Farewell

We began this blog in August 2013 with the mission to keep you, the reader, current on the latest financial reporting news. After over 200 posts and a book, it’s time to bid the blog farewell. Over the years, we have appreciated your readership, feedback, and support. Even though the blog is ceasing publication, we are committed to continuing our mission in a different format.

It seems fitting that we end the blog with a look back to 2017 and our 10 most popular posts for the year.

Thanks again. We will be back in touch soon.

10. PCAOB Inspection Scrutiny of Fair Value Measurement Continues

Fair value measurement has been a hot topic during the last few years, increasingly attributable to PCAOB identified audit deficiencies and heightening scrutiny over the existing fair value framework and related auditing standards.  In this post, we take a look at the causes of attention and recent responses from professionals and professional organizations.

9. Capital Structure in 30 Minutes

Capital structure decisions have long-term consequences for shareholders. The purpose of this whitepaper is to equip directors and shareholders to contribute to capital structure decisions that promote the financial health and sustainability of the company.

8. 5 Things to Know about Fair Value and Equity Investments

The rules are changing for how companies report their investments in other businesses. As highlighted in a recent article in the New York Times, new rules from the FASB regarding how entities will have to measure certain equity investments (for example, Google’s equity holdings in Uber) may lead to increased earnings volatility and additional fair value complexities. Here are five things to know about the “new” rules and a few questions to consider as the implementation dates approach.

7. Revenue Recognition: What’s an Analyst to Do?

The new revenue recognition standard has been called “historic in its breadth and impact across industries.” The standard itself was introduced back in 2014 with the FASB’s issuance of Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). Since that time, accountants and preparers have grappled with preparing for the new guidance. The focus of this post is not to comprehensively explain the new rules. Instead, we examine one public company’s experience with the transition (Workday) and then highlight a few areas that may be of interest to analysts, finance managers, and interested onlookers – from a valuation perspective.

6. Corporate Venture Capital Trends

With the rapid rise of corporate venture capital and increasing pressure to jump on board with startups, it seems that many companies across the industry spectrum are making venture investments.

5. Q&A: New Guidance on Valuation of Contingent Consideration (Earnouts)

Contingent considerations (earnouts) are agreements between the parties to a corporate transaction to defer a portion of the purchase price. Techniques for measuring fair value have evolved over time. The exposure draft advocates wider application of options-based methods. The guidance is an important step in advancing the valuation profession. The SEC and others have lamented the diversity of practice among practitioners, and the exposure draft addresses that concern in a constructive manner. The detailed discussions and examples should promote broad and consistent adoption of techniques that have to-date been applied only sporadically and inconsistently. Techniques advocated in the exposure draft should promote the “auditability” of very tricky and subjective fair value measurements.

4. People Are Worried About Equity Compensation

On the one hand, it is not difficult to imagine that tax changes would have some effect, at the margin, on the mix of the various forms of employee compensation – current cash, deferred/contingent cash, or equity scrips. On the other hand, it is difficult to conjecture a causal relationship between changing financial reporting requirements and lower aggregate (risk-adjusted) take-home worker compensation.

3. Amazon, Whole Foods, and Value Implications

Much has been written about Amazon’s $13.4 billion acquisition of Whole Foods Market that was announced on Friday, June 16. There are all sorts of theories about Amazon’s strategy and the brilliance (or folly) of combining the powerhouse online retailer with a traditional retail grocery chain. But for purposes of this post, we’re going to take a step back and look at the impact of the two externally-driven events on the stock prices of other players in the industry.

2. Corporate Venture Capital and ASU 2016-01: Best Practices for Equity Investments

Accounting Standards Update 2016-01 has generally flown under the radar since it was released almost two years ago. However, this accounting update has the potential to significantly affect financial reporting by public and private companies with minority equity investments – including corporate entities with a portfolio of venture capital investments. In this post, we release our whitepaper on the topic, which provides an overview of the accounting standards changes as they pertain to companies with equity investments and a few best practice considerations for firms with exposure to these changes.

1. A Market Participant Perspective on the Size Premium

The traditional method for measuring return premiums is backward-looking. Analysts typically compare realized returns for various asset classes over long historical periods, inferring the premiums from the differences in the return series. With regard to the size premium in particular, this approach has a number of shortcomings.

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