Financial Reporting

ASC 820 – Fair Value Measurement & Portfolio Valuation

Formerly SFAS 157

Over 40 standards require some aspect of fair value reporting. Prior to the issuance of Accounting Standards Codification 820 there was little guidance available, so inconsistency between financial statements was widespread. While not directly creating any new rules or requirements, ASC 820 sought to regulate and standardize fair value reporting.  The guidance provided a hierarchy structure to classify fair value inputs into: Level 1, Level 2 and Level 3.

Since 2011, registration and disclosure requirements for hedge funds and other private funds increased due to the repeal of certain provisions.  Many hedge fund advisors are now required to register with the SEC and therefore require ongoing valuations to monitor illiquid investments.  We have successfully partnered with many PE and VC firms to provide them with valuations that are ASC 820 compliant.

ASC 350/360 – Impairment or Disposal of Long-Lived Assets (Goodwill, Intangibles, PP&E)

Formerly SFAS 142, 144

The incorporation of fair value metrics into financial reporting has created a number of new reporting considerations for business entities. Accounting Standards Codification 350 and Accounting Standards Codification 360 provide guidance to test the impairment of both tangible and intangible assets.

ASC 718 – Compensation – Stock Compensation

Formerly SFAS 123R

Accounting Standards Codification 718 requires companies that award their employees share based payments to recognize the fair value of those awards. The provisions outline the standards for reporting such transactions and help navigate the overall economics.  ASC 718-20 provides specific guidance for share-based payment awards that are classified as equity; the determination of fair value can become quite complex depending on the amount and terms of the grant/awards.  We can assist both start-ups, and established companies, become compliant so they can expense the proper amount over the vesting period and remain in compliance with the accounting pronouncements.

ASC 805 – Business Combinations

Formerly SFAS 141R

Business combinations give rise to a number of financial reporting requirements for the stakeholders involved.  Companies with GAAP-based financial statements must comply with the guidance set forth in Accounting Standards Codification 805, by recognizing and allocating all balance sheet items in an acquisition.  This applies to all tangible and intangible assets and is   typically referred to as a Purchase Price Allocation (PPA).  To remain compliant, generally any goodwill booked (or indefinite-lived intangible assets) must be tested at least annually under ASC 350.

ASC 815 – Derivatives & Hedging

Formerly SFAS 133 &155

The increasing use of complex securities and derivatives to mitigate risk led to the issuance of Accounting Standards Codification 815; the intent of the regulations was to improve financial reporting transparency surrounding any derivatives.  ASC 815 sets forth the definition of a derivative instrument and specifies how to account for such instruments (i.e. embedded derivatives, hybrid instruments).  The codification also includes guidance related to hedge accounting and the treatment of certain instruments as debt or equity.