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Transcript of 36th Annual SEC and Financial Reporting Institute Conference€¦ · SEC and Financial Reporting...
SEC and Financial Reporting Institute
36th Annual
SEC and Financial Reporting Institute Conference June 8, 2017 Millennium Biltmore Hotel Los Angeles, California
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
DOCUMENT INDEX
20170605
SEC and Financial Reporting Institute
Program and Speakers
1. Program
2. Speakers and Speaker Biographies
Presentation Slides
3. Session 1 - FASB Update
4. Session 2 & 3 - Current Accounting and Auditing Practice Issues
5. Session 5 - Being a CPA in the data age
6. Session 7 - Implementing “New GAAP”: Revenue Recognition, Leases, and Financial Instruments
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
PROGRAM
20170604
SEC and Financial Reporting Institute
Morning Sessions | Crystal Ballroom and Tiffany Room . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7:30 - 8:30 Registration and Continental Breakfast
8:30 - 8:40 SEC and Financial Reporting Institute Welcome
Lori L. Smith Assistant Professor USC Leventhal School of Accounting
William W. Holder Dean, Leventhal School of Accounting Alan Casden Dean’s Chair in Accounting USC Leventhal School of Accounting
8:40 - 9:50 Opening Addresses by the SEC and the FASB
Wesley R. Bricker Chief Accountant Office of the Chief Accountant U.S. Securities and Exchange Commission
Matthew Esposito Assistant Director Financial Accounting Standards Board
9:50 - 10:35 Current Accounting & Auditing Practice Issues - Part I
Moderator Panelists John W. White Partner Cravath, Swaine & Moore LLP
Mark Kronforst Chief Accountant Division of Corporation Finance U.S. Securities and Exchange Commission
Marc Panucci Deputy Chief Accountant Office of the Chief Accountant U.S. Securities and Exchange Commission
John May Partner, SEC Services Leader PricewaterhouseCoopers LLP
Sharon Varig VP, Controller and Chief Accounting Officer Aetna
10:35 - 10:50 Refreshment Break
10:50 - 12:40 Current Accounting & Auditing Practice Issues - Part II
Moderators Panelists John W. White Partner Cravath, Swaine & Moore LLP
Mark Kronforst Chief Accountant Division of Corporation Finance U.S. Securities and Exchange Commission
Marc Panucci Deputy Chief Accountant Office of the Chief Accountant U.S. Securities and Exchange Commission
Lori L. Smith Assistant Professor USC Leventhal School of Accounting
John May Partner, SEC Services Leader PricewaterhouseCoopers LLP
Sharon Varig VP, Controller and Chief Accounting Officer Aetna
Helen A. Munter Director Registration and Inspections Public Company Accounting Oversight Board
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
PROGRAM
20170604
SEC and Financial Reporting Institute
Luncheon and Keynote Presentation | Biltmore Bowl . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12:50 - 2:20 Luncheon and Keynote Presentation A Conversation with Jeannette Franzel, PCAOB Board Member
Introductions Luncheon Presentation Roger Molvar Board Member PacWest Bancorp
Dennis R. Beresford Executive in Residence J.M. Tull School of Accounting University of Georgia
Jeanette M. Franzel Board Member Public Company Accounting Oversight Board
Afternoon Sessions | Crystal Ballroom and Tiffany Room . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2:30 - 3:15 Being a CPA in the Digital Age
Moderator Panelist Lori L. Smith Assistant Professor USC Leventhal of School of Acctg
Max Carrier National Partner-in-Charge, eAudIT, KPMG Global
Delivery Center and Audit Data & Analytics KPMG LLP
3:15 - 4:05 OCA Consultation Trends
Moderator Panelist Scott A. Taub Managing Director Financial Reporting Advisors, LLC
Sagar Teotia Deputy Chief Accountant Office of the Chief Accountant U.S. Securities and Exchange Commission
4:05 - 4:15 Refreshment Break
4:15 - 5:30 Implementing “New GAAP”: Revenue Recognition, Leases, Financial Instruments
Moderator Panelists Scott A. Taub Managing Director Financial Reporting Advisors, LLC
Kristin Bauer Partner Deloitte & Touche LLP
Joshua D. Paul Director, Technical Accounting Google
Rahul Gupta Partner, National Professional Standards Grant Thornton LLP
Shari Mager Managing Director KPMG LLP
Rick Lawlor Senior Finance Director, Corporate Accounting Microsoft
Reception | Tiffany Room . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5:30 - 6:30 Reception
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKERS
SEC and Financial Reporting Institute
Dennis R. Beresford Executive in Residence J.M. Tull School of Accounting
University of Georgia
Kristin Bauer Partner Deloitte & Touche LLP
Wesley R. Bricker Chief Accountant Office of the Chief Accountant
U.S. Securities and Exchange Commission
Max Carrier National Partner-in-Charge, eAudIT
KPMG LLP
Matthew Esposito Assistant Director Financial Accounting Standards Board
Jeanette M. Franzel Board Member Public Company Accounting Oversight Board
Rahul Gupta Partner, National Professional Standards Group
Grant Thornton LLP
William W. Holder Dean, Leventhal School of Accounting
Alan Casden Dean’s Chair in Accounting
USC Leventhal School of Accounting
Mark Kronforst Chief Accountant Division of Corporation Finance
U.S. Securities and Exchange Commission
Rick Lawlor Senior Finance Director, Corporate Accounting
Microsoft
Shari Mager Managing Director KPMG LLP
John May Partner, SEC Services PricewaterhouseCoopers LLP
Roger H. Molvar Board Member PacWest Bancorp
Helen A. Munter Director Division of Registration and Inspections
Public Company Accounting Oversight Board
Marc Panucci Deputy Chief Accountant Office of the Chief Accountant
U.S. Securities and Exchange Commission
Joshua D. Paul Director, Technical Accounting
Scott A. Taub Managing Director Financial Reporting Advisors, LLC
Sagar Teotia Deputy Chief Accountant Office of the Chief Accountant
U.S. Securities and Exchange Commission
Sharon Varig VP, Controller and Chief Accounting Officer
Aetna
John W. White Partner Cravath, Swaine & Moore LLP
20170604
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 1
SEC and Financial Reporting Institute
Dennis (Denny) R. Beresford is Executive in Residence at the J. M. Tull School of Accounting, Terry College of Business, University of Georgia. From July 1997 through June 2013 he was Ernst & Young Executive Professor of Accounting. From January 1987 through June 1997 he was chairman of the Financial Accounting Standards Board. Previously, he was national director of accounting standards for Ernst & Young. He is a graduate of the University of Southern California. Denny previously served on the boards of National Service Industries, Inc., WorldCom (MCI), Inc., Kimberly-Clark Corporation, Fannie Mae, and Legg Mason, Inc. He is also a member of the board of directors of the National Association of Corporate Directors and the Financial Reporting Committee of the Institute of Management Accountants. In 1995, Denny was awarded an honorary Doctor of Humane Letters degree from DePaul University. In 2004 he was elected to the Accounting Hall of Fame and received the AICPA Gold Medal for distinguished service. In 2006 he was selected as one of the inaugural inductees of Financial Executives International’s Hall of Fame. In 2012 the Journal of Accountancy named him as one of the “125 people of impact in accounting,” as among those who have had the most impact on the accounting profession since the AICPA was founded in 1887. In 2013 he received the Institute of Management Accountants’ first Distinguished Member Award.
Dennis R. Beresford Executive in Residence J.M. Tull School of Accounting University of Georgia
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 2
SEC and Financial Reporting Institute
Kristin Bauer Partner - National Office Deloitte & Touche LLP
Kristin Bauer specializes in technical accounting at Deloitte’s National Office serving as a consultation resource to engagement teams serving a broad range of industries. She specializes in revenue recognition and leases and has extensive experience in current implementation efforts. In her current role, Ms. Bauer’s responsibilities include formulating firm policies and interpretative guidance on accounting standards for Deloitte professionals, clients, and other parties interested in financial reporting and in communicating with accounting standard setters and regulators. Prior to rejoining Deloitte in 2014, Kristin was a Practice Fellow at the Financial Accounting Standards Board (FASB) from 2010 to 2014. During her time at the FASB, she led the FASB’s revenue recognition project team that developed the final revenue standard (ASU 2014-09 and IFRS 15). She was also a key contributor to the project team responsible for improving the financial reporting of leases, ultimately resulting in ASC 842 and IFRS 16. Before her fellowship, Kristin served in various roles in Deloitte’s National Office. As a consultation resource, she assisted engagement teams with addressing issues related to restatements, assessments of materiality, management integrity, possible fraud and illegal acts and client continuance. Kristin started her career in Deloitte’s Chicago office and served clients in that market for 10 years. Immediately prior to joining National Office, she was the lead senior manager on the IPO and subsequent-year audit of a newly created carve-out entity. She concentrated on large, public multinational clients and addressed technical accounting matters including adoption of new accounting pronouncements, carve-outs, acquisitions, and divestitures. Certified Public Accountant – Illinois and Connecticut Bachelor of Science in Accountancy, with Honors – University of Illinois — Urbana Champaign
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 3
SEC and Financial Reporting Institute
Wesley R. Bricker Chief Accountant Office of the Chief Accountant U.S. Securities and Exchange Commission
Wes is the Chief Accountant for the U.S. Securities and Exchange Commission. In the role, he serves as the principal advisor to the SEC on accounting and auditing matters. He consults with registrants, auditors and other industry representatives, and is responsible for the oversight of the Financial Accounting Standards Board (FASB) and the Public Company Accounting Oversight Board (PCAOB), among the other duties of the Chief Accountant. He joined the SEC from PricewaterhouseCoopers LLP, where he was a partner responsible for clients in the banking, capital markets, financial technology, and investment management sectors. Earlier, he served as a professional accounting fellow in Office of the Chief Accountant and prior to that held various audit and professional practice positions at PwC, including in the firm’s national office during the global financial crisis advising on complex financial accounting matters. Mr. Bricker is trained as an accountant and lawyer with degrees from Elizabethtown College and the American University Washington College of Law. He is licensed to practice as a certified public accountant in Virginia, Maryland, the District of Columbia, Pennsylvania, and New Jersey and as an attorney in New York.
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 4
SEC and Financial Reporting Institute
Max Carrier National Partner-in-Charge, eAudIT, KPMG Global Delivery Center and Audit Data & Analytics KPMG LLP
Max has been with KPMG for 37 years, successfully serving in a number of leadership positions. Max is currently the National Partner-in-Charge of eAudIT, KPMG Global Delivery Center and Audit Data & Analytics. Max’s leadership responsibilities have included financial and operations management, technology and data & analytics development, deployment and support, change management, centralization and standardization of services, budgeting and forecasting, strategic planning, assuring the global delivery of KPMG’s commitment to client care and audit quality, retaining and developing key resources, risk management, audits of Fortune 500 companies, and representing the Firm in the marketplace and business community. He is currently instrumental in the development and implementation of KPMG’s Data & Analytics Masters Program with Universities across the country. Publications and speaking engagements
• Presenter for Houston TSCPA Foundation and the Business and Industry Committee Expo focusing on the topic of data and analytics
• Panelist for American Accounting Association’s Accounting Programs Leadership Group and the Federation of Schools of Accountancy Annual Seminar on the topic of Big Data Resources
• Moderator and panelist for KPMG’s Audit Committee Institute Roundtable Series, focusing on the responsibilities and challenges of today’s audit committee members.
• Moderator and panelist at National Association of Corporate Director’s educational seminars discussing board and audit committee responsibilities and challenges, corporate governance and technology concerns.
• Guest lecturer to the undergraduate program at the University of Texas at Dallas, the Corporate Governance MBA program at Southern Methodist University, and the Masters in Accounting Program at The Ohio State University.
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 5
SEC and Financial Reporting Institute
Matthew Esposito Assistant Director Financial Accounting Standards Board
Matthew Esposito is an assistant director of technical activities at the Financial Accounting Standards Board (FASB). Mr. Esposito oversees various technical areas, including those related to the accounting for financial instruments, credit losses, consolidation, and leases. He joined the FASB’s research and technical activities staff in September 2013. Before joining the FASB, Mr. Esposito was a director in Citigroup’s Accounting Policy Group in New York. Prior to joining Citigroup in December 2010, Mr. Esposito was a director in the Financial Instruments and Credit Group of PricewaterhouseCoopers and alum of their National Professional Services Group. Mr. Esposito has over 17 years of experience in the financial services industry, advising on technical accounting issues related to financial instruments under U.S. GAAP. He focused on technical accounting related to financial asset transfers, derivatives and hedging activities, credit losses, consolidation, and debt and equity classification matters. Mr. Esposito has extensive experience working with mortgage and asset-backed securities, loan products, derivatives, and customized structured transactions. Mr. Esposito has a B.S. in accounting from Binghamton University. He is a CPA in New York.
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 6
SEC and Financial Reporting Institute
Jeanette M. Franzel Board Member Public Company Accounting Oversight Board
Jeanette M. Franzel is a Board Member of the Public Company Accounting Oversight Board (PCAOB). PCAOB’s mission is to oversee the audits of public companies and brokers and dealers to protect investors and further the public interest. Board Member Franzel brings extensive audit experience to the PCAOB after a distinguished career at the U.S. Government Accountability Office (GAO). She ended her tenure as Managing Director, overseeing all aspects of GAO’s financial audits of the U.S. federal government. From 2008 through 2011, Ms. Franzel’s team provided oversight of the U.S. government’s efforts to stabilize the financial markets and promote economic recovery. Earlier in her career, Ms. Franzel audited the federal government’s actions to resolve over one thousand failed banks and savings and loan institutions. Ms. Franzel has testified before congressional committees more than a dozen times. Ms. Franzel holds the following professional certifications: CPA, CIA, CMA and CGFM.
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 7
SEC and Financial Reporting Institute
Rahul Gupta Partner, National Professional Standards Group Grant Thornton LLP
Rahul is a Partner in the National Professional Standards Group (NPSG) of Grant Thornton LLP. Rahul assists engagement teams and clients with technical accounting issues and monitors current accounting developments, under both U.S. GAAP and IFRS. Rahul is also involved in developing firm’s thought leadership on accounting issues, including liaising with Financial Accounting Standards Board (FASB), International Accounting Standards Board (IASB), AICPA and Securities and Exchange Commission. Rahul has more than sixteen years of public accounting experience in the United States and India. Rahul was a staff member at FASB from August 2011 through January 2016, where he provided technical depth and practical insight to assist the FASB in improving U.S. GAAP. Prior to joining the FASB, he was a senior manager in the firm’s NPSG, where he assisted engagement teams and firm’s clients with technical accounting issues. Prior to joining the NPSG, Rahul worked in the firm’s Dallas audit practice. In India, Rahul started his career working in the audit practice of Grant Thornton International’s Indian member firm in New Delhi focusing on clients that reported under U.S. GAAP. Rahul is a Certified Public Accountant in Texas and Illinois, and a Chartered Accountant (Associate Member) in India. Rahul holds a Bachelor of Commerce degree from Agra University, India, and a Post Graduate Diploma in Information System Audit from the Institute of Chartered Accountants of India.
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 8
SEC and Financial Reporting Institute
William W. Holder Dean, Leventhal School of Accounting and Alan Casden Dean’s Chair in Accounting USC Leventhal School of Accounting
William Holder serves as Dean of the USC Leventhal School of Accounting, and holds the Alan Casden Dean’s Chair of Accountancy. Prior to his current post, Dean Holder was the Ernst & Young Professor of Accounting and Director of the SEC and Financial Reporting Institute in the Marshall School of Business at the University of Southern California. Dean Holder is an expert on financial reporting and auditing. He has published extensively on these subjects and received numerous awards during his career, including being twice named as one of the “Top 100 People” in the accounting profession and receiving the AICPA Gold Medal for Distinguished Service, the highest honor awarded by that organization. He has served on a number of governance and standard setting authorities including the Accounting Standards Executive Committee of the AICPA and the Governmental Accounting Standards Board. During Congressional hearings leading to passage of the Sarbanes/Oxley Act, he provided invited testimony about financial reporting, auditing and corporate governance.
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 9
SEC and Financial Reporting Institute
Mark Kronforst Chief Accountant Division of Corporation Finance U.S. Securities and Exchange Commission
Mark Kronforst is the Chief Accountant in the Division of Corporation Finance at the U.S. Securities and Exchange Commission. Mark’s previous roles in the Division include Associate Director – Disclosure Operations and Deputy Chief Accountant. Before joining the Division in 2004, Mark worked for a large SEC registrant as the Director of Financial Reporting and as an audit senior manager in KPMG’s Silicon Valley and Minneapolis offices.
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 10
SEC and Financial Reporting Institute
Rick Lawlor Senior Finance Director, Corporate Accounting Microsoft
As Microsoft’s Senior Finance Director in Corporate Accounting, Rick Lawlor is responsible for leading the global implementation of the New Leases Accounting Standard. Corporate Accounting is responsible for ensuring sound financial reporting and internal controls at the Microsoft. For the past 2 years, Rick has led the Central Finance team for Microsoft’s Cloud Infrastructure Finance team, transforming and managing Financial Planning & Analysis, Reporting & Systems, Standard Cost Allocations and Controls & Compliance across Microsoft’s commercial and consumer cloud businesses. Previously, Mr. Lawlor led the finance team for Microsoft’s Global Foundation Services division that delivers the cloud infrastructure and foundational technologies to power Microsoft’s online businesses worldwide. He was responsible for a significant team who managed the financial planning & analysis, capex management, operations, and accounting for cloud infrastructure and foundation technologies that powers Microsoft’s cloud services worldwide. Lawlor joined Microsoft in 2005 and previously led Strategy Sourcing and Procurement in the Windows & Online Services Divisions. Prior to Microsoft, he served as the CFO for Travelport a subsidiary of Cendant, where he was responsible for the financial management and was deeply involved in the company’s successful acquisition of Orbitz. Prior to Travelport/Cendant, he led a variety of business development and finance roles at two technology start-ups. Also he was a management consultant for PricewaterhouseCoopers and auditor for Deloitte & Touche. Mr. Lawlor graduated from The American University with a bachelor’s degree in Accounting and a Masters of Business Administration.
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 11
SEC and Financial Reporting Institute
Shari Mager Managing Director Deal Advisory KPMG LLP
Shari Mager is a leader within KPMG’s M&A deal advisory practice, with a focus on accounting advisory, company mergers/acquisitions/divestitures, as well as debt and capital raises. In 20 years of consulting, Shari has managed domestic and international projects and relationships. Shari often serves as the senior adviser to executive teams of companies tackling their most challenging issues, including accounting change, M&A, and organizational transformation. Shari focuses on transactions, accounting advisory, equity, and debt capital raising for clients in a wide variety of industries, including technology, real estate, hospitality, healthcare, and life sciences. In her leadership role, Shari regularly exchanges ideas and discusses emerging issues with clients, in order to share insights and best practices. Shari has extensive experience in advising both financial sponsors and management teams of publicly-traded and privately-owned companies, as well as their board members, on financial accounting and reporting matters, and operational aspects of transactions. Shari is a frequent presenter at various Accounting & Reporting, M&A and IPO conferences and summits. Shari began her professional career in KPMG’s audit practice, and is a licensed CPA in Canada and in the US (California and North Carolina).
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 11
SEC and Financial Reporting Institute
John May Partner, SEC Services PricewaterhouseCoopers LLP
John has been a partner in PwC’s National Office for 16 years and is the leader of PwC's National SEC Services Group. From 1989 until 1996, John worked in PwC's Chicago office where he served public and private growth-oriented companies with a concentration in the manufacturing sector. From 1996 until 2000, he worked in PwC's Kansas City office where he focused on multinational SEC registrants in the transportation and services sectors. John is a member of the Center for Audit Quality SEC Regulations Committee and recently completed a two year term as the Committee’s chair. Additionally, John is a member of the CAQ's SEC Audit Practices Task Force. John is also a principal editor and author of a number of PwC publications including PwC's SEC Volume--a comprehensive manual for SEC registration and reporting.
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 12
SEC and Financial Reporting Institute
Roger Molvar Board Member PacWest Bancorp
Roger H. Molvar serves as a director and member of the audit and the compensation, nominating, and governance committees of PacWest Bancorp, the largest independent bank headquartered in Los Angeles. In 2014, CapitalSource Bank merged with PacWest Bank in what was described as one of the top value creating banking transactions of the year. At CapitalSource Bank, Roger was a founding director and chair of both the audit and the risk management committees. Prior board service includes Farmers & Merchants Bank, La Opinión Media, and numerous civic and non-profit entities. From 2000 to 2004, Roger was chief executive officer of IndyMac Consumer Bank and previously, was an executive officer and management committee member of The Times Mirror Company, which was acquired by media giant Tribune Co. in 2000. Roger is chairman of the SEC and Financial Reporting Institute at the University of Southern California. He is an active participant in the West Audit Committee Network, which facilitates discussions on enhancing corporate governance, and serves on the Editorial Advisory Board of the AICPA’s Journal of Accountancy. He received his undergraduate degree in business administration from the University of Washington and is a graduate of the Graduate School of Financial Management at Dartmouth and the Stanford University Advanced Management College.
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 13
SEC and Financial Reporting Institute
Helen A. Munter Director Division of Registration and Inspections Public Company Accounting Oversight Board
Helen Munter is the director of the Division of Registration and Inspections, which is the PCAOB’s largest operating division. Ms. Munter oversees all division operations including firm registration, the Global Network Firm Inspection Program, the Non-Affiliate Firm Inspection Program, and the Broker-Dealer Interim Inspection Program. Prior to being named director in 2011, Helen was a deputy director and team leader for several of the PCAOB’s largest and most complex inspections. During her tenure as deputy director, Helen led the team of accountants that established many of the inspections processes that are in place today. In addition, she was responsible for opening the PCAOB’s San Mateo office where she served as regional leader until she assumed the role of division director. Before joining the PCAOB in 2004, Helen was an audit partner and deputy director of professional practice in the San Francisco office of Deloitte & Touche LLP. She spent 16 years at Deloitte in the San Francisco and Barcelona, Spain offices. Helen received a B.A. from the University of California at Berkeley. She is a certified public accountant and is fluent in Spanish.
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
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SEC and Financial Reporting Institute
Marc Panucci Deputy Chief Accountant Office of the Chief Accountant U.S. Securities and Exchange Commission
Marc is a Deputy Chief Accountant in the Office of the Chief Accountant at the U.S. Securities and Exchange Commission (SEC). His responsibilities include leading the activities of the Office of the Chief Accountant’s Professional Practice Group (PPG). These activities include understanding investor and audit committee perspectives and consulting with registrants and auditors on the application of internal control over financial reporting obligations, independence requirements and auditing standards. He also assists the SEC in its oversight responsibility for the activities of the Public Company Accounting Oversight Board (PCAOB) and monitors the development of auditing standards, both in the U.S. and internationally. Before joining the Commission, Marc was a Partner at PwC from 2010 to 2016. His responsibilities included providing consultation and support regarding implementation, application, and development of auditing policies and standards, including leading the firm’s efforts related to internal control over financial reporting consultations. Marc was also responsible for the development of the firm’s positions related to international and domestic audit standard-setting matters. Marc was also a board member of the AICPA’s Auditing Standard Board (ASB). The ASB is responsible for development of auditing standards and guidance related to non-issuers. Marc also previously worked at the SEC from 2007 to 2010, including as a Senior Associate Chief Accountant in the Office of the Chief Accountant. During this time, he specialized in the SEC's guidance related to the evaluation of internal control over financial reporting, auditing matters relating to public companies, and the SEC's activities with respect to its oversight role over the PCAOB. Marc received a Bachelor of Science degree in Accounting from Robert Morris College. He is a Certified Public Accountant in Pennsylvania and New Jersey.
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 15
SEC and Financial Reporting Institute
Joshua D. Paul Director, Technical Accounting Google
Josh is the Director of Technical Accounting at Google, leading Google’s technical accounting & policy, SEC reporting and treasury accounting. Josh was previously a partner at PricewaterhouseCoopers. He has diverse experience serving a variety of companies including Fortune 500 public companies. He has experience ranging from large, complex multinationals to small and mid-cap companies. Josh also was in PwC’s National Office and handled hundreds of client consultations. He focused on revenue recognition, stock-based compensation, and business combinations. While in PwC’s National Office, Josh spoke regularly at Firm, client and industry events around the country. Josh was also Professional Accounting Fellow in the Office of the Chief Accountant of the U.S. Securities and Exchange Commission. In this role, he worked with registrants on complex accounting and reporting matters, monitored the activities of various professional accounting standard setting bodies within the United States and internationally, and worked on various regulatory matters facing U.S. capital markets.
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
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SEC and Financial Reporting Institute
Lori L. Smith Director SEC and Financial Reporting Institute Assistant Professor of Clinical Accounting USC Leventhal School of Accounting
Lori Smith is an expert in auditing and financial accounting and reporting with extensive experience from two perspectives - as an audit and assurance partner with a global professional services firm and as a company executive for a fortune 500 public company. Lori is Assistant Professor of Clinical Accounting at the USC Leventhal School of Accounting, focusing on public company financial reporting and ethics. She also serves as Assistant Dean for Academic Administration for USC Leventhal and as Director for the SEC and Financial Reporting Institute. Prior to joining USC, Lori was an audit and assurance partner with Deloitte and Touche LLP and Director of Accounting for Bergen Brunswig Corporation. Lori received a Bachelor of Science degree in Accounting from University of Southern California and is a certified public accountant licensed in California.
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 17
SEC and Financial Reporting Institute
Scott A. Taub Managing Director Financial Reporting Advisors, LLC
Scott A. Taub joined Financial Reporting Advisors, LLC (FRA) as a Managing Director in 2007. Based in Chicago, Illinois, FRA provides consulting services related to accounting and SEC reporting and litigation support services. From September 2002 through January 2007, Mr. Taub was a Deputy Chief Accountant at the Securities and Exchange Commission (SEC). He twice served as Acting Chief Accountant for a total of 14 months. He played a key role in the SEC’s implementation of the accounting reforms under the landmark Sarbanes-Oxley Act, and was responsible for the day-to-day operations of the Office of the Chief Accountant, including resolution of accounting and auditing practice issues, rulemaking, oversight of private sector standard-setting efforts, and regulation of auditors. Mr. Taub represented the SEC in many venues, including the FASB and IASB’s advisory committees, and in front of the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises. He also served as the SEC Observer to the FASB’s Emerging Issues Task Force (EITF) and as Chair of the Accounting and Disclosure committee of the International Organization of Securities Commissions (IOSCO). He twice served as Acting Chief Accountant for a total of 14 months. Mr. Taub also was a member of the SEC staff between 1999 and 2001 as a Professional Accounting Fellow in the Office of the Chief Accountant. Prior to September 2002, Mr. Taub was a partner in Arthur Andersen's national office. The role of that group within Andersen was to consult on complex financial reporting matters; establish and disseminate Andersen’s policies regarding financial reporting matters; and represent the firm before various standards setters including the FASB, SEC, AICPA, and IASB. Mr. Taub consulted and authored interpretive guidance for Andersen on a wide variety of accounting and reporting issues, including revenue recognition, business combinations, compensation arrangements, intangible assets, and investment accounting. Prior to joining Andersen’s national office, he was member of the audit practice in the firm’s Detroit office serving publicly held and privately owned companies in a variety of industries.
(continues)
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 18
SEC and Financial Reporting Institute
Scott A. Taub (continued) Mr. Taub is currently a member of the FASB/IASB Joint Transition Group for Revenue Recognition. He previously served on the IASB's IFRS Interpretations Committee and the FASB’s Valuation Resource Group. He is a frequent speaker, having addressed numerous audiences sponsored by a variety of organizations. He was the primary author of several SEC reports and publications, including the Report and Recommendations Pursuant to Section 401(c) of the Sarbanes-Oxley Act of 2002 On Arrangements with Off-Balance Sheet Implications, Special Purpose Entities, and Transparency of Filings by Issuers and the Study Pursuant to Section 108(d) of the Sarbanes-Oxley Act of 2002 on the Adoption by the United States Financial Reporting System of a Principles-Based Accounting System. Mr. Taub is the author of the Revenue Recognition Guide, a 500-page comprehensive guide to accounting for revenue recognition published by CCH and a co-author of CCH's Financial Instruments Guide. Mr. Taub attended the University of Michigan in Ann Arbor, where he received an undergraduate degree in economics in 1990, and won the William A. Paton Award for his performance on the CPA exam. In 2005 Mr. Taub won the SEC’s award for Supervisory Excellence. He is a licensed CPA in Michigan and is a member of the American Institute of Certified Public Accountants.
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 19
SEC and Financial Reporting Institute
Sagar Teotia Deputy Chief Accountant Office of the Chief Accountant U.S. Securities and Exchange Commission
Sagar Teotia is currently the Deputy Chief Accountant in the Office of the Chief Accountant (OCA) at the U.S. Securities and Exchange Commission (SEC). In this role, Mr. Teotia leads the activities of the office’s accounting group which includes consulting with public companies and divisions and offices within the SEC on the application of accounting standards and financial disclosure requirements. Mr. Teotia also serves as an advisor to the Commission on accounting matters while also working closely with private sector bodies such as the Financial Accounting Standards Board (FASB). Prior to Mr. Teotia joining as Deputy Chief Accountant of the SEC, Mr. Teotia was a Partner at Deloitte in the National Office Accounting Consultation group (Accounting Consultation) in Chicago. In his role in Accounting Consultation, he frequently consulted on accounting and reporting issues related to financial instruments, business combinations, and compensation (stock based and pension). Prior to joining Deloitte’s National Office in Chicago, Mr. Teotia was a professional accounting fellow (PAF) in OCA at the SEC. Mr. Teotia’s responsibilities as a PAF included providing accounting conclusions on complicated technical accounting issues to SEC Registrants, actively monitoring and providing oversight comments to the FASB on current standard setting projects, and working on several special projects within OCA. Mr. Teotia received an accounting degree from the University of Illinois at Urbana-Champaign. He is licensed to practice as a certified public accountant in Illinois.
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 20
SEC and Financial Reporting Institute
Sharon Virag VP, Controller and Chief Accounting Officer Aetna
Sharon Virag is the VP, Controller and Chief Accounting officer of AETNA, a Fortune 50 diversified healthcare benefits company with over $60 billion in revenue, where she is responsible for controllership, tax, treasury, Finance Transformation and Finance Shared Services for the company. Sharon is also a member of the Financial Accounting Standards Advisory Council (FASAC), a group that advises the Financial Accounting Standards Board (FASB) on matters related to board projects and agenda prioritization, as well as a member of the Corporate Reporting Committee of the Financial Executives Institute (FEI). Prior to joining Aetna, Sharon was the Vice President, Chief Accounting Officer of AES Corp., a global power company operating in 23 countries, generating $17 billion in annual revenues on $42 billion in assets under management. She also held Global Controller positions at several General Electric businesses between 2010 and 2013, as well as multiple posts, both domestic and international, at General Motors Company (“GM”) from 2008 to 2010, including Assistant Corporate Controller; Controller, GM AsiaPacific; and Director of Internal Control and Sox Compliance. In addition to her private sector experience, Sharon was with the Public Company Accounting Oversight Board (“PCAOB”) from 2005 to 2008, where she served as the project leader for Auditing Standard No. 5, the Board’s requirements/regulations for Sarbanes-Oxley Section 404, and acted as staff liaison to the Securities & Exchange Commission Advisory Committee on Improvements to Financial Reporting (CiFER), among other roles. Sharon started her financial career in auditing, including working for Deloitte & Touche, LLP from 1998 to 2004 as an Audit Senior Manager and Audit Manager. She has a BS in Accounting from California State University and is a Certified Public Accountant in the State of Arizona.
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 21
SEC and Financial Reporting Institute
John W. White Partner Cravath, Swaine & Moore LLP
John W. White is a partner in Cravath’s Corporate Department and serves as Chair of its Corporate Governance and Board Advisory practice. From 2006 through 2008, he served as Director of the Division of Corporation Finance at the U.S. Securities and Exchange Commission, which oversees disclosure and reporting by public companies in the United States. While on the SEC staff, Mr. White led the Division through one of the most significant and prolific rulemaking periods in its history, including the Commission’s adoption of final rules addressing executive compensation disclosure, Sarbanes‑Oxley Section 404’s internal control requirements, internet access to proxy materials, oil and gas disclosure, use of interactive data in financial reporting, shareholder proposals relating to the election of directors, private offerings, and capital raising and reporting by smaller public companies, as well as the Commission’s issuance of guidance regarding the use of corporate websites. International initiatives included acceptance of International Financial Reporting Standards (IFRS) by foreign private issuers, the proposed roadmap for use of IFRS by U.S. issuers and modernizing the Commission’s rules on cross‑border tender offers and deregistration and exemption from registration of foreign issuers, as well as revisions to the public reporting regime for foreign private issuers. He played an integral role in the SEC’s response to market turmoil throughout 2008, ensuring that the Division acted swiftly and appropriately to facilitate strategic transactions and access to capital for public companies. During his over 25 years as a partner at Cravath, Mr. White has focused his practice on representing public companies on a wide variety of matters including corporate governance matters, public reporting obligations, public financings and restatements and other financial crises. Mr. White is a member of the Standing Advisory Group (SAG), which advises the Public Company Accounting Oversight Board (PCAOB). He has also served on the Financial Accounting Standards Advisory Council (FASAC), which advises the Financial Accounting Standard Board (FASB).
(continues)
SEC and Financial Reporting Institute Conference
June 8, 2017 | Millennium Biltmore Hotel Los Angeles
SPEAKER BIOGRAPHIES
20170604 22
SEC and Financial Reporting Institute
John W. White (continued) He is a member of the Board of Trustees and the Audit Committees of both the Practising Law Institute and the SEC Historical Society. Mr. White is a frequent speaker on corporate governance and the securities laws. He served three years on the New York Stock Exchange’s Legal Advisory Committee, four years as Chairman of the Securities Regulation Institute and five years as Co‑chair of PLI’s Annual Institute on Securities Regulation. He is currently a member of the Annual Institute’s Advisory Committee as well as the Advisory Committee for PLI’s Annual Institute in Europe. Additionally, he serves as an inaugural member of The American College of Governance Counsel. Mr. White was twice selected by National Association of Corporate Directors (NACD) as one of the 100 most influential people in the boardroom and corporate governance community. He is also recognized by Chambers USA: America’s Leading Lawyers for Business in both securities regulation and capital markets and is named in The Legal 500, The Best Lawyers in America and Ethisphere Institute’s “Attorneys Who Matter.” Lawdragon has named Mr. White a nationwide “Legend” and inducted him as a “Power Broker” into its “Hall of Fame.” Mr. White received a B.S. with honors in accounting from the University of Virginia in 1970, and in May 1970 he received the Elijah Watts Sells award for the highest score in the nation on the Uniform CPA Examination. He received a J.D. magna cum laude from New York University School of Law in 1973, where he was Managing Editor of the Law Review. After a judicial clerkship with Hon. John J. Gibbons of the U.S. Court of Appeals for the Third Circuit, Mr. White joined Cravath in 1975 and became a partner in 1980. At Cravath, he has served as Recruiting Partner, Corporate Managing Partner, Finance Partner and twice as Head of the Corporate Department.
1
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
The views expressed in this presentation are those of the presenter.Official positions of the FASB are reached only after extensive due process and deliberations
FASB Update
Matt Esposito
Assistant Director, Financial Accounting Standards Board
36th Annual SEC and Financial Reporting Institute Conference
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Agenda
2
Revenue Recognition
Leases
Credit Losses
Public Business Entities
Hedging
Q&A
2
Revenue Recognition
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Converged standards
issued
May 2014
Jan 2016
Key clarification amendments
issued
Mar–May 2016
Jan 2017
Mandatory effective date for public
entities
Jan 2018
Implementation Timeline
4
Joint IASB/FASB TRGIASB/FASB available for implementation questions
SAB 74 disclosures on possible impact of application
FASB-only TRG(IASB observer)
3
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Joint Transition Resource Group (TRG)
5
To solicit, analyze, & discuss stakeholder issues arising from implementation of the new guidanceTo solicit, analyze, & discuss stakeholder issues arising from implementation of the new guidance
To inform the FASB and the IASB about those implementation issues, which will help the Boards determine what, if any, action will be needed to address those issues
To inform the FASB and the IASB about those implementation issues, which will help the Boards determine what, if any, action will be needed to address those issues
To provide a forum for stakeholders to learn about the new guidance from others involved with implementationTo provide a forum for stakeholders to learn about the new guidance from others involved with implementation
Objectives:
The TRG will not issue authoritative guidance
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Revenue Recognition TRG Activities
6
A majority of the TRG issues were educational
Input from TRG led to amendments to clarify the Boards’ intent for a
handful of issues
72Discussed at
TRG Meetings**
36Discussed directly with
stakeholders
0Open
108Submissions
to Date*
*Data as of May 2017
4
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
3
4
6
5
16
10
10
11
13
14
16
Transition
Allocate the transaction price (Step 4)
Licensing
Principal vs. Agent
Contract costs
Identify the contract(s) with a customer (Step 1)
Presentation and disclosure
Scope
Recognize revenue when (or as) the performance…
Determine the transaction price (Step 3)
Identify the performance obligations (Step 2)
Where are the issues?
7
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Resources to Help with Revenue Recognition Implementation
8
Resources to help with
implementation
FASB Transition Resource Group
for Revenue Recognition
FASB technical inquiry service
AICPA industry task forces
Informal industry groups
FASB webcasts and other webcasts
5
Leases
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Right-of-Use Model
10
A lease is a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment (an
identified asset) for a period of time in exchange for consideration
6
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Identifying a Lease
11
Lease contracts in the scope of Topic 842
involve
An identified asset
That is explicitly or implicitly specified
Supplier has no practical ability to substitute and would not economically benefit from substituting
the asset
The right to control the use during the lease
term
Decision-making authority over the use of
the asset
The ability to obtain substantially all
economic benefits from the use of the asset
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Lessee Accounting Overview
12
Finance
Operating
Right-of-use (ROU) asset
Lease liability
Amortization expense
Interest expense
Cash paid for principal and
interest payments
Right-of-use (ROU) asset
Lease liability
Single lease expense on a straight-line basis
Cash paid for lease payments
Income Statement Cash Flow StatementBalance Sheet
Classification is similar to the classification in Topic 840
Recognition and measurement exemption for short-term leases
Don’t forget to check the video Leases: A Quick Example of the Display Approach available on the FASB Leases Project webpage
7
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Lessor Accounting Overview
13
Sales-Type & Direct
Financing
Operating
Net investment in the lease
Interest income and any selling profit on the
lease1
Cash received for leases
Continue to recognize
underlying asset
Lease income, typically on a straight-line basis
Cash received for leases
Income Statement Cash Flow StatementBalance Sheet
Classification is similar to the classification in Topic 840, but with some important changes
1 Selling profit is recognized at lease commencement for sales-type leases and over the lease term for direct financing leases (note: selling profit is rare for direct financing leases)
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Leases: Scope and Scope Exceptions
14
The Leases standard does not apply to:
Leases of intangible
assets(Topic 350)
Leases of assets under construction (Topic 360)
Leases of biological assets
(Topic 905)
Leases to explore for or
use nonregenerative
resources (Topics 930 and
932)
Leases of inventory
(Topic 330)
Scope: All leases, including subleases
8
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Leases: Overview of Inquiries
15
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
The Leases completed project page contains the following resources for more information on the new standard:
- The final Accounting Standards Update (ASU)
- The press release introducing the ASU
- FASB In Focus—a summary of the ASU
- FASB: Understanding Costs and Benefits
- Video #1: Why a New Leases Standard?
- Video #2: Putting It on the Balance Sheet
- Video #3: The Display Approach: A Quick Example
Leases Standard: Resources
16
9
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Leases: Effective Dates
• Fiscal years beginning after December 15, 2018, including interim periods within those fiscal years
Public Companies*
• Fiscal years beginning after December 15, 2019 and interim periods beginning after December 15, 2020
All Other Organizations
• Permitted for all organizations
Early Application
* “Public Companies” refers to the following: (1) public business entities, (2) a not-for-profit entity that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an-over-the-counter market, and (3) an employee benefit plan that files or furnishes statements with or to the SEC
17
Credit Losses
10
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Credit Losses . . . What’s Changing?
19
Loans Debt SecuritiesHeld for
InvestmentCECL
Held to Maturity
CECL
Held for Sale
Lower of amortized cost basis or market
**
Available for Sale
AFS credit-loss model *
Trading FV-NI **
Under new credit-loss model for AFS, credit losses will be recorded through an allowance. Allowance will be limited to difference between debt security’s amortized cost basis and its fair value.
No substantive change to current practice.
Allowance for purchased financial assets with credit deterioration determined in similar manner; however, initial allowance added to purchase price, rather than as provision expense.
**
PCD
PCD
PCD
PCD
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Allowance for Credit Losses . . .
A valuation account
Deducted from amortized cost basis of financial assets
Used to present “net amount expected to be collected”
Changes flow through net income
Credit Losses Standard: Measurement
20 20
Amortized cost . . . unpaid principal balance (UPB) lent to a customer
adjusted for loan fees and origination expenses,
repayments, writeoffs, nonaccrual practices, and
certain hedging transactions
Amount expected to be collected. . .
remaining amounts expected to be
collected from loans
Book the differenceas Allowance
11
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Credit Losses: Effective Dates
21
Public Business Entities that are SEC Filers
(Annual and Interim)
Reporting Periods beginning after Dec. 15,
2019
Public Business Entities that are not SEC Filers (Annual and
Interim)
Non-Public Business Entities* (Annual Periods only)
Reporting Periods beginning after Dec. 15, 2020
Non-Public Business Entities* (Annual and
Interim)
Reporting Periods beginning after Dec. 15,
2021
*Includes not-for-profit entities and employee benefit plans
The entire standard is available for early application for periods beginning after Dec. 15, 2018
A separation was made in effective date decisions for Public Business Entities to allow smaller community banks that do not file with the SEC additional time to implement the standard
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Transition Resource Group (TRG)
22
Solicit, analyze, & discuss stakeholder issues arising from implementation of the new guidanceSolicit, analyze, & discuss stakeholder issues arising from implementation of the new guidance
Inform FASB about those implementation issues to help Board determine if/what action needed to address themInform FASB about those implementation issues to help Board determine if/what action needed to address them
Provide forum for stakeholders to learn about new guidance from others involved with implementationProvide forum for stakeholders to learn about new guidance from others involved with implementation
Objectives:
The TRG will not issue authoritative guidance
12
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Preparers• Large & small banks• Credit unions• Insurance companies
Auditors
• Various client bases
Users
Credit Losses TRG Structure
23
The TRG comprises experts across a wide spectrum of stakeholders
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
First public meeting: April 2016
TRG members reviewed drafts of the standard and illustrations to help ensure the standard was clear and could be applied.
Feedback received at meeting indicated that overall the standard is clear and operational.
Credit Losses TRG – April 2016 Meeting
24
13
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
The Credit Losses web portal contains educational materials as well as TRG information
The education section contains:
- The final Accounting Standards Update
- The press release introducing the ASU
- FASB In Focus—a summary of the ASU
- FASB: Understanding Costs and Benefits
- Video: Why a New Credit Losses Standard?
The TRG section contains:
- Meeting webcast archive
- Meeting agendas and memos
Credit Losses: Resources
25
Public Business Entity Definition
14
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Common Q&As . . . What’s a “PBE”?
27
Note: PBEs must be a business entity, so a not-for-profit entity and an employee benefit plan are excluded.
Note: PBEs must be a business entity, so a not-for-profit entity and an employee benefit plan are excluded.
“Public Business
Entity” meets any
of these criteria . . .
Master GlossaryMaster
Glossary
A. Required to (or voluntarily does) file or furnish its financial statements with Securities and Exchange Commission (SEC)
B. Required to file or furnish its financial statements with a regulatory agency other than the SEC in accordance with:
the Securities Exchange Act of 1934 (Act), as amended
or rules and regulations promulgated under the Act
C. Required to file or furnish its financial statements with a foreign or domestic regulatory agency
with issuance of securities not subject to contractual restrictions on transfer
D. Has issued, or is a conduit bond obligor for, securities that are traded, listed or quoted on an exchange or an OTC market
E. Has securities not subject to contractual restrictions on transfer, and required by law, contract, or regulation to both . . .
prepare U.S. GAAP financial statements (including notes)
make them publically available on a periodic basis
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Criterion D: Has issued, or is a conduit bond obligor for, securities that are traded, listed or quoted on an exchange or an OTC marketCriterion D: Has issued, or is a conduit bond obligor for, securities that are traded, listed or quoted on an exchange or an OTC market
Common Q&As . . . What’s a “PBE”?
28
Criterion D intended to be narrow . . .
Did not substantially change from prior definitions of . . .
o “public entity” and “nonpublic entity”
“An OTC market” is a public market . . .
o Where information on trading, listing or quoting activity is
made publicly available
o Examples: “OTC Pink Sheets” and “OTC Bulletin Board”
Transaction activity in nonpublic markets . . .
o Would not make an entity a PBE
o Example: “PORTAL,” a private securities trading platform . . .
o Available only to Qualified Institutional Buyers (QIBs)
15
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Criterion E: Has securities not subject to contractual restrictions on transfer, and required by law, contract, or regulation to both . . .
prepare U.S. GAAP financial statements (including notes)
make them publically available on a periodic basis
Criterion E: Has securities not subject to contractual restrictions on transfer, and required by law, contract, or regulation to both . . .
prepare U.S. GAAP financial statements (including notes)
make them publically available on a periodic basis
Common Q&As . . . What’s a “PBE”?
29
Investors
Bank Holding Company
Bank Subsidiary
Has a financial statement requirement under FDICIA, but . . . no unrestricted securities issued
No financial statement requirement, even if financials are filed on behalf of subsidiary
No “look through” required
Neither entity a PBE because . . . Unrestricted common equity in nonpublic market
Restricted common equity 100% owned
by BHC
Entire PBE definition, including Criterion E, should be applied “entity by entity”
o Example: analysis under Criterion E (assume Criteria A - D are not met):
Hedging
16
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Hedge Accounting – Revised Model
31
Hedge of Nonfinancial Item
Hedge of Financial Instrument
Fair ValueHedge
CashFlow
Hedge
Hedge of inventory
Hedge of forecasted
purchase or sale of inventory
Swap fixed rate debt to
floating
Swap floating rate debt to fixed
“Effective” portion of changes in FV of hedging derivative deferred in OCI
NEW: “Ineffective” portion deferred in OCI
Amounts previously recorded in AOCI are reclassified into earnings in the reporting period when the hedged item affects earnings.
NEW: Presentation of gain or loss on derivative in same income statement line item as hedged item.
Derivative marked to fair value through earnings
NEW: Presentation of derivative gain or loss in the same income statement line item as hedged item
Basis of hedged item adjusted for changes in FV attributable to hedged risk--also through earnings
Basis adjustment offsets derivative mark to earnings
For Qualifying Hedging Relationships*
*The highly effective qualifying threshold (80%-125%) of current GAAP will be retained
The concept of separately recording “ineffectiveness” will be eliminated from hedge accounting
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Component Hedging – Revised Model
32
Hedge of Financial Instrument
Hedge of Nonfinancial Item
What is an entity allowed to designate as the hedged item?
NEW: Contractually
Specified Component
No changes to designated risks for financial instruments. Component hedging will now be allowed for both types of hedged items
Interest Rate Risk
Credit Risk
Foreign Exchange
Risk
Variability in total cash flows (CF Hedges)
or Overall
changes in fair value
(FV Hedges)
Variability in total cash flows (CF Hedges)
or Overall
changes in fair value
(FV Hedges)
17
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Hedges of Interest Rate Risk
33
Component hedging of interest rate risk is limited to a prescriptive list of “benchmark” interest rates:
U.S. Treasury
Rate
LIBORSwapRate
OvernightIndex SwapRate (OIS)
SIFMAPrime Rate
Allowed Not Allowed
For both variable rate and fixed rate financial
instrument hedges
U.S. Treasury
Rate
LIBORSwapRate
OvernightIndex SwapRate (OIS)
SIFMA
Allowed
Variable rate financial instrument
hedges only
Fixed rate financial instrument hedges
only
Allowed
AnyContractually
Specified Rate*
Separate approach for variable rate financial instruments Benchmark definition retained for fixed rate – add SIFMA to list
*Extends cash flow hedging to Prime and SIFMA
What rates can be hedged – Current GAAP What rates can be hedged – Revised Model
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Fair Value Interest Rate Risk Hedging – Total Coupon
34
Change inFair Value
of Swap
Change inFair Value
of Bond
Present Value
Present Value
Must meet highly effective threshold
7% Bond
5% Swap
5% 5% 5% 105 %Principal
5% 5% 5% 5%
Cash flows on fixed leg used in PV calculation
Cash flows used in PV calculation
2% Credit Spread
Current GAAP
Hedge of interest rate risk of a fixed rate coupon must include the total coupon cash flows.
Amended Guidance
An entity may exclude the credit spread in the fixed rate coupon and measure the hedged item using the benchmark interest rate component of the total coupon determined at hedge inception.
18
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Fair Value Interest Rate Risk Hedging – Partial Term
35
Change inFair Value
of Swap
Change inFair Value
of Bond
Present Value
Present Value
Must meet highly effective threshold
5 Yr Bond
3 Yr Swap
Yr 1 Yr 2 Yr 3
Current GAAP
An entity is permitted to apply fair value hedge accounting for only a portion of the term of a financial instrument, but it is very difficult (if not impossible) to achieve in practice.
Amended Guidance
An entity may apply fair value hedge accounting to a portion of the term of a financial instrument using a revised methodology that would make partial term hedges more achievable.
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
Interest Payments Principal Payments
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Fair Value Interest Rate Risk Hedging –Callable Debt
36
Change inFair Value
of Swap
Change inFair Value
of Bond
Present Value
Present Value
Must meet highly effective threshold
5 Yr Bond
5 Yr Swap
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
Mirror Call OptionEffective Yr 3
Prepayment Option Effective Yr 3
Current GAAP
When measuring the change in fair value of the hedged item, an entity must consider all factors when assessing the exercise of a prepayment option, which makes hedging prepayable debt difficult to achieve.
Amended Guidance
When measuring the change in the fair value of the hedged item, an entity may only consider how changes in interest rates affect the exercise of the prepayment option.
19
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Hedging - Other Simplifications
37
A concern of many stakeholders relates to the complex and burdensome nature of complying with certain existing requirements. In response to these concerns, Board decisions included the following changes to Topic 815:
Qualitative Testing: For all hedging relationships that do not meet the requirements for the shortcut or the critical terms match methods, an initial quantitative assessment of hedge effectiveness will be required (same as current GAAP). However, in all subsequent periods an entity may qualitatively assess hedge effectiveness unless facts and circumstances change.
Hedge Documentation / Effectiveness Testing:
- An entity may perform the quantitative testing portion of hedge documentation before or at the three-month effectiveness testing period. The quantitative testing does not have to be at hedge inception. The timing of the preparation of all other hedge documentation elements would not change.
- A private company that is not a financial institution would have up to the time when the next interim (if applicable) or annual financial statements are available to be issued to perform all initial and subsequent effectiveness testing and designate the method of assessing effectiveness.
Shortcut Method: An entity may apply a long-haul method if use of the shortcut method was or is no longer appropriate, as long as the hedge is highly effective from inception of the hedging relationship through the assessment date.
FASB Agenda Prioritization
20
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Major FASB agenda projects recently completed
Board sought feedback from our advisory groups and other stakeholders about future agenda items:
- 2015 FASAC Survey(included six advisory groups)
- Academic Resource Group
- 2016 Financial Reporting Issues Conference(FRIC)
Invitation to Comment (issued 8/4/16)
- Round table (12/16/16)
Background
39
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Invitation to Comment
40
45 Comment Letters
- 24 Practitioners
- 13 Preparers
- 5 Users
- 3 Others
Preparer29%
Practitioner53%
User11%
Other7%
Respondent Type
21
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Project Overall Preparer Practitioner User Other
Liabilities and Equity
1 1 1 3 2
Performance Reporting
2 3 2 1 4
Intangibles 3 2 3 2 3
Pensions and OPEB
4 4 4 4 1
Relative Rank of All Topics by Comment Letter Respondent Type
41
Copyright 2017 by Financial Accounting Foundation, Norwalk CT. For non-commercial, educational/academic purposes only.
Questions
1
Current Accounting and Auditing Practice Issues – Part I
John White (moderator)
Mark Kronforst
John May
Marc Panucci
Sharon Virag
Disclaimers
• Each presenter is speaking in his or her own personal capacity and the views expressed are theirs alone and do not necessarily reflect the views of their employer, their colleagues or other people with whom they are associated or of any organizations with which they are or have been affiliated.
• The material discussed in this program is for training and illustrative purposes only and does not purport to reflect appropriate or inappropriate disclosure or procedures that should be followed or inquiries that should be made, if any, in any particular situation.
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Topics for Panel
1. Non-GAAP Measures: One Year Later
2. Drill Down on Contingencies
3. Regulation S-X: Rule 3-13 Waivers
4. Expanded Auditor’s Report
5. Revisiting ICFR
6. Inspections: What’s New!
7. Independence Matters
8. Form AP Roll-Out
9. The SEC Comment Process
1. Non-GAAP Measures:One Year Later
3
Non-GAAP Basics
• Reg G and Reg S-K Item 10(e) contain the disclosure requirements
• Location of the disclosure determines applicable requirements– Reg G: Any public disclosure
– Form 8-K Item 2.02 (furnished): Earnings press releases
– Reg S-K Item 10(e): Filings with the SEC
• Special circumstances or exceptions– Compensation measures in proxy statements
– Segments
– M&A
5
Non-GAAP Basics (cont’d)
• Overriding principle: Not materially misleading
• Disclosure requirements:– Reg G: Most directly comparable GAAP financial measure and reconciliation
– Form 8-K Item 2.02: Reg G requirements plus equal or greater prominence, investor usefulness, and management purposes
– Reg S-K Item 10(e): Reg G and Form 8-K Item 2.02 requirements plusexpress prohibitions relating to liquidity measures, face of pro formas, financial statements (including notes), non-recurring items, and titles
• Increased SEC Staff focus in recent years– “Supplement . . . and not supplant” GAAP measures
– Prime source of Corp Fin comments in 2016
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7
May 2016: Updated Guidance
• Materially misleading: (Reg G, Rule 100(b)) – Exclusion of normal, recurring, cash operating expenses
– Cherry picking
– Individually tailored accounting principles
• Equal or greater prominence
• Per share liquidity measures
• Non-GAAP forward-looking EPS guidance
• Calculation/presentation of income tax effects
8
Non-GAAP: Controls and Oversight
• Importance of controls– Deciding on non-GAAP measures and adjustments
– Disclosure controls and procedures
• Audit Committee role– CAQ: Questions on Non-GAAP Measures: A Tool for Audit
Committees (June 2016)
– CAQ: Non-GAAP Financial Measures: Continuing the Conversation (December 2016)
• Auditor’s role
• Compensation Committee role
• Enforcement “sweep”
5
2. Drill Down on Contingencies
Accounting for Loss Contingencies
10
Ability to Reasonably Estimate the Potential Loss
Reasonable Estimate No Reasonable Estimate
Likelihood That a Loss
Will Be Realized
Probable
[1] Accrue reasonable estimate. Disclose as necessary to avoid misleading financial statements.
If reasonable estimate is a range, must accrue the best estimate in that range; if none, accrue the minimum.
[2] No accrual. Disclose contingency and state that no reasonable estimate is possible.
Reasonably Possible
[3] No accrual. Disclose contingency and estimated amount of possible loss or range of loss.
[4] No accrual. Disclose contingency and state that no reasonable estimate is possible.
Remote [5] Neither accrue nor disclose. [6] Neither accrue nor disclose.
6
Contingencies
• Disclosure basics:– Use terms consistent with ASC 450-20
– Explaining an inability to estimate
– Give estimates of reasonably possible losses (aggregation permitted in some circumstances)
• When to accrue and how much– Impact of settlement offers
• Settlements without prior accruals– Expect questions
– Foreshadowing disclosure (prior to recording loss)
• What do your auditors expect of you?
• Dealing with the lawyers
11
SEC Comment Letters
Stericycle Inc. (June – August 2016)– SEC Staff comment asked why Stericycle was unable
to estimate the amount or range of reasonably possible loss for a lawsuit when the settlement agreement was entered into shortly after the filing of the Q1 2015 10-Q.
– Stericycle acknowledged it could have recorded $45 million in accrued liabilities arising out of the settlement in Q1 2015 (as opposed to Q2 2015) and restated its previously issued financial statements.
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7
Enforcement Actions
RPM International (September 2016)– SEC charged company with...
• Failure to disclose a loss contingency for a DOJ investigation
• Failure to accrue a probable and estimable liability
• Failure to disclose material weakness in ICFR and DCP
– GC also charged for failure to inform CEO, CFO, audit committee and independent auditors
13
Enforcement Actions
General Motors (January 2017)– SEC charged company with...
• Deficient internal accounting controls, resulting in failure to assess potential impact of defective ignition switch on financial statements
• Failure to notify internal accountants of the company’s internal investigation for 18 months
• Therefore, accountants were unable to evaluate if a loss was reasonably possibly and if disclosure was required
– $1 million settlement
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9
Current Accounting and Auditing Practice Issues – Part II
John White (moderator)
Lori Smith (moderator)
Mark Kronforst
John May
Helen Munter
Marc Panucci
Sharon Virag
Topics for Panel
1. Non-GAAP Measures: One Year Later
2. Drill Down on Contingencies
3. Regulation S-X: Rule 3-13 Waivers
4. Expanded Auditor’s Report
5. Revisiting ICFR
6. Inspections: What’s New!
7. Independence Matters
8. Form AP Roll-Out
9. The SEC Comment Process
10
3. Regulation S-X: Rule 3-13 Waivers
Regulation S-X: Rule 3-13 Waivers
• Rule 3-13: “Filing of other financial statements in certain cases
The Commission may, upon the informal written request of the registrant, and where consistent with the protection of investors, permit the omission of one or more of the financial statements herein required or the filing in substitution therefor of appropriate statements of comparable character.”
• Brief history
• Current landscape and recent matters addressed
• The future of waivers
20
11
4. Expanded Auditor’s Report
Timeline
• Nine years in the making........– From the 2008 Treasury Advisory Committee Report to
adoption last week of a final standard by the PCAOB
• June 1, 2017: PCAOB adoption of an “Auditing Standard on the Auditor’s Report”– “...to enhance the relevance and usefulness of the auditor’s
report with additional information for investors.”
• SEC approval still to come
22
12
Key Provisions
• Retains pass/fail model
• Requires auditors to communicate any “critical audit matters” from the current period’s audit– Not applicable to emerging growth company audits
• Disclosure of auditor tenure
• Standardization: – Opinion in first paragraph
– “whether due to error or fraud”
– Section titles
• Addressees: shareholders and the board
23
“Critical Audit Matters” (“CAMs”)
• Any matter arising from the audit of the financial statements that was communicated or required to be communicated to the audit committee and that: – (1) relates to accounts or disclosures that are material to the
financial statements, and
– (2) involved especially challenging, subjective, or complex auditor judgment.
• In determining CAMs, auditors to consider their assessment of risks of material misstatement
24
13
What’s Next?
• SEC approval needed
• Effective dates:– All provisions other than those related to CAMs:
» Audits for years ending on or after Dec. 15, 2017
– Provisions related to CAMs:
» Large accelerated filers: audits for years ending on or after June 30, 2019
» Others: audits for years ending on or after Dec. 15, 2020
• Impact on preparers– Review of a pilot program: identifying and drafting CAMs
• Impact on auditors
• Role of audit committees
• What’s in store for inspections25
5. Revisiting ICFR
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27
Internal Control over Financial Reporting
• Focus at this conference last two years: Where are we now?– Still: Leading source of inspection comments
• Going forward:– SEC and PCAOB perspectives
– What should preparers be doing now?
– What should audit committees be doing now?
• Don’t forget...– ICFR and your readiness for New GAAP
6. Inspections: What’s New!
15
PCAOB Inspections Update
• What’s new?
• Focus areas
• Initiatives
• What should preparers know?
29
Questions
16
7. Independence Matters
Auditor Independence
• Auditors and audit committees: A shared responsibility
• OCA independence consultations– How does the process work?
– Who participates?
• Predecessor/successor issues– Impact of mandatory auditor rotation abroad
• PCAOB update
32
17
8. Form AP Roll-Out
New PCAOB Form AP
• Requires disclosure of: – Name of the engagement partner
– Information about other accounting firms that participated in the audit
• Effective for audit reports issued on or after:– January 31, 2017 for name of the engagement partner
– June 30, 2017 for information about other accounting firms
34
18
PCAOB Database
• New searchable PCAOB database is up and running– Over 8,000 engagements/engagement partners already listed
35
9. The SEC Comment Process
19
SEC Staff• Division of Corporation Finance (William Hinman –
Director)– 11 Review Groups (organized by industry)
• Senior Assistant Chief Accountant in each group (“SACAs”)
• Issue comment letters on 1934 Act filings
– Office of Chief Accountant (Mark Kronforst – Chief Accountant)• Interpretations, accommodations or waivers of financial reporting and
disclosure requirements: [email protected] (includes Rule 3-13 waivers)
• Office of the Chief Accountant (Wesley Bricker – Chief Accountant)– Accounting (Sagar Teotia)
• Consultations on accounting matters
– Professional Practice (Marc Panucci)• Auditing and independence matters
37
SEC Resources
• Overview of the Filing Review Process:– http://www.sec.gov/corpfin/Article/filing-review-process---corp-fin.html
• Financial Reporting Manual:– http://www.sec.gov/divisions/corpfin/cffinancialreportingmanual.shtml
• Compliance and Disclosure Interpretations:– http://www.sec.gov/divisions/corpfin/guidance/exchangeactrules-
interps.htm
• Staff Legal Bulletins:– http://www.sec.gov/interps/legal.shtml
• Guidance for Consulting OCA– https://www.sec.gov/info/accountants/ocasubguidance.htm
38
21
41
A Few Take-Away Points
• Establish controls around non-GAAP measures
• Discuss non-GAAP with your audit committee
• Be careful with contingencies (read RPM,GM, and Stericycle)
• Rule 3-13 waivers: don’t be afraid to ask
3© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 677072
Risk of U.S. jobs being computerized in next two decades
Job
Yes No
“The Future of Employment: How Susceptible are Jobs to Computerization” C Frey and M. Osborne (2013)
50/50
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CEOs say applying financial data to achieve profitable growth is the greatest strategic value of a CFO
Yes No
Forbes Insights and KPMG International CEO November 2015 Survey
85%
5© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 677072
CFO’s plan to improve the analytical skill set of their existing finance team in the coming year
Yes No
CFO Annual IT Survey – 2017 “Data and Analytics: The CFO’s Evolving Role
60%
7© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 677072
Examples of available technologies
Example technology elements: big data technology platform
—Pentaho—QlikView—Tableau—Spotfire—D3.js
—R Studio—Alteryx—GitLab—Elastic
Search—SAS—Python
—IBM Watson—Microsoft
Cortana—IP Soft—Genpact—Automation
Anywhere
—Kettle—Microsoft
SQL—Informatica
—Microsoft SQL Server
—Postgre SQL—Hortonworks—Cloudera
ExtractionTransformationand Load (ETL)
Data storage & database
systemsAdvancedanalytics
Data sources
VisualizationsCognitive
8© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 677072
Example areas for digital transformation
ComplianceUse data to better monitor for changes that will impact the company’s compliance obligations and related business processes.
Investor relationsLeverage analytics to help explain to analysts the underlying drivers of past business performance, e.g., impact of weather on sales.
Financial planningDevelop predictive models using internal and external data to create more accurate forecasts, and planning models.
Customer knowledgeIdentify consumer tastes and trends by monitoring data and social media activity and build into your product development and revenue plans.
9© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 677072
Journal entry analysis
Great entry point into using data & analysis—Most financial personnel are familiar with the GL system—Extracting data from the GL system is a common occurrence—Entire population subject to analysis—“Jumping” from GL entries to actionable insights via D&A feels like a small step
Actionable insights include—Cross-entity comparisons—Volume of automation vs. manual intervention—Compliance with policies/controls—Assessment of non-typical journal entries—Global reach
10© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 677072
Generate highly customizable analyses for identification of inappropriate journal entries. — Journal entries recorded on weekends, holidays, or unusual times outside of business hours that may indicate fraudulent
activity— All journal entries recorded by a preparer or approver, can be analyzed
Journal entries analysis
Manual and Automated Journal Entry Postings on Weekends
Filter weekend Values
Saturday Sunday
Automated or manual entry User name
Document number –distinct count
Amount in document currency – sum
Document number –distinct count
Amount in document currency – sum
Automated 69,791 2,083,786 5,744 1,042,157
Manual EC241F8E-315 53 1,907,300
0954B949-649 5 15,608 2 3,070
E8DEE2FC-1AF 1 740
EC241F8E-315 32 3,558,601 316 673,069
Manual Total 90 5,481,509 319 676,879
Grand Total 69,881 7,565,295 6,063 1,719,036
Account number Account category Dr amount Cr amount
Local currency User name Posting date Entry date
Auto or manual?
A6B98EB7-D Trade receivables third party 1,097,300 - USD EC241F8E-315 2013-09-30 2013-10-05 Manual
99AC9424-6 Non current assets - 1,097,300 USD EC241F8E-315 2013-09-30 2013-10-05 Manual
99AC9424-6 Non current assets 1,097,300 - USD EC241F8E-315 2013-09-30 2013-10-05 Manual
A1A21AX7-B Cash - 1,097,300 USD EC241F8E-315 2013-09-30 2013-10-05 Manual
—Assess manual vs. automated entries for automation and standardization
—Leverage investment in ERP/integrated accounting systems
—Support control effectiveness
—Identify problems while small
—Full population/real time
Benefits to the company
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Revenue 3 way match
A three-way match for goods based on key information: quantity per the customer purchase order is agreed to the shipping document and sales invoice and pricing per the customer purchase order is agreed to the sales invoice
Evaluates 100% of sales activities for each period by matching transactions in revenue to relevant information per the customer purchase order, shipping document, and sales invoice
12© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 677072
Revenue 3 way match – Results
Price difference analysis
Price risk category Revenues subject to 3 way match
# of transactions % (amount) % (number) Extended
differenceNo difference 303,232,241 1640 94.5% 92.9% 0
PO > invoice price 14,438,076 73 4.5% 4.2% 823,682
PO < invoice price 3,175,837 51 1.0% 2.9% 98,740
Total 320,846,154 1764 100.% 100.0% 922,422
124 transactions for a total of $17,613,913 were identified with
price differences
94.5% of transactions
analyzed contained no price differences
$922,422 total “extended” difference
or 0.3% of total amount tested
13© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 677072
Revenue 3 way match – Results
Quantity difference analysis
Quantity risk category Revenues subject to 3 way match
# of transactions % (amount) % (number) Extended
differenceNo difference 230,904,107 1,275 72.0% 72.3% 0PO < Invoice quantity 0 0 0% 0% 0
PO > Invoice quantity 89,942,047 489 28.0% 27.7% 19,543,001
Total 320,846,154 1764 100.0% 100.0% 19,543,001
489 transactions for a total of $89,942,047 were identified with quantity differences
72% of transactions analyzed contained
no quantity differences
$19,543,001 total “extended” difference
or 6.1% of total amount tested
14© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 677072
Managing claimsThe challenge:Two insurance carriers identified that a significant number of claims result from the policies underwritten by their independent agents. How do they identify the culprits and reduce the amount of claims?
Carrier A approach
— Used data to analyze specific claims metrics to identify patterns around policies underwritten by independent agents.
— Used the metrics to rate the agents and created a plan to focus on monitoring and mentoring the agents that are performing poorly
Carrier B outcome
— Number of claims was reduced
— Revenue decreased significantly
— Company liquidated
Carrier B approach
— Terminated their independent agents that underwrote the policies which resulted in significant claims
Carrier A outcome
— Number of claims was reduced
— Revenue decreased slightly due to higher scrutiny of specific metrics
— Most independent agents improved while others left voluntarily
15© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 677072
Impact of weather patterns
$
Do I buy something in
store?
Yes
No
Yes
No
Other…
Brand Preference
Availability/Schedule
Ability to Pay
Consumer Profile
? Yes
No
W eather aside, will I go to the
store?
Yes
No
Given the weather, do I go
to the store?Shopping Triggers
Other…
“Need”1
Marketing
By definition, the “No” paths are not modeled because they cannot be observed these in the sales and traffic data
Do I buy something online?
Scope of modeled weather impact
30
10
15
Reported LY Comp
105
Forecast Growth
Weather-Adjusted LY Comp
Actual Weather Impact
Non-Weather Impact
Actual
+20%+5%100
Weekly Dollar Sales
TY LY
Thechallenge
— Model the impact of discrete weather behavior at individual locations on weekly store sales performance.
KPMG response
— Create a model that statistically linked weather observations geo-mapped to individual store locations with differences between forecast and actual store sales.
— Calculate the impact of weather on sales for a given week and adjusted rates for same-store weekly sales comps.
Benefits to retailer
— Ability to estimate how weather contributes to deviations from its sales forecasts each week.
— Identification of where non-weather-related factors influenced sales and operational performance.
— Better understanding of customer buying pattern.
16© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 677072
Predicting student withdrawals
Thechallenge
— A leading university wanted to reduce students leaving before graduating by approaching at-risk students with targeted remedial actions to prevent their withdrawal.
KPMG response
— Developed a survival analysis model that combined advanced analytics, various data sources, along with machine learning, to identify characteristics of students likely to leave the university prematurely.
— Model examined over 1,500 initial data signals, pulls data from relevant sources, and provides a hazard score for each student.
— Model enables the university to intervene on a timely basis with customized interventions to improve student retention.
Benefits to university
— Improved student retention = increased tuition revenues— Enhanced brand through higher graduation rates— Changes to curriculum, faculty, classroom and housing
needs
17© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 677072
Automated intelligenceThechallenge
— Company sells $5B of assets but needs to review 2 milliondocuments to ensure that sensitive documents are held back while documents of the sold assets go to the acquirer.
— Challenges in the form of complex file structure and document types, plus highly specialized technical and proprietary content (a.k.a. unstructured data)
KPMG response
— Leveraging its Athena Document Cognitive Automation Framework for:- Acquisition, scanning, and ingestion of 2 million documents - Three-Tiered strategy to classify documents as going to Seller
vs. Acquirer- Document Risk Scoring for review by Seller subject matter
experts- Reporting, Visualization, and Interactive Refinement
Benefits to seller
— Cost Reduction - $28 vs. $.49 per document— Efficiency - 8 FTE/12 months vs. 4 FTE/4 months— Coverage - sample vs. 100%— Clear audit trail of documents to be disclosed/retained, and reasons
for the determinations.
High performanceenvironment
Ingestion
18© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 677072
Robotics changing the way business is done
$
1.7billion
$
The global market for robots and artificial intelligence is expected to reach$152.7 billion by 2020. The adoption of these technologies could improveproductivity by 30 percent. Bank of America Merrill Lynch
McKinsey research suggests that smart robots will replace more than 100 million knowledge workers – or one-third of the world’s jobs – by 2025
billion
Recent research from the London School of Economicssuggests a return on investment in robotic technologiesof between 600% and 800% for specific tasks
ROI800%and600%
$152.7
20© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 677072
Accountant for the data age
Is prepared for how the profession has evolved and will evolve in the future
Is empowered with data and analytics skillsets
Maintains a firm foundation in accounting, auditing, tax, financial reporting and business acumen
Is innovative
Embraces change
Applies advanced technologies with ease
21© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 677072
Knowledge areas for data age accountants
Common challenges and risks
Collection, cleaning and analysis of data Database design
Common ERP capabilities
Technology and options for visualizations
Decision making in the Data Age
Use of predictive, prescriptive and
regression analysis
Commitment of time and patience
Modeling patterns of data, outliers and anomalies
22© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 677072
KPMG Master of Accounting with Data and Analytics ProgramThe first-of-its-kind Program is being developed at: The Ohio State University Max M.
Fisher College of Business
Villanova School of Business
Additional partner universities will be added
Connecting with academia to build accountants for the
data age © 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
23© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 677072
KPMG master of accounting with data and analytics program
Demonstrates the importance placed by the profession on a quality
education
Closes the gap between academic
preparation and accounting career
readiness
Encourages more students to obtain a
graduate education before
entering the accounting profession
Influences the broader academic and student community to pursue an advanced
curriculum that includes data and analytics
Accelerates “time to impact” for new
accounting professionals
Sets the tone for academic innovation in
accounting
25© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 677072
Considerations to implement digital transformation
—Connect strategic decision-makers with operational owners and D&A practitioners by partnering with business units and functions to change mindsets and identify and drive most valuable opportunities in analytics
—Utilize your unique position to own the strategy for maximum data sharing in order to drive data democratization
—Partner with the CIO to invest in nimble technology layers that enable analytics on top of the ERP backbone
Digitalization is not easyMissing Skills – Data Access – Data Quality – Disparate Systems – Data to Insights – Silver Bullet Mentality
Time & patience
Max Carrier, KPMG LLP National Partner-in-Charge of eAudIT and Audit Data & Analytics.
Max’s responsibilities include development, deployment and support, change management and strategic planning for the use of D&A technologies.
Max also leads the KPMG Master of Accounting with Data and Analytics Program, bringing D&A education to curriculums at leading business schools, for our profession and students in this data age.
E-mail: [email protected]: 214-840-2590Cell: 469-261-8583KPMG’s website: www.kpmg.com/usFind me on: LinkedIn
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 677072
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
kpmg.com/socialmedia
1
June 8, 2017
Revenue Recognition, Leases & Financial Instruments –Implementation Considerations
2
Revenue from Contracts with CustomersASU 2014-09 (as amended)
Project Issuance Date ASU1 Effective Date Deferral Q3 2015 ASU 2015-14
2 Principal versus Agent Considerations (Reporting Revenue Gross versus Net)
Q1 2016 ASU 2016-08
3 Identify Performance Obligations & Licensing Q2 2016 ASU 2016-10
4 Narrow-scope Improvementsand Practical Expedients
Q2 2016 ASU 2016-12
5 Technical Corrections and Improvements
Q4 2016 ASU 2016-20
6 Clarifying the Scope of Asset DerecognitionGuidance and Accounting for Partial Sales of Nonfinancial Assets
Q1 2017 ASU 2017-05
2
3
Revenue Recognition – Effective date & transition
Effective date− Public Companies – Annual reporting periods beginning after December 15, 2017, including
interim reporting periods therein (FY 2018)− All Other Companies – Annual reporting periods beginning after December 15, 2018, and
interim periods thereafter (FY 2019)− Early application permitted as of original effective date (FY 2017)Transition− Full Retrospective Approach - restate prior comparative periods, all periods/years presented
using new standard− Modified Retrospective Approach - apply to contracts not completed as of effective date and
record cumulative catch up
January 1, 2017 Initial Application Year
2018Current Year
2017Prior Year 1
2016Prior Year 2
New contracts New ASU
Existing contracts New ASU + cumulative catch up
Legacy GAAP Legacy GAAP
Completed contracts Legacy GAAP Legacy GAAP
cumulative catch-up adjustment
4
Percentage of SEC registrants that disclosed their transition method in their most recent SEC filings:
Note: Based on public filings made by nearly 1,000 SEC registrants as of May 31, 2017, of which 15 have early adopted. Of the 15 that have early adopted, 8 companies applied the full retrospective transition method and 7 companies applied the modified retrospective transition method.
Revenue Recognition – Anticipated Transition Method
9%
40%51%
Full Retrospective
Modified Retrospective
Undecided/Other
3
5
Of those SEC registrants that stated their anticipated transition method (i.e. excluding undecided or undisclosed registrants), the following summarizes the anticipated transition method by industry sector:
Revenue Recognition - Transition Method – by industry
0 10 20 30 40 50
Travel and Hospitality
Telecom
Technology
Retail and Distribution
Real Estate
Power & Utilities
Oil & Gas
Media & Entertainment
Life Sciences
Industrial Products & Services
Health Care Providers & Plans
Financial Services
Consumer Products
Chemical & Specialty Materials
Automotive
Full Retrospective Modified Retrospective
6
• Implementation Strategy / Approach
• Stakeholders
• Key judgements & policy considerations
• Disclosures
• Data gathering
• SAB 74
• Auditor Involvement
• Internal Controls
− Implementation
− Go Forward
Revenue Recognition – Implementation considerations
4
7
Leases ASU 2016-02
8
Effective date
• Public companies — annual reporting periods beginning after December 15, 2018 and interim periods therein
• All other entities — annual reporting periods beginning after December 15, 2019 and interim periods beginning after December 15, 2020
• Early adoption permitted
• Lessees and lessors are required to use a modified retrospective transition method for all existing leases
• Would apply the new model for the earliest year presented in the financial statements
• Application of approach linked to current lease classification and new lease classification
• An entity can use hindsight when evaluating lease term
Leases – Effective Date and Transition
Transition
Transition Relief Package
Lessees and lessors are not required to reassess the following upon transition:
Whether any expired or existing contracts are leases or contain leases
The lease classification for any expired or existing leases
Initial direct costs for any existing leases
5
9
The “Big Picture”Leases
Most leases on balance sheet for lesseesMost leases on balance sheet for lessees
Classification will drive expense profile
Lessor model classification largely unchangedLessor model classification largely unchanged
Most changes result from alignment with ASC 606
Separate lease & non-lease components and disclosures
FASB tried to make things easyFASB tried to make things easy
Classification, reassessment, transition
Effective 2019 but don’t wait to assess impactEffective 2019 but don’t wait to assess impact
Process and systems changes may be requiredPotential impact on debt covenants
10
Leases – FASB Board Meetings – Implementation Issues
Meeting Date Topics
1 November 30, 2016
Impairment• Testing operating lease related ROU asset for impairment
under ASC 360• Impact of prior period impairments of asset group on
operating lease related ROU assetLease term• Determining the term of a head lease in a lease/sublease
arrangementLessor accounting• Accounting for sales-type/direct financing leases with
significant variable payments
2 May 10,2017
Scope / Definition of a lease• Pipeline laterals• Easements
Transition Provisions• Leverage existing systems• Limit optionality to apply transition
6
11
Financial Instruments
Financial Assets ImpairmentASU 2016-13Classification & MeasurementASU 2016-01
12
Effective date
• SEC filers — annual reporting periods beginning after December 15, 2019 and interim periods therein
• All other public companies — annual reporting periods beginning after December 15, 2020 and interim periods therein
• All other public companies — annual reporting periods beginning after December 15, 2020 and interim periods beginning after December 15, 2021
• Early adoption not permitted
• Cumulative-effect adjustment to opening balance sheet of the annual period of adoption
Financial Assets – ImpairmentEffective Date and Transition
Transition
7
13
Loans/Receivables Debt Securities
Held for investment
Current expected credit loss (CECL) Held to maturity CECL
Held for sale Lower of cost or market
Available for sale Revised model with allowance
Trading Fair value through net income
Financial Assets – Impairment
Key Provisions & Changes
• Removes purchased credit loss accounting model in ASC 310-30 and impaired loan accounting including disclosures from GAAP
• Allows day 1 gross up of allowance on purchased credit impaired instruments
• Introduces few new disclosures, specifically vintage level disaggregated disclosuresfor financial assets under CECL (For public business entities)
14
TRG – Implementation Issues
Meeting Date Topics
June 12, 2017(Upcoming)
Scope• Scope of PCD accounting for beneficial interestsDetermining Contractual term• Credit card receivable• Forecasting reasonably expected TDRMeasurement• Discount rate to be used in a DCF model to measure
CECLTransition• Transition of financial assets accounted for under
Topic 310-30
Financial Assets – Impairment
8
15
Effective date
• Public companies — annual reporting periods beginning after December 15, 2017 and interim periods therein
• All other entities — annual reporting periods beginning after December 15, 2018 and interim periods beginning after December 15, 2019
• Early adoption not permitted, except
• presentation of own credit related fair value change on financial liabilities in OCI
• application of fair value of financial statement disclosure guidance by private companies
• Cumulative-effect adjustment to opening balance sheet of the annual period of adoption
• Prospective application of guidance related to non-marketable equity securities
Financial Instruments – Classification & MeasurementEffective Date and Transition
Transition
16
• Equity investments (not equity method investments) should be measured at fair value through net income, except
• Accounting policy election available on a security by security basis to carry non-marketable equity investment at cost minus impairment plus/minus observable price changes
• One step qualitative impairment test for non-marketable equity investments not carried at fair value through net income
• Own credit related fair value change in financial liabilities recognized in OCI
• Public business entities not required to disclose method and significant assumptions used to estimate fair value of financial instruments measured at amortized cost
• Eliminated fair value disclosure requirement of financial instruments measured at amortized cost by private companies
• Eliminated the entry price method to calculated fair value of certain financial instruments for disclosure purposes
Financial Instruments – Classification & Measurement
Key Provisions & Changes
9
17
• Accounting for non-marketable equity investments, including forwards and options in non-marketable equity investments
• Change in fair value due to own credit for hybrid financial instrument measured at fair value under the FV election in ASC 815
• Measuring own credit related fair value change in financial liabilities
Financial Instruments – Classification & Measurement
Implementation considerations