Financial Reporting Blog: Best of 2016

2016 proved to be an interesting year, both in terms of developments in financial reporting and the range of topics covered on this blog. We’ve enjoyed sharing our thoughts in this forum over the last three years and look forward to new challenges and opportunities in 2017.

Here are this year’s 10 most popular posts from Mercer Capital’s Financial Reporting Blog in 2016:

10. Preferences and FinTech Valuations

Despite a strong year in the FinTech sector, IPO pricing is always tricky, especially in the tech space. In this post, we consider Square’s IPO and how preferences associated with shares affect valuations.

9. Lands’ End and Trade Name Impairment

Last week, Lands’ End, Inc. (NASDAQ: LE) announced that it would write down the value of its flagship trade name asset (Lands’ End). Management’s preliminary guidance is for a charge of $90 million to $110 million, which could lower the asset’s value by 20% from $528 million to $418 million. Obviously, a non-cash impairment charge is just that, non-cash, but what does it mean for stakeholders and how is such a charge actually determined?

8. Non-Compete Agreements: The Good, the Bad, and the Ugly

Non-compete agreements are increasingly in the news, though not always in the most favorable of contexts. Proponents argue that such agreements protect firms’ intellectual property and prevent the loss of key employees, customers, suppliers, and trade secrets. Others would suggest that non-competes stifle innovation by limiting competition and employee mobility. In this post, we consider recent examples of non-compete agreements and how they impact value.

7. 2016 Mid-Year Market Review of Public and Private Equity

The first six months of 2016 were eventful for U.S. markets. Worldwide, markets dealt with the continued blight within the oil industry and the shockwave ofUnited Kingdom’s decision to leave the European Union. In the U.S., investors worried over potential Fed interest rate hikes and the inflated unicorn valuations.

6. PCAOB to Focus on M&A and Fair Value in 2016

In July 2016, the PCAOB issued a staff inspection brief to provide information about the plan, scope, and objectives of PCAOB inspections in 2016 of registered audit firms and their audits of issuers. Translation: watch out for these potential landmines when preparing, auditing, or reviewing your firm’s financial statements.

5. FASB Muses on Goodwill Impairments

One question that the FASB has wrestled with over the last few years is if goodwill should be amortized or not. It’s been over a decade since amortization was replaced in favor of a periodic two-step goodwill impairment assessment. Adoption of these provisions has varied greatly. Now, more changes to this system are in the works, as the FASB Board met last week and made a few tentative decisions regarding the accounting for goodwill impairment for public and private entities.

4. A Guide to Reviewing a Purchase Price Allocation Report

A purchase price allocation report should be well documented, concise, and provide sufficient background information. This post enumerates elements of a properly prepared purchase price allocation report.

3. Corporate Finance in 30 Minutes

Corporate finance does not need to be a mystery. In this whitepaper, we have distilled the fundamental principles of corporate finance into an accessible and non-technical primer. Structured around the three key decisions of capital structure, capital budgeting, and dividend policy, the guide is designed to assist directors and shareholders without a finance background to make relevant and meaningful contributions to the most consequential financial decisions all companies must make.

2. 7 Things to Know About the New Lease Accounting Rules

More than ten years in the making, the FASB announced sweeping changes to the accounting for leases earlier this year that will affect nearly all financial statement issuers. Here’s a brief summary of what you need to know about Topic 842.

1. A Layperson’s Guide to the OPM: Everything You Always Wanted to Know About the OPM, But Were Afraid to Ask (Part 1)

The option pricing model, or OPM, is one of the shiniest new tools in the valuation specialist’s toolkit. While specialists have grown accustomed to working with the tool and have faith in the results of its use, many non-specialists remain wary, as the model – and its typical presentation – has all the trappings of a proverbial black box. The purpose of this post is to clarify the fundamental insight underlying the model and illustrate its application so that non-specialist users of valuation reports can gain greater comfort with the model.