Public companies expected to be required to disclose government subsidies
This article in Bloomberg BNA reports that FASB is expected to issue new rules this year that will require public companies to disclose the amount of their government subsidies. Government support would include, for example, cash and non-cash economic incentives such as grants to assist in buying a building, land grants, low-interest loans, interest expense subsidies, tax abatements providing relief from property tax, sales and use tax or payroll tax, and other legally enforceable government incentives. It remains to be seen whether—and how—the public might react to this information.
CAQ issues new roadmap for audit committees on non-GAAP measures
The Center for Audit Quality has issued a new guide for audit committees related to non-GAAP financial measures. Based on information gained from a series of roundtables held in 2017, Non-GAAP Measures: A Roadmap for Audit Committees identifies common themes and key considerations for audit committees, including leading practices to help assess whether a company’s non-GAAP measures present “high-quality non-GAAP measures.” And what exactly is a “high-quality non-GAAP measure”? According to the CAQ, a non-GAAP measure is high-quality if it provides a “balanced representation of the company’s performance.”
Report on international disclosure of “key audit matters”
This study conducted by the Association of Chartered Certified Accountants reports on the results of a year of international reporting of “key audit matters,” the International Auditing and Assurance Standards Board’s analog to “critical audit matters” in the U.S. The study looked at 560 audit reports across 11 countries. These types of studies may provide some useful insights for companies in the U.S.: disclosure of “critical audit matters” will be required as part of the auditor’s report in the U.S. for audits of fiscal years ending on or after June 30, 2019 (for large accelerated filers) and December 15, 2020 (for all other companies to which the requirements apply). According to the study, financial reporting improved following the adoption of KAMs in 2016. Not only did the disclosures themselves provide better information, but the study saw improvements in governance, audit quality and corporate reporting.
Are pay-ratio disclosures misleading?
As I noted in this recent blogpost, a survey conducted by Compensation Advisory Partners LLC of pay-ratio disclosures from 150 companies with a median revenue of $2.1 billion showed that, as of March 9, 2018, the lowest ratio was 1:1 and the highest was 1465:1. What? 1:1? How did that happen? For one explanation, I refer you to this column from Bloomberg’s hilarious Matt Levine, part of which I quote below:
Early pay-ratio trends from compensation consultants
What are the early trends in pay-ratio disclosure? Surveys conducted by compensation consultants provide some insights.
SCOTUS upholds state court jurisdiction over class actions asserting only ’33 Act claims
Today, SCOTUS issued its opinion in Cyan Inc. v. Beaver County Employees Retirement Fund. The opinion by Justice Kagan for a unanimous Court answered two questions: Did the Securities Litigation Uniform Standards Act of 1998 eliminate state court jurisdiction over class actions alleging only ’33 Act violations, and, even if not, under SLUSA, can defendants remove these state court actions to federal court? SCOTUS said no in both cases: “SLUSA did nothing to strip state courts of their longstanding jurisdiction to adjudicate class actions alleging only 1933 Act violations. Neither did SLUSA authorize removing such suits from state to federal court.”
SEC Commissioner Jackson sees cyber threat as a corporate governance issue
In remarks on Thursday of last week to the Tulane Corporate Law Institute, SEC Commissioner Robert Jackson discussed what he termed to be “the most pressing issue in corporate governance today: the rising cyber threat.” To support his characterization, Jackson reports that, in 2016, there were over 1,000 data breaches with an aggregate cost of over $100 billion, according to the Identity Theft Resource Center. And the issue has “rocketed to the top of the corporate agenda”: “One recent study showed that nearly two-thirds of executives identified cyber threats as a top-five risk to their company’s future. That shows how quickly this has become a board-level issue.”
Cooley Alert: SEC Issues New Guidance on Cybersecurity Disclosure and Policies
Our most recent Cooley Alert discusses the SEC’s new guidance on cybersecurity disclosure and policies. The message of the guidance is this – with the increasing importance of cybersecurity and the increasing incidence of cyber threats and breaches, companies need to review the adequacy of their disclosures regarding cybersecurity and consider how […]
BDO identifies questions companies may need to address at annual meetings of shareholders this season
Just in time to get ready for those annual meetings of shareholders, accounting firm BDO’s Center for Corporate Governance and Financial Reporting has developed a list of topics that companies should be prepared to address at their annual meetings of shareholders this season. The broad themes include the impact of efforts by the current administration regarding protectionism, taxes and deregulation, as well as corporate accountability and compliance.
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