Technical Accounting and Stock Compensations Practice Group
When a company is new or young, most of the focus of the operation is in getting product sold and out the door, paying employees and vendors on time, and letting the tax preparer give the books a “once-over” at tax time. But as operations grow and become more sophisticated, the need for more periodic financial information reported under accounting principles generally accepted in the United States of America becomes imperative. The need can arise from a number of different areas:
- The need to provide the Board of Directors and investors with timely and accurate financial information, not simply receipts and disbursements,
- The need to provide lenders with monthly or quarterly financial statements to support their underwriting or as a borrowing base for secured lending,
- The need as basis for the Company to compare itself competitively on a level playing field to other companies to which it competes for both capital and customers,
- The Company is in a highly regulated (i.e., health care, insurance, banking, defense, etc.) industry or one which carries complicated accounting requirements (i.e., software, construction, multi-national, etc.),
- The Company undertakes deferred or incentive compensation plans for its executives and employees, which carry sophisticated accounting requirements, or,
- The Company decides to enter the public company marketplace, imposing on itself expanded technical reporting requirements, both pre-IPO, and then as a public entity regulated by the Securities and Exchange Commission.
Most of our clients come to us with established bookkeeping operations, which adequately invoice customers, collect receivables, process vendor billings, and timely pay its vendors and employees. But at some point in their growth cycle, they encounter one of the needs enumerated above, and require technical accounting expertise. Most of our Partners have practiced public accounting in the past, maintain their expertise through continuing education, and have applied these skills in real-world environments across many industries. We can supply this expertise on a cost-effective, part-time basis, avoiding the need to hire full-time talent. Not only are the technical accounting needs of the organization met, but our part-time or interim Consulting CFOs provide strategic direction based on decades of past experience, that is often lacking in small and medium-sized enterprises (SME’s).
Companies requiring outside audits are often overburdened with the planning and preparation aspects of an audit performed by an outside Certified Public Accountant. Generally Accepted Auditing Standards preclude the auditor from auditing the work he or she performs. Increasingly, audit preparation involves more than just supporting schedule preparation, but the requirement for “white papers”, a document which sets forth the technical accounting principle the Company has implemented, and applying the facts and circumstances of specific transactions to the principle employed. Often, SME’s simply do not have the inhouse expertise or bandwidth to address these concerns in a timely or accurate manner.
Chris Chillingworth is a Partner in CFOs2GO and leads our technical accounting and stock compensation practices. He is a Certified Public Accountant (inactive) with more than 35 years experience in addressing technical accounting issues in the high technology manufacturing, software, professional services, life sciences, social media, online gaming, telecommunications, food service, and real estate industries. He has been a public company Chief Financial Officer and Chief Accounting Officer, responsible for all S.E.C. regulatory reporting and disclosures, and has successfully led a number of public and private company restatement efforts. He routinely counsels our clients on Financial Accounting Standards Board issues, including authoring numerous whitepapers on revenue recognition, stock compensation, and goodwill impairment issues that have been accepted without comment by the Big-4 CPA firms.
Who We Serve
You’ve grown beyond simply paying bills and collecting receivables, and now need financial statements that can be certified by outside CPA’s. Your bank is demanding “GAAP” financial statements in order to extend or renew credit facilities. You can’t afford to hire a full-time technical accountant, but you can afford a targeted review of your policies and procedures.
Public companies have unique and extensive reporting requirements, all of which must be met within a very narrow time window. Often the company’s finance department cannot handle all aspects of the reporting requirements within the given timeframes. And in the unfortunate circumstance where past financial reporting has been found to be inaccurate or inadequate, we can field a team of financial experts to restate your prior financial statements and put your house in order. Further, we work through a strategic business partner to provide the filing tools which integrate narrative text and informational data, along with built-in XBRL reporting capabilities.
Your finance department is operating smoothly, then, guess what, you encounter a hiccup. Whether it’s a specific accounting problem, pre-audit support, a potential merger due diligence (either as a buyer or seller), or corporate governance issues, we react quickly to solve your immediate needs.
Companies considering an incentive or stock compensation plan for the first time, or expanding an existing plan beyond the founding executives need assistance establishing policies, implementing systems, recording expense under ASC 718, or consulting on alternative compensation plans.
- Technical accounting research resulting in whitepapers describing the accounting principle and how it applies to the company’s specific facts and circumstances.
- Specific expertise in revenue recognition under ASC 810, multiple deliverables, stock compensation under ASC 718, inventory valuation (e.g., slow-moving, obsolete, lower-of-cost-or-market, and other cost accounting issues), and goodwill impairment under ASC 350.
- In-house enterprise valuation expertise
- Forensic accounting and financial restatements
- Consolidations of multi-national business entities with foreign currency translation issues and complex equity structures (e.g. Variable Interest Entities [VIE’s]).
- Public company reporting under S.E.C. regulations.
Successful Client Engagements
- Led one of the larger public company stock compensation restatements of the last decade, addressing more than 30 back-dating and corporate governance issues.
- As V.P-Finance / C.F.O. of two public companies, successfully completed multi-year financial restatements based on faulty revenue recognition practices, restating more than 8,000 errant transactions.
- Established numerous stock compensation plans, including consulting on plan documents, establishing manual reporting systems, converting manual systems to automated administrative, accounting, and reporting systems, and whitepaper preparation covering Black-Scholes inputs to compensation expense models.
- Implemented a qualitative impairment test under ASC 350 to test goodwill impairment of a multi-national private company, thus avoiding the time and expense of carrying out a quantitative test.
- Led multiple Sarbanes-Oxley implementations for public companies to establish corporate governance and provide a framework for reliable financial reporting.