GAAP Flash – SEC Reporting, ASC 606, and Tax Filing Trends – 04.21.17
GAAP Flash – SEC Reporting, ASC 606, and Tax Filing Trends – 04.21.17

GAAP Flash – SEC Reporting, ASC 606, and Tax Filing Trends – 04.21.17

This week’s GAAP Flash discusses the impact of negative publicity related to social media on financial reporting, the importance of risk management strategies, the procrastination trend when it comes to filing income taxes with the IRS, and how the new revenue recognition disclosure requirements (ASC 606) could create more work for companies than expected.

United, Pepsi Outcry Unlikely to Hurt Financial Results (April 15, 2017) – WSJ CFO Journal (@CFOJournal)

Disclosures need to be made within the annual report filed with the SEC when an event happens that could materially affect either stock prices or profits and losses. So far this year, United Airlines, Starbucks and Pepsi have all received negative attention on social media, but have not reported the events to the SEC. There is no doubt that social media has changed how news is received, and how quickly it is shared. When a company finds itself embroiled in a social media controversy, the impact on financial reporting is still unclear. Currently, much of the company’s disclosure decisions fall on the CFOs.

How It’s Relevant: Companies might want to consider creating a game plan for how they would handle a social media attack or negative publicity. If there is a procedure in place for when an event should be disclosed, the appropriate response would be clearer. As the article indicates, a company could come up with a threshold, so if income or sales fall below a certain level, then it would be considered material and disclosed. Perhaps these are one-off instances? Doubtful! There’s bound to be a new, controversial hashtag that will trend within the next few weeks!

Financial Rewards of Being a ‘Front Liner’ on Risk (April 18, 2017) – WSJ Risk & Compliance Journal (@WSJRisk)

How important is it for your company to create a “risk management strategy”? Very! According to a study by PwC, companies that have policies in place are more likely to have higher profits and revenues than companies that do not. These include policies for financial, strategic, environmental, and cybersecurity risks. The report states that only 13% of participants work for companies that have implemented these front line strategies. Which begs the question, “What are the other 87% of companies doing to manage their risk?”

How It’s Relevant: Here is yet another article outlining the importance of having risk-management programs in place. Should there be a troubling event, and the company has implemented effective risk management strategies, it will recover more quickly. Having proper policies in place also allows companies to evaluate risk tradeoffs that could result in profitable opportunities, which also makes shareholders happy!

Millions of Americans still haven’t filed their taxes (April 17, 2017) – Accounting Today (@AccountingToday)

Procrastination is becoming a trend, especially as it relates to filing your income taxes with the IRS. Compared to last year, individuals seem to be putting off filing their tax returns until the last minute. But why? Technology advancements allow us to complete our tax returns electronically from home, so there is less planning ahead. Studies show that millennials are likely to wait to start until a couple of days before the deadline. Those who owe money with their returns are also likely to wait. Perhaps they were penalized for not having healthcare? Whatever the reasons, tax preparation professionals are feeling the strain.

How It’s Relevant: For tax professionals, tax season is hard enough without waiting for your clients to give you the necessary information at the 11th hour. If this procrastination trend continues, it is important that firms do their best to motivate clients to gather and submit their information earlier. Send email blasts. Reach out to clients personally. The more work that is completed in February and March will make April feel a little less stressful!

Revenue Recognition Disclosure Requirements: A Challenge That Can’t Wait (April 17, 2017) – CFO.com (@cfo)

Companies are underestimating the amount of work that goes into implementing the new revenue recognition standards, especially with respect to the new disclosure requirements. The article explains that the disclosures aren’t as simple as “showing your work.” The amount of information that will be required starting in 2018 is extremely detailed and tedious. Done correctly and efficiently, the new disclosures should be tackled simultaneously while implementing the new revenue and recognition standards.

How It’s Relevant: Preparing for the changes in reporting requirements means that companies will need to implement new internal processes and procedures, not to mention systems and internal controls. Planning ahead for the changes will help the transition by limiting the duplication of work, and ensuring compliance before it becomes crunch time. Looking for a place to start? Check out our free, 1-hour eLearning module on the new revenue recognition standard (ASC 606) or our series of blog posts and other resources.

Disclaimer
This post is published to spread the love of GAAP and provided for informational purposes only. Although we are CPAs and have made every effort to ensure the factual accuracy of the post as of the date it was published, we are not responsible for your ultimate compliance with accounting or auditing standards and you agree not to hold us responsible for such. In addition, we take no responsibility for updating old posts, but may do so from time to time.

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