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The Application of Guideline Publicly Traded Company Risk Adjustment

Quantifying the Risk Adjustment Depending on the valuation assignment facts and circumstances, the valuation analyst (analyst) may encounter a unique valuation problem: a problem that is well outside the ordinary scope of typical valuation issues. Unique problems provide the analyst an opportunity to develop thought leadership solutions in a manner that (1) provides value to the client and (2) assists the r ...

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SEC Approves New PCAOB Audit Standards

On June 1, 2017 the Public Company Accounting Oversight Board (PCAOB) adopted a new auditing standard to provide additional information to investors.  The new standard received approval from the Securities and Exchange Commission on October 23, 2017.  In this post, Rohan Bose, financial analyst with Mercer Capital, summarizes several of the major changes coming to audit reports in the near future. To read t ...

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PCAOB Inspection Scrutiny of Fair Value Measurement Continues

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

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The 10 Unimpeachable Commandments

Practical Applications in Unimpeachable Neutrality Expert witnesses in the fields of forensic accounting, matrimonial litigation, and business valuation must possess a thorough understanding of the applicable standards, case law, evidentiary rules, and regulations specific to each engagement to effectively help the court understand the facts and evidence. The already daunting task of interpreting these rule ...

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U.S. SEC’s Piwowar Urges Companies to Pursue Mandatory Arbitration Clauses

SEC Official Suggests IPO Paperwork Could Include Arbitration Clauses Michael Piwowar, a Republican member of the Securities and Exchange Commission, has suggested that companies be allowed to include mandatory arbitration clauses in paperwork for initial public offerings. To read the full article in Reuters, click: U.S. SEC’s Piwowar Urges Companies to Pursue Mandatory Arbitration Clauses. ...

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$475 Million Bargain Purchase Leads to an SEC Settlement

Was it a bargain purchase or not?  The SEC has reached a $6.2 million settlement with a Big 4 audit firm relating to auditing failures associated with Miller Energy Resources.  This post will examine the particulars of the case and provide some observations on fair value accounting that can be gleaned from the SEC settlement order. To read the full article in Mercer Capital's Financial Reporting Blog, click ...

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Crowded Out?

In October 2015, the SEC adopted final rules governing the crowdfunding of startups and Regulation Crowdfunding was issued in May 2016.  The new rules allow non-accredited investors to invest directly in startup (and other) companies that can raise up to one million dollars every twelve months through crowdfunding.  Now, a year after Regulation Crowdfunding came into effect, Samantha Albert, senior financia ...

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

How do you get buyers and sellers to execute an M&A transaction when the prospects of an industry are extremely uncertain?  Part of the answer may be to structure the deal in a way that defers payment of a (significant) portion of the purchase price in the form of contingent consideration.  In this blog post, Sujan Rajbhandary, vice president, interviews Travis Harms, who leads Mercer’s valuation for fi ...

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Audit Committees Face Expertise, Risk Management Challenges

Risk Management, Compliance are Key Challenges, Auditors Say Forty-one percent of audit committee members point to risk management as the biggest challenge to their organizations this year, according to a recent KPMG survey.  Other major issues include regulatory compliance and "maintaining the control environment in an extended organization," respondents said. To read the full article in CFO, click: Audit ...

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Fair Value Measurements

In the Crosshairs of Regulators In this article, Mark Zyla of Acuitas discusses trends in fair value measurements in financial reporting and enforcement actions. Mr. Zyla notes that financial reporting is increasingly scrutinized by regulators. He observes that recent inspection reports of accounting firms that audit publicly traded entities by the Public Company Accounting Oversight Board (PCAOB) have indi ...

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Portfolio Valuation and Regulatory Scrutiny

Over the past decade, we have been retained by several investment funds to assist them in responding to formal and informal SEC investigations regarding fair value measurement of portfolio investments.  Reflecting back on those engagements yields a couple observations and reminders for funds and fund managers as they go through the quarterly valuation process.  Travis Harms, Mercer Capital’s Financial Repor ...

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Bernie Madoff Fraud Fallout

A Valuation Perspective In this article, three U.S. Tax Court cases are discussed. Each case stems from the fallout which occurred after the discovery of the Madoff Ponzi scheme amounted to more than just lost investments for each of the investors. The end-effect is much more far-reaching and complex, as many investors have been forced to pay hefty legal bills in a battle to reduce their estate tax liabilit ...

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Top Considerations for 2016 Audit Cycle

Areas of high attention for auditors during the 2016 audit cycle will include a new standard on naming the engagement partner as well as internal control over financial reporting.  Ken Tysiac, JofA editorial director, reports that key considerations for auditors in general and auditors of brokers and dealers are discussed in two new publications by the Center for Audit Quality. To read the full article in t ...

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Noncompete Agreements for Section 280G Compliance

Golden parachute payments can lead to significant tax consequences for both the company and the individual.  Lucas Parris, senior member of Mercer Capital’s Financial Reporting Valuation Group, discusses strategies to mitigate these tax risks to reduce the likelihood of additional excise taxes. To read the full article in Mercer Capital's Financial Reporting Blog, click: Noncompete Agreements for Section 28 ...

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Discounts for Lack of Marketability

Consideration for Closely Held Securities, Part I of II Valuation analysts may be asked to value closely held company securities for various reasons. These reasons include transaction pricing, financial accounting, taxation planning and compliance, and litigation (related to both breach of contract and tort claims). Depending on: 1) the business valuation approaches and methods applied; and 2) the benchmark ...

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Non-GAAP Measures: The SEC Updates Interpretation of Disclosure Regulations

While observers appear to be increasingly worried about the proliferating use of non-GAAP measures, a useful debate on non-GAAP measures would probably focus on the nature of their presentation within various disclosures rather than whether or not they should be outlawed altogether.  Sujan Rajbhandary, vice president, senior member of Mercer Capital’s Financial Reporting Valuation Group, explains. To read t ...

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The Cost to Obtain Liquidity

Studies in the Closely Held Company Valuation (Part II of II) In the first part of this two-part discussion, the author identified six transaction risk factors attempting to sell a controlling (including 100 percent) interest in a closely held company. Those included: 1) an uncertain time horizon to complete the offering or sale; 2) “Make ready” accounting, legal, and other costs to prepare for and execute ...

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Measuring the DLOM for a Closely Held Company Controlling Interest

Six Transaction Risks Owners Face Selling a Company that May Explain DLOM (Part I of II) In this first of a two-part article, Robert Reilly reviews the various models analysts use to estimate the DLOM and factors analysts consider in the DLOM selection. Valuation analysts often value closely held companies for transaction, taxation, financing, accounting, litigation, and other purposes. Depending on: 1) the ...

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Non-GAAP Measures: Here to Stay?

The debate over the use of non-GAAP performance measures continues.  Even as the prevalence of these items grows in the financial reports of public companies, cautionary tales of the uses and abuses of such metrics garner headlines.  Lucas M. Parris, senior member of Mercer Capital’s Financial Reporting Valuation Group, explains. To read the full article in Mercer Capital's Financial Reporting Blog, click: ...

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