Audit Analytics recently released its annual report on financial restatement trends – the report looks at trends over the last 19 years.  Since 2015, total restatements – reissuance (“Big R”) and revision (“Little R”) – have declined for five consecutive years bringing the total to a 19-year low of 484 restatements in 2019.  And, of those, almost 80% were Little R restatements, which is the highest percentage since 2005.  Here’s some of the other highlights:

In addition to a decrease in overall number of restatements, Audit Analytics found an indication of low severity in every criterion quantified: (1) the negative impact on net income, (2) the average cumulative impact on net income per restatement, (3) the percentage of restatements with no impact on income statements, (4) the average number of days restated, and (5) the average number of issues identified in the restatements

– Average number of issues implicated in a restatement was approximately 1.5

– Average number of days that were corrected by a financial adjustment decreased from 500 days in 2018, to 451 in 2019 – the lowest number during the 19 years analyzed

– The largest adjustment in 2019 was $276 million and was the lowest during the last 18 years and dramatically lower than the largest adjustments in 2004 ($6.3 billion) and 2005 ($5.2 billion)

– More severe reissuance restatements from U.S. accelerated filers totaled only 32 in 2019, which is the lowest amount since 2005 when the disclosure requirement came into effect

ISS Policy Survey:  Covid-19, Climate Change, Board Diversity & More

Summer seems to be flying by and like previous years, ISS opened it’s “Annual Policy Survey.” Similar to last year, ISS is using a single survey with a limited number of questions to help streamline the process.  Even though the process is streamlined, it still covers a broad range of topics, including:

COVID-19 related questions on ISS policy guidance in response to the pandemic, AGM formats, and expectations regarding compensation adjustments and adjustments to short-term incentives globally.  Additional topics include, among others, a number of global questions related to climate change risk, sustainable development goals, auditors and audit committees, and racial and ethnic diversity on corporate boards, independent board chairs in the U.S.; and executive and director remuneration in pan-European markets.

As always, the policy survey is just the first step as ISS formulates its 2021 voting policies. In addition to the survey, ISS will gather input via regionally-based, topic-specific roundtables and conference calls.  From there, interested market participants can comment on the final proposed changes to the policies.

Our August Eminders is Posted!

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– Lynn Jokela