evaluate your team members current position and what’s the next goal your coached team
Managing people effectively means motivating and engaging them so they feel valued and important members to reach and what’s the strategic way to get there. Sometimes, team leaders are more
focusing on telling what the team members should do on current situation but have no thought for the future long term goal. People management is a dynamic process that if carrying out properly, could benefit the business for all sizes. Below are some tips for consideration to build up effective people management. • K N OW YOU R T E A M ME MBE RS A N D L E T T HE M K N OW YOU Why effective people management is so difficult?
One of the most challenging issues is to build up a trust relationship. Letting team member to know you and management style is as important as to know their strength and weakness. Knowing each team member could help you to arrange resources and place the right person on the right place. But to let them know you could help to build up a more transparent communication channel to resolve issues on a timely manner. • T RE AT PEO PL E PRO F E S SIO N A L LY A N D RE SPEC T F U L LY You would like your team members to respect you as a leader and at the same time, you should show your respect to them, as the way you like to be treated. It is beneficial to set up a firm and fair approach to team members and live with it as a constant guideline to deal with issues came up.
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• SE T U P E X P EC TAT IO N A N D RE V IE W P ROC E S S People have different level of knowledge and skill set and will not all perform equally, but they all can get better. Com-
The best way to really engage team members is to ask them for input to problem solving. Less effective leaders only focus on the role of decision maker. municate the expectation in an appropriate manner and allow them to have time to execute and provide feedback on what they do right and room to improve. One-to-one discussion and review with each member 5 | SingerLewak
should be held regularly to look back the performance and look forward the goals for the immediate future. • E NC OU R AG E IN P U T A N D DE L EG AT E BY L E V E L The best way to really engage team members is to ask them for input to problem solving. Less effective leaders only focus on the role of decision maker. By asking them for their advice or suggestions, they will feel fully engaged and more willing to be part of it. Delegation of work based on members’ level is a win-win if done properly. Delegation should also provide an opportunity for another person to grow and develop their skills. • RE WA RD A N D REC O G N I T IO N It’s important to recognize a job well done and to remember
happy employees are always leading to high productivity. Public recognition provides more incremental value to the employee satisfaction. Even the employees who are not recognized are motivated to achieve recognition in the future. Effective people management required constant attention and regular evaluation on both you and your members’ current position to be sure you are working effectively with each your member. This will help you and your members to grow and develop on a long term relationship and to create a momentum to be successful in a business environment.
SPECIFIC PROCEDURES AND PROCESSES ARE FOUNDATIONAL TO THE AUDIT COMMITTEE’S EXECUTION OF ITS RESPONSIBILITY OVER RISK MANAGEMENT BY CONNIE WONG | SENIOR MANAGER, ASSURANCE & ADVISORY email@example.com
Since the SEC first recommended that publicly held companies establish audit committees in 1972, the responsibilities and authority of the audit committees have increased tremendously through the additional rules and recommendations issued by the National Commission on Fraudulent Financial Reporting,
The risk of losing documents, photos and files on our personal computers and business networks through viruses or hardware malfunctions has become too great and hard to manage Blue Ribbon Committee and Sarbanes-Oxley Act. The responsibilities of audit committees are generally to:
• Oversee the financial reporting process, which includes review of complex or unusual transactions, review highly judgmental areas, review annual and quarterly financial statements, approve related parties trans-
• Engage and review the external auditors’ performance, which includes discussing all matters that are required to be communicated under generally accepted auditing standards with the external auditors and approval of non-audit services • Monitor compliance with laws
action and select accounting policies and principles • Oversee the internal control assessment process • Oversee the internal audit function
Wouldn’t it have been great if when my home computer crashed, that I could have gone to a library or friend’s house, or even my cell phone, and recovered the lost basketball schedule – in seconds? and regulations and results of management’s investigation
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• Provide an open avenue of communication between internal audit, external audits and the board of directors • Establish procedures related to confidential, anonymous submissions of concerns by employees regarding accounting and auditing matters • Review and discuss the company’s practices with respect to enterprise risk assessment and management • Any other responsibilities as requested by the board of directors Among the above listed responsibilities, risk assessment is a relatively new item as it was not explicitly called out until Sar-
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banes-Oxley Act. Sarbanes-Oxley Act utilizes a risk-based approach which requires management to perform detailed analysis to identify risks around the business, especially those that are related to financial reporting. Audit committees are then responsible to oversee this process. There are so many risks associated with a business, establishing procedures and processes will help management and audit committees to properly assess and manage the risks that are most relevant to the business. Below are some steps or procedures that management and audit committees can consider to integrate the risk-based approach.
Sarbanes-Oxley Act utilizes a risk-based approach which requires management to perform detailed analysis to identify risks around the business, especially those that are related to financial reporting STE P 1 : Management shall first identify all principal business risk. That shall include both financial and operational risk.
S T E P 2 : After identifying the risk, management shall then assess the likelihood of occurrence and the projected impact on the company assuming an â€œeventâ€? involving that risk were to occur, as well as the impact from a financial reporting aspect. This will enable management to link business risk to financial reporting to implement Sarbanes Oxley Act. S T E P 3 : After identifying the high risk events, i.e. the risk assessment part, management then has a roadmap to focus on the significant risk to further analyze internal controls around the risk, including risk implications and any mitigating actions, i.e. the risk management part. Assess-
ment of sufficient insurance coverage will usually be considered as well.
Policies shall also be set up to ensure timely updates to the risk assessment whenever new lines of business or products are launched. Annual review of the risk assessment will also be helpful.
are launched. Annual review of the risk assessment will also be helpful. Implementing enterprise risk management program will help management to better allocate resources to risks that are most significant to the business and to be prepared for the unexpected.
STEP 4 : Policies shall also be set up to ensure timely updates to the risk assessment whenever new lines of business or products
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I .T. MANAG E M E NT
ERP SOFTWARE IMPLEMENTATIONS – CONSIDER AMONG THE “7 HABITS” TO ENSURE SUCCESS BY BOB GREEN, CPA.CITP | PARTNER/PRACTICE LEADER firstname.lastname@example.org
CFOs, you are well aware of the emotional response that the letters “ERP” can bring to executives and board members. The response is often not pleasant. That does not have to be the case. If there is one thing we can con-
If there is one thing we can confirm from our years of experience with ERP selection and implementation project management, it is that more often successes are assured from ERP upgrades/projects when you use the “begin with the end in mind” strategy firm from our years of experience with ERP selection and implementation project management,
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it is that more often successes are assured from ERP upgrades/ projects when you use the “begin with the end in mind” strategy (thank you Steven Covey). This sounds simple, but it takes strategic leadership and mindful management of an ERP upgrade project team’s activities - to achieve. Simply, when you take on an ERP upgrade, we strongly recommend that the leadership or steering committee first develop key objectives as to what is to be achieved, and how success of these objectives will be measured. Then, more specifics need to be developed re: what the “end” will look like, from a reporting and process improvement perspec-
tive. And, consider the specific information needs and data fields that will be critical for capture in the ERP solution, as well as how they will be used in assessment of the business’ performance. These are but a few of many things that we recommend people consider when taking on a critical ERP upgrade project. WHAT’S AHEAD: Next month we’ll hit on a deeper discussion about these recommended activities, and by September we’ll be sharing these and some ERP success stories in our CFO Essentials Roundtables – stay tuned!
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