November 19, 2020

Corp Fin Releases Updated Financial Reporting Manual

Yesterday, Corp Fin announced an update to the Division’s Financial Reporting Manual. The Manual is updated as of October 30, 2020 and sections with updates are marked with the date tag “Last updated: 10/30/2020.”  Here’s a summary of some of the changes this update includes:

– Revised to reflect changes to smaller reporting company, accelerated filer and large accelerated filer definitions and amendments from Disclosure Update and Simplifications;

– Clarified the application of Rule 3-13 to Form 8-K and the income test for Rule 3-09 financial statements when there is more than one equity method investee;

– Clarified audit requirements for a special-purpose acquisition company target in Form S-4/F-4;

– Described the substantial deficiency situation impact on certain rule and eligibility standards;

– Included another example of a “To Be Issued” accountant’s report; and

– Removed outdated references and updated for changes to GAAP, guidance issued by the PCAOB, Division of Corporation Finance, and SEC’s Office of Chief Accountant in the last few years.

We’ll be on the lookout for more guidance coming from Corp Fin, given Director Bill Hinman’s upcoming departure. Back in 2016 when Keith Higgins prepared for his departure, Corp Fin issued 35 new CDIs in a single day.

Sold!  ISS Changes Ownership (Again)

Earlier this week, ISS announced a change in its majority ownership – it seems like that just happened not too long ago, but looking back it’s been about 3 years since the firm last changed hands.  Deutsche Börse AG is buying approximately 80% of ISS from current private-equity owner Genstar Capital.  Genstar and ISS’ current management will continue to hold the remaining 20%.  The ISS press release says the Deutsche Börse purchase is based on an ISS valuation of almost $2.3 billion.  Here’s an excerpt with additional info:

The transaction is expected to close in the first half of 2021 subject to customary closing conditions and regulatory approvals.  After the closing, ISS will continue to operate with the same editorial independence in its data and research organisation that is in place today. The current executive leadership team with CEO Gary Retelny will co-invest in the transaction and will also lead the business of ISS after the closing.

PCAOB Issues Audit Committee Resource on Auditing Estimates & Use of Specialists

It’s been almost two years since the PCAOB adopted a new requirements related to auditing accounting estimates, including fair value measurements, and using the work of specialists. With those requirements set to take effect for audits of financial statements for fiscal years ending on or after December 15, 2020, last week the PCAOB issued a resource aimed at helping audit committees understand the requirements. The PCAOB’s memo provides a list of questions for audit committees to consider asking their auditors, here’s the memo’s key takeaways:

– The effects of the new requirements will not be uniform across all audits

– The extent of effects of the new requirements will depend on the nature and extent of accounting estimates included in the company’s financial statements, and also on whether the company uses a specialist

– The new standard and amendments do not change the requirements for the auditor’s communications with audit committees, including those communications related to critical accounting estimates

– Auditors are applying these new requirements in extraordinary times and in situations that continue to evolve due to the Covid-19 pandemic

– Lynn Jokela