The Imperative for Blockchain Accounting

By Dov Fischer June 7, 2019 by renholding

For hundreds of years, the basic flowchart of accounting information has been the same. A firm records its own transactions, maintains a record of those transactions, and reports those transactions (Soll, 2014, xiv). Trends in technology make it inevitable that …

SEC Chief Accountant Talks the Future of Financial Reporting

By Wesley Bricker May 3, 2019 by renholding

I’m grateful for the opportunity to visit Baruch College’s Zicklin School of Business and speak at the annual financial reporting conference for the fourth time. Many students who were starting their collegiate work here when I first spoke at this

…

Opening the Black Box of Companies’ Capital Investment Process

By Gilles Hilary, Mark (Shuai) Ma and Wenjia Yan April 16, 2019 by renholding

In spite of intensive academic research on capital expenditure efficiency, how firms make investment decisions remains largely a black box. We analyze that process by dividing it into two stages: budgeting of capital expenditures (CapEx) and execution of the budget. …

Sullivan & Cromwell Discusses Key Considerations for Annual SEC Filings

By Robert E. Buckholz, Catherine M. Clarkin, Robert W. Downes, James M. Shea Jr. and Danielle B. Abada February 25, 2019 by renholding

As issuers prepare their Form 10‑K and 20‑F filings for fiscal year 2018, they should consider the guidance provided in some recent speeches from officials of the Securities and Exchange Commission (“SEC”), which highlight a number of considerations relating to …

The Operating Returns to Acquired Intangible Assets

By John M. McInnis and Brian Monsen November 15, 2018 by renholding

Accounting rule makers have long debated whether companies should recognize intangible assets on their balance sheets. At the heart of this debate is whether recognized values can predict future income and cash flows, or whether the high degree of measurement …

Do Investors Care Who Did the Audit?

By Marcus M. Doxey, James G. Lawson, Thomas J. Lopez and Quinn T. Swanquist September 14, 2018 by renholding

In 2008, the U.S. Department of the Treasury’s Advisory Committee on the Auditing Profession called for a “standard-setting initiative to consider mandating the engagement partner’s signature on the auditor’s report” as a way to increase audit transparency.[1] The Public …

The Revolving Door between the PCAOB and Large Audit Firms

By Bradley E. Hendricks, Wayne R. Landsman and F. Dimas Peña-Romera August 2, 2018 by renholding

In a recent study, we examine the flow of workers between the Public Company Accounting Oversight Board (PCAOB) and large U.S. audit firms. The PCAOB, created by the Sarbanes-Oxley Act of 2002, oversees the audits of public companies by, among …

How Corporate Governance Affects Mimicking Peers’ Financial Decisions

By Douglas J. Fairhurst and Yoonsoo Nam August 1, 2018 by renholding

Traditional explanations for why companies choose certain financial policies focus on firm-specific factors. For instance, all else being equal, firms with higher tax rates are likely to favor debt financing over equity financing, given the tax advantages of debt. However, …

The Consequences of Restatements for Outside Directors

By Daniel Street July 13, 2018 by renholding

Serving on a public company’s board of directors carries responsibilities and risks as well as benefits for directors. If directors do not carry out their duties effectively, they risk damaging their reputation, losing their board seats, and facing shareholder lawsuits. …

Financial Misreporting: Hiding in the Shadows or in Plain Sight?

By Delphine Samuels, Daniel J. Taylor and Robert E. Verrecchia June 13, 2018 by renholding

It’s widely assumed that executives are less likely to inflate earnings at high profile companies under a good deal of regulatory oversight. And yet it’s also widely known that managers in high profile companies have an incentive to overstate their …

SEC Chief Accountant Talks Financial Reporting and Innovation

By Wesley Bricker June 7, 2018 by renholding

Thank you, Robert [Hodgkinson] for the kind introduction. Thank you, also, to the Institute of Chartered Accountants in England and Wales (“ICAEW”) for sponsoring this event. I am delighted to be in London and with you this afternoon. London continues …

Executive Equity Compensation Drives Earnings Inflation

By Martin Artz and Natalie Mizik April 5, 2018 by renholding

The economic crisis of 2008 put a bright spotlight on executive compensation and its effects on the behavior of top management. The critics have pointed to the unprecedented escalation in executive compensation, drawing a direct link to deteriorating business ethics, …

Antitrust as Corporate Governance: Why a Firm’s Mission Is to Earn No Profit

By Ramsi Woodcock March 28, 2018 by renholding

BlackRock, the vast asset manager, has been feted for demanding that the boards of its portfolio firms pursue a social purpose, which likely entails spreading corporate profits beyond shareholders to include labor and victims of environmental harm.[1] But despite …

Meaningful Ways to Measure Organizational Performance

By Hershey H. Friedman and Frimette Kass-Shraibman March 23, 2018 by renholding

A key principle of financial reporting is that “information should be expressed so that substance, not form, governs” [1]. What this means is that “the financial statements and accompanying disclosures of a business should reflect the underlying realities of business …

Does Conservative Reporting Deter Securities Class Action Lawsuits?

By Michael Ettredge, Ying (Julie) Huang and Weining Zhang February 8, 2018 by renholding

The number of accounting-related class action lawsuits has increased in recent decades, imposing billions of dollars of direct and indirect costs on public companies and, eventually, their shareholders each year. Although accounting theory says that litigation risk generates accounting conservatism …

Gibson Dunn Offers Securities Enforcement Update for 2017

By Marc J. Fagel January 26, 2018 by renholding

2017 was the prototypical transition year for the SEC. In contrast to many other federal agencies under the current administration, the new SEC leadership did not promise a wholesale rethinking of the agency’s mandate. Rather, they seemed to signal minor …

Financial Reporting Choices of Large Private Firms

By Jennifer J. Gaver, Paul Mason and Steven Utke January 17, 2018 by renholding

In recent years, there has been an increase in the number of firms opting to either forgo the public equity market or exit the market in favor of private financing.[1] Increasingly, financing for private firms comes from private funds, …

Gibson Dunn Discusses SEC Guidance on How the New Tax Law Affects Disclosure and Accounting

By Ronald O. Mueller, Elizabeth Ising, Michael Scanlon, Brian Lane and Andrew Fabens January 8, 2018 by renholding

On December 22, 2017, the Securities and Exchange Commission’s Office of the Chief Accountant and Division of Corporation Finance (“Staff”) issued important guidance that provides significant relief and helpful answers on some of the accounting and disclosure issues raised by …

The Value of Unicorns and “Worthless” Companies Explained

By J.B. Heaton January 2, 2018 by renholding

In a new paper, “Worthless Companies,” I explain how companies with worthless assets can have substantial equity value on efficient markets and debt that trades near par, so long as an irrational bidder may acquire the company.

Consider a firm …

How Effective Is the SEC in Identifying Financial Reporting Errors?

By Matthew Kubic December 22, 2017 by renholding

The Securities and Exchange Commission (SEC) Division of Corporate Finance (DCF) reviews and regulates information in public filings to “deter fraud and facilitate investor access to information necessary to make informed investment decisions.”

Commentators criticize the SEC for …

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