How Accounting Helps Hide Mergers from the FTC and DOJ

By John D. Kepler, Charles McClure and Christopher R. Stewart November 11, 2024 by renholding

Evidence of a rise in corporate market power has drawn the attention of U.S. policymakers, prompting antitrust regulators to more closely scrutinize mergers and acquisitions (M&A) that consolidate product markets. Such consolidations are believed to be behind the increased market …

How Audit Committee Chairs’ Service on Other Boards Enhances Non-GAAP Disclosure Quality

By Cheng-Hsun Lee July 30, 2024 by renholding

In today’s rapidly evolving corporate governance landscape, the role of audit committees in overseeing financial reporting has never been more important. Recent regulations, such as the updated Compliance & Disclosure Interpretations (“C&DIs”), have emphasized the need for audit committees to …

Disclosure Procedure

By Andrew Jennings September 13, 2021 by renholding

Each year, U.S. public companies spend millions of people-hours producing the securities disclosures that undergird public capital markets. But relatively little is known about how firms produce such consequential information, including whether they are spending too much, too little, or …

SEC Speaks on Accounting and Reporting Considerations for SPAC Warrants

By John Coates and Paul Munter April 13, 2021 by renholding

In a recent statement,[1] Acting Chief Accountant Paul Munter highlighted a number of important financial reporting considerations for SPACs.[2] Among other things, that statement highlighted challenges associated with the accounting for complex financial instruments that may be common

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Accounting and Convergence in Corporate Governance

By Martin Gelter July 1, 2020 by renholding

Convergence in corporate governance – the adoption by various countries of similar governance laws and practices – and whether it is even occurring have been a hot topic of debate over the past 20 years, particularly in the legal and …

Do Non-GAAP Expense Exclusions Mislead Investors?

By Thomas J. Lopez, Christopher McCoy, Gary K. Taylor and Michael Young September 24, 2019 by renholding

A firm has two options when reporting its quarterly and annual earnings: It can report earnings based on generally accepted accounting principles (GAAP), or it can report non-GAAP earnings by excluding (adding) certain expenses that will increase (decrease) its non-GAAP …

Double Trouble: An Analysis of IRS Attention and Financial Reporting

By Zackery D. Fox and Ryan J. Wilson February 7, 2019 by renholding

Existing research provides limited insight into what draws the attention of tax authorities to public information and how that information is used in the process of examining corporate tax positions. For publicly traded firms in the U.S., the Internal Revenue …

SEC Adopts New Requirements on Using XBRL Reporting Language for Financial Statements

By Securities and Exchange Commission June 29, 2018 by renholding

The Securities and Exchange Commission voted on June 28, 2018, to adopt amendments to eXtensible Business Reporting Language (XBRL) requirements for operating companies and funds. The amendments are intended to improve the quality and accessibility of XBRL data.

The amendments,

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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 …

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, …

Skadden Discusses Trends in M&A Disclosure Litigation

By Edward B. Micheletti, Jenness E. Parker and Bonnie W. David December 18, 2017 by charlesbluesky

Over the past two years, the deal litigation landscape has changed dramatically. In early 2016, the Delaware Court of Chancery announced a new rule for evaluating disclosure-based settlements in deal litigation — the “plainly material” standard — and expressed a …

Early Returns: Companies Change Non-GAAP Financial Disclosures Following Recently Issued SEC Guidance

By Matthew E. Kaplan, Joshua M. Samit, Lauren M. Isaacson and David M. Becker September 8, 2016 by renholding

On May 17, 2016, the Securities and Exchange Commission issued new Compliance and Disclosure Interpretations (“C&DIs”) on the use of non-GAAP financial measures. With a fiscal reporting period having passed since the SEC issued the C&DIs, we surveyed …

Davis Polk discusses the SEC’s Proposed Disclosure Reforms

By Bruce K. Dallas, Derek Dostal, Joseph A. Hall, Michael Kaplan and Richard D. Truesdell, Jr. July 28, 2016 by renholding

On July 13, the Securities and Exchange Commission issued a proposal aimed at eliminating or updating duplicative, overlapping and obsolete disclosure requirements. The proposal is welcome, but largely technical in nature and generally focused on duplicative requirements. As a result, …

Weil Gotshal provides Practical Tips for “Self-Correcting” Non-GAAP Disclosure in Light of the SEC’s Updated Guidance

By Catherine T. Dixon, P.J. Himelfarb and Kaitlin Descovich July 26, 2016 by ilyabeylin

In the wake of its release on May 17, 2016 of updated Compliance and Disclosure Interpretations (“CDIs”) relating to the disclosure of non-GAAP financial measures, the SEC’s Division of Corporation Finance has indicated in no uncertain terms that now is …

Cleary Gottlieb explains SEC’s New Guidance on Non-GAAP Financial Measures

By Les Silverman, Nick Grabar, Sandra Flow and Dase Kim June 9, 2016 by ilyabeylin

On May 17, 2016, the Division of Corporation Finance of the Securities and Exchange Commission (the “SEC”) released new and updated Compliance and Disclosure Interpretations (“C&DIs”) on the use of non-GAAP financial measures (“NGFMs”). The release of the C&DIs follows …

Cahill Gordon discusses FASB’s Recent Exposure Drafts on Determinations of Materiality

By Charles A. Gilman, Jon Mark, John Schuster and Tyler A. O'Reilly October 28, 2015 by jbarrowscls

The Financial Accounting Standards Board (the “Board”) recently issued two exposure drafts that recommend a series of amendments related to determinations of materiality.¹ These efforts form part of the Board’s ongoing disclosure framework project, an initiative dedicated to improving …

Lobbying on Accounting Standards by Auditors

By Abigail Allen, Karthik Ramanna and Sugata Roychowdhury February 12, 2015 by tharts1

Corporate accounting standards are an important basis for the measurement of firm and managerial performance and for the stewardship of corporate assets in a market economy. Understanding the process that culminates with the creation of accounting standards can provide insights …

Greater Disclosure Harms Cartels

By Igor Goncharov and Caspar David Peter February 4, 2015 by ilyabeylin

The U.S. Department of Justice estimates that breaking up illegal cartels leads to consumer savings of at least 10% of annual sales in the relevant market. However, from the regulator’s perspective it is notoriously difficult to identify cartels. Even more …

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