2015 University of South Florida Accounting Circle CPE ... · 2015 University of South Florida Accounting Circle CPE Conference . May ... 2015 USF Accounting Circle Conference

2015 University of South Florida Accounting Circle CPE Conference

May 28-29, 2015

4202 E. Fowler Ave. BSN3403 Tampa, FL 33620

2015 USF Accounting Circle Conference Speakers

Kristin Allen is an accomplished leader focused on helping making life easier for her finance peers. As a Senior Director in Jabil’s Finance Transformation team, Kristin facilitates change and process improvement through mentoring, applying proven process improvement and problem-solving methodologies, such as Lean Six Sigma, and leading a team of process improvement experts. She has been with Jabil’s Finance Transformation team for 4 years, working with both the corporate and plant finance teams. Prior to Jabil, Kristin worked as a finance process improvement and internal controls consultant with Protiviti and Arthur Andersen for 12 years. Kristin graduated from USF with both her Masters and Bachelors in Accounting and is a Florida CPA and CIA. She is excited to share how patience, a clear objective and a simple plan helped Jabil achieve a 4-day close.

Faith started her career at Publix Super Markets, Inc. 33 years ago working in corporate accounting, then initiating the continuous quality improvement effort throughout the company, and now has more than 15 years in Loss Prevention. She has field experience as a Regional Loss Prevention Specialist focusing on dishonest employee investigations/interviews and leading the effort to initiate shrink compliance auditing. As the Senior Manager of Analytics she was responsible for all loss prevention data systems and a staff who analyzed shrink, maintained company-wide case and audit file records, issued civil demand and managed recovery, conducted financial crimes investigations, and ensured compliance regarding Money Services reporting. As Lakeland Division Manager, she and her staff have responsibility for Loss Prevention and Safety in over 275 stores to include criminal investigations, physical security, shrink and safety awareness, audits, and investigations. Faith has a BA in Business from Warner Southern University and is a Certified Fraud Examiner.

Faith Clark, CFE Publix Super Markets, Inc. Divisional Loss Prevention & Safety Manager

Kristin Allen, CPA, CIA Jabil Circuit, Inc. Senior Director of Finance Transformation

Jason Guthrie, CPA Ernst & Young LLP. Americas Professional Practice- Audit

Judy Genshaft University of South Florida, System President

Judy Genshaft was appointed president of the University of South Florida System in July 2000. Under her tenure, USF has been named a Top 50 research university among both public and private institutions nationwide in total research expenditures, according to the National Science Foundation; is one of 63 public research universities recognized by the Carnegie Foundation for very high research activity; and has become a global leader in producing new U.S. patents. The USF System serves more than 48,000 students on three campuses and generates an annual economic impact of more than $4.4 billion. Additionally, President Genshaft has played a high-profile role in guiding the nation’s higher education agenda. She is a past Chair for the American Council on Education and is a member of the Association of Public and Land-Grant Universities Board of Directors. President Genshaft made history in 2010 when she became the first woman to chair the NCAA Division I board and is also the former chair of the American Athletic Conference Council of Presidents.

Jason is a Senior Manager within Americas Professional Practice – Auditing (APPAu) based in Cleveland, OH. He is originally from San Jose, California - home of EY’s Global Technology Center - where he spent over 6 years auditing many companies within the technology industry, including Hewlett-Packard Company (“HP”) and Juniper Networks, one of the world’s largest provider of networking hardware and software.

Jason leverages his broad experience addressing complex accounting and auditing matters in his current role in APPAu where he has led much of the research, design, learning and implementation of data analysis tools and techniques over the past 3 years across the Americas.

Jason is an active alumnus of BYU, from which he holds a Master and Bachelor degree in Accounting with a concentration in Audit and a Minor in Information Systems Management. He is a Certified Public Accountant in California and Ohio.

Brad is a Managing Director/Shareholder in the Assurance* Group of CBIZ MHM, Tampa Bay and Mayer Hoffman McCann P.C. Prior to joining the practice, he spent seven years in public accounting with Deloitte in Tampa. He most recently served as Director of Accounting and Risk Management for Bloomin’ Brands Inc.

Dividing his time between national and local responsibilities, he focuses significantly on building the SEC Consulting practice and additional areas of technical consulting for MHM in the Southeast. This includes consultations with companies considering going public as well as assistance with IPOs; assistance with SEC filings; review of complex contracts; and analysis of new accounting standards and application of them for public entities.

Brad also spends a portion of his time as a member of MHM’s Professional Standards Group where he performs internal consultations on complex private or public company engagements, as well as focus on the firm’s SEC audit methodology.

Jeff is a Director with Deloitte & Touche LLP in its National Office SEC Services Department in Washington, DC. The SEC Services Department performs pre-filing reviews of SEC filings, assists clients with the SEC comment process, and provides assistance and interpretative guidance to clients on SEC issues.

Jeff joined the firm’s National Office SEC Services Department in May 2012. He is also a speaker on current and emerging SEC accounting and financial reporting issues.

Prior to joining the firm’s National Office, Jeff spent over 7 years with the SEC in the Division of Corporation Finance, where he was an Accounting Branch Chief. Prior to joining the SEC, he worked for Deloitte & Touche LLP as a Manager where he served major clients that were SEC registrants.

Jeffrey Jaramillo, CPA Deloitte & Touche LLP Audit Director

Bradford L. Hale, CPA CBIZ MHM, LLC. Managing Director

Stephanie Lifshin Jabil Circuit, Inc. Manager of Finance Transformation

Dan Julevich, CPA, CIA, CISA, CRMA WellCare Health Plans, Inc. Senior Director, Internal Audit and ERM

Dan is responsible for the corporate Enterprise Risk Management (ERM) program at WellCare Health Plans. He has over 20 years of audit, consulting, and management experience across a broad range of subject matter and industries. Dan began his professional career with Ernst & Young and also worked for Protiviti and Bankers Financial Corporation prior to joining WellCare.

Dan is a CPA, CIA, CISA, and earned a bachelor’s degree in Accounting and Finance from Florida State University. He is a Little League baseball coach and a U.S. Air Force veteran.

Stephanie Lifshin has a broad base of experience gained from various roles within Jabil, ranging from internal control adherence to change and project management. She successfully led the multi-year global Finance initiative to reduce the close cycle from 6 days to 4. Stephanie joined Jabil in 2007, working in the Internal Audit department. After spending 4 years in Audit, she transferred to become a Manager on the Finance Transformation Team. In this current role, she focuses on process improvements and increasing efficiency within Corporate Finance. Prior to Jabil, Stephanie was a corporate accountant for a biopharmaceutical company. Stephanie received her Bachelor of Science in Business Management degree from Babson College.

Scott McKay is a Risk Advisory and Forensics Services Partner in the Raleigh office of Cherry, Bekaert LLP. Scott’s public accounting background and extensive industry experience enables him to provide keen insights when conducting investigations of potential irregularities and defalcations. He has extensive experience with fraud in the procurement cycle including corruption and misappropriation of assets. In addition, he has experience in the following areas:

• Corruption in the sales and distribution channels, involving customer incentive schemes

• Financial fraud – revenue recognition and improper estimates

• Stock-based compensation schemes Moreover, Scott has extensive experience in anti-fraud internal control design and establishing control self-assessment and ongoing monitoring techniques within the given organization. Prior to joining Cherry Bekaert, he served for several years in financial leadership roles as Corporate Controller and as Director of Corporate Audit for a large public multi-national semiconductor company. Prior to his industry experience, Scott served as Manager with a national accounting firm, where he performed assurance and risk advisory services for multinational organizations, construction, manufacturing, distribution and casinos.

Cary D. McMillan is Chief Executive Officer of True Partners Consulting LLC, a nationwide provider of tax and financial consulting services, headquartered in Chicago. Prior to joining True Partners, he served in many roles at Sara Lee Corporation including Executive Vice President, Chief Executive Officer of Sara Lee Branded Apparel and Chief Financial Officer. Before joining Sara Lee in 1999 he was managing partner of Arthur Andersen’s Chicago office. McMillan currently serves on the boards of McDonald’s Corporation, American Eagle Outfitters, Inc. and Hyatt Hotels Corporation. Previously he served on the boards of Hewitt Associates and Sara Lee Corporation He is also active in the Chicago non-profit community. He currently is the Chairman of the Board of The School of the Art Institute; Vice Chairman of The Art Institute of Chicago; and on the boards of the PBS affiliate, WTTW and Millennium Park. McMillan is a graduate of the College of Business at the University of Illinois. He is a member of the American Institute of Certified Public Accountants and Illinois CPA Society.

Cary McMillan True Partners Consulting, LLC CEO

Scott McKay, CPA, CFE, CIA Cherry Bekaert LLP Partner, Risk Advisory Services

Fred Nicely, Esq. Council On State Taxation Senior Tax Counsel

Kerry Myers, Esq., CFE University of South Florida Clinical Professor of Accounting and Law

Kerry Myers teaches graduate classes on forensic accounting, which includes the topics of white collar crime, fraud, money laundering, and financial investigation, at USF's Lynn Pippenger School of Accountancy in the Muma College of Business. He is also part of the Florida Center for Cybersecurity. Prior to joining USF, Myers worked 25 years as both an attorney and an accountant with the Federal Bureau of Investigation. He was one of the original members of the Tampa Bay Bank Fraud Task Force and also served on the Tampa Joint Terrorism Task Force. He was also certified as a bomb technician with the FBI and worked the Oklahoma City Bombing, Centennial Park Bombing in Atlanta, and the TWA Flight 800 crash off of Long Island Sound. He testified against both Timothy McVeigh and Terry Nichols during their respective trials. Myers received the Federal Law Enforcement Officers' Association Annual Award for Bravery in 2008 for his work in Afghanistan with improvised explosive devices, and a Director's Award from then-FBI Director Louis Freeh for leading a national terrorism undercover operation. Myers earned his Juris Doctorate, with distinction, from the University of Missouri and a Bachelor of Science in Business Administration-Accounting, summa cum laude, from Central Missouri State University. He is a Certified Fraud Examiner and is licensed to practice law in Missouri, where he was a trial attorney and prosecutor for almost a decade before joining the FBI.

Fred Nicely is a Senior Tax Counsel at the Council On State Taxation (COST). His role as Senior Tax Counsel extends to all aspects of the COST mission statement: “to preserve and promote equitable and nondiscriminatory state and local taxation of multijurisdictional business entities.” Before joining COST, Fred served in the Ohio Department of Taxation for four years as Deputy Tax Commissioner over Legal and for the prior seven years as the Department’s Chief Counsel. Fred’s responsibilities at the Department included testifying before legislative committees, participating as an alternative delegate for Ohio at Streamlined Sales Tax Project meetings, and reviewing legal documents issued by the Department, including deciding the merits of filing an appeal. He is a frequent speaker and author on Ohio’s tax system and on multistate tax issues generally. Fred also has extensive experience in public utility tax law, having served as an administrator of the Department’s public utility tax division. Fred’s undergraduate degree in psychology (with a concentration in accounting) is from the Ohio State University. He obtained his MBA and JD from Capital University in Columbus, Ohio. He can be reached at 202/484-5213; ([email protected]).

mailto:[email protected]

Bruce Nunnally has over 30 years of public accounting experience, including 9 years with the international public accounting firm, Ernst & Young, LLP. Bruce is a national instructor of accounting and auditing issues. He has presented accounting and auditing continuing education classes for a quarter of the top 30 CPA firms in the U.S. Some of the courses he has led include:

• Annual Update for Accountants and Auditors

• Governmental and Not-for-Profit Update

• Audits of 401K Plans

• Fair Value Accounting

• FASB Update for Industry

In 2000, Bruce was recognized as an “Outstanding Discussion Leader” by the Florida Institute of Certified Public Accountants.

Bruce has been a Certified Public Accountant since 1981 and a partner with CRI since its inception.

Prior to graduating from the University of South Florida with a B.S. in Accounting, Steve spent 6 years on active duty in the US Navy’s Submarine Service.

Steve is the Managing Director of Oscher Consulting where he serves as a consulting and testifying expert in accounting, financial and economic matters. He has been appointed by the Courts as a Trustee, Receiver, Examiner and Special Master.

His professional activities have included:

• Chairman, Florida State Board of Accountancy

• Chairman, Audit Committee, USF Physicians Group

• Chairman, USF School of Accountancy Advisory Board

He has been recognized as:

• USF – 1987 Distinguished Alumnus Award

Steve Oscher, CPA, ABV, CFF, CFE Oscher Consulting, PA Managing Director

Bruce A. Nunnally, CPA, CGMA Carr, Riggs & Ingram, LLC Partner

Walt Pavlo Jr. Forbes contributor Prisionlogy

Aakash Patel Elevate, Inc. President

Aakash Patel is here to help business owners learn, connect and grow in the community. Patel has a diverse work background in journalism, business development and public relations. In 2012 Patel started his firm, Elevate, Inc., a Florida-based strategic business consulting firm providing a public relations, community relations, target networking and social media. Prior to that, he worked as an Editorial Assistant at the Tampa Bay Times Tallahassee Bureau, served as Public Relations Coordinator for the Westin Tampa Bay Hotel and Aqua, and was the founding Director of Business Development for Chamber.com. He is an active member of the Greater Tampa Chamber of Commerce, Vistage, Tampa Downtown Partnership, Seminole Torchbearers, and Washington Leadership Program. And, in order to give back while staying connected, Patel volunteers and serves as Chair of The Early Learning Coalition of Hillsborough County and The University of Tampa Board of Counselors. In addition he also volunteers his time with the Indo-US Chamber of Commerce, the Gasparilla Film Festival Advisory Board, the Centre Club Board of Governors, and the Leadership Tampa Bay Board of Directors. Aakash holds both a degree in English Literature and a degree in Political Science from Florida State University.

Walt Pavlo is a contributor to Forbes.com where he writes about white-collar crime. He is the co-author of Stolen Without A Gun, which he co-wrote with Neil Weinberg (Editor-in-Chief at American Banker). Mr. Pavlo’s story has been a part of training programs at the Federal Bureau of Investigation, major corporations and top ranked MBA programs across the country. Walt Pavlo is the founder of www.500PearlStreet.com, which is a website dedicated to providing information on current White-collar crime cases with the purpose of educating people on the major cases in our federal court system. He is also an adjunct professor at Endicott College’s Van Loan School teaching graduate level classes in Finance and Ethics. Mr. Pavlo is a nationally recognized speaker on white-collar crime, ethics and federal prison. He specializes in helping future leaders, corporate leaders and employees understand how fraud starts within an organization by providing insight into the motivations of perpetrators and the opportunities they see when they commit crimes within a company. Mr. Pavlo was recruited by the Federal Bureau of Investigation to lead training and discussions on financial fraud in the corporate environment in order to create awareness that fraud can exist in any workplace. His case has been cited in numerous textbooks and periodicals as a classic story of how a lack of proper mentoring and support within an organization can lead to poor decisions. His story has been featured on ABC Nightline, The Katie Couric Show and the NBC Today Show. Mr. Pavlo earned his B.S. in Industrial Engineering from West Virginia University and his MBA in Finance from Mercer University.

Bill leads Protiviti’s Tampa Market practice. In this capacity, he oversees client engagements focused on a broad range of operational, technology and compliance risks. His primary areas of focus include corporate governance; business risk management and internal audit services. Bill’s professional experience includes more than 20 years of internal audit, information systems audit and fraud examination services. His experience includes over 12 years in private industry and 8 in public accounting and consulting. Bill is a frequent speaker and author of articles on matters related to corporate governance, risk management and internal auditing. Bill often examines Client continuity plans including tests of operational effectiveness of plans, thoroughness of continuity and disaster recovery preparations and tests of operational effectiveness of plans Bill is the lead executive for providing ERM services for a specialty financial services company in St. Petersburg, FL. Initial work performed included an enterprise-wide risk assessment via facilitated session with the company’s Executive Management team and implementation of the ISO31000 framework. Bill also supervised an engagement to provide advisory oversight of the development of the Firm’s business continuity plans and tests. Bill supervised the evaluation of Business Continuity Plans as part of Internal Audit engagements at numerous clients, covering review of documented plans, adequacy of tests, confirmation that remediation activities were implemented, and reporting of status to Executive Management and the Board.

Todd Webster is an Audit Managing Director with KPMG LLP and is from KPMG’s Tampa, FL office. He recently completed a four year rotation with KPMG’s Department of Professional Practice in New York City where his role was to function as a technical resource for engagement teams in the field who are providing audit services to state and local governments, health care entities, and not-for-profit entities. In July 2014, Todd returned to the Tampa. He has been with KPMG for 13 years, during which time he has primarily served clients in the health care, state and local government, and not-for-profit industries. Prior to joining KPMG, Todd spent 5 years with Arthur Andersen LLP in the audit practice serving clients in a variety of industries. As part of his rotation in NY, Todd served as a GASB Practice Fellow from July 2010 to July 2012. As a practice fellow, Todd was the project manager on GASB Statements No. 60, No. 62, and No. 65, and fielded all technical inquiries related to those Statements. Todd is a Certified Public Accountant in the states of Florida, New York, and North Carolina. He is also a member of the American Institute of Certified Public Accountants and the Florida Institute of Certified Public Accountants.

Todd Webster, CPA KPMG LLP Managing Director

William Thomas, CFE, CIA, CISA, CRMA Protiviti Managing Director

D. Keith Wilson, CPA Public Company Accounting Oversight Board (PCAOB) Deputy Chief Auditor

Brian Wiegmann, CPA PricewaterhouseCoopers LLP Director, Transaction Services- Capital Markets and Accounting Advisory Services

Brian Wiegmann is a Director in PricewaterhouseCoopers' Transaction Services Capital Markets & Accounting Advisory Services group ("TS-CMAAS") in Miami, Florida. He provides accounting advisory services to help clients understand the accounting and financial reporting consequences of complex and sophisticated financial structures employed in mergers, acquisitions, divestitures and financing transactions, while helping clients balance a transaction’s commercial and accounting objectives. Brian also advises clients regarding the impact of new accounting standards and the implementation process. Prior to re-joining TS-CMAAS last year, Brian spent two years as a Director in PwC’s U.S. National Office - Accounting Services Group based in Florham Park, NJ. During his tour with the National Office, Brian focused on a broad array of technical accounting areas but spent a majority of his time on current and future revenue recognition and compensation matters. During his time with TS-CMAAS and the National Office, Brian has also specialized in business combination transactions, fair value accounting, leasing transactions, securitizations, joint ventures and alliances, and consolidation analyses. Brian started his career with PwC in the audit practice, working on utility and other consumer and industrial product services’ companies. Brian has a Master's and Bachelor's in Accounting from the University of Florida, and he is a licensed CPA in Florida and New York.

Keith Wilson, CPA, is Deputy Chief Auditor for the Public Company Accounting Oversight Board (PCAOB) in Washington, D.C. He works in the Office of the Chief Auditor, assisting in the development of auditing and related professional practice standards. While at the PCAOB, Mr. Wilson has led a number of standards-related projects, resulting in development of several of the Board's audit and attest standards. He has also been involved in the development of staff guidance addressing topics such as internal control over financial reporting, professional skepticism, and audit risks in certain emerging markets.

Andy Zolper is Chief Information Security Officer for Raymond James Financial, Inc, a diversified financial services provider with subsidiaries engaged in investment and financial planning, investment banking and asset management. Through its three broker/dealer subsidiaries, Raymond James Financial has more than 6,300 financial advisors serving more than 2.5 million accounts in more than 2,500 locations throughout the United States, Canada and overseas. As CISO, Andy provides strategic direction to identify appropriate security measures, sponsors implementation of security solutions, manages daily security operations, and provides governance to manage technology risk – all in order to help Raymond James achieve its business objectives. Andy was previously at UBS as CISO of its Wealth Management Americas division, and later as global head of IT Risk Management. Prior to joining UBS, he led teams in IT risk management, global program management, and business process reengineering at JPMorgan Chase. Before JPMC, Andy was responsible for application development at Sterling Resources Inc, and developed the company's process reengineering, e-learning and knowledge management software products. Before joining Sterling Resources, Andy served in various management roles at Verizon ranging from staff director of competitive intelligence analysis to field management of "fiber to the curb" deployment. Andy graduated from the Virginia Military Institute. He is a US Marine Corps veteran, having served as a communications and signals intelligence officer. He is a graduate of SIFMA's Securities Industry Institute at The Wharton School, a Registered Operations Professional (Series 99), a certified Six Sigma Black Belt and a Certified Information Security Manager (CISM). He represents Raymond James on the Advisory Council of BITS, the technology policy division of The Financial Services Roundtable, and is a member of SIFMA’s Cyber Security Working Group. Andy lives in St. Petersburg Florida with his wife and five children.

Andy Zolper Raymond James Financial, Inc. SVP and Chief IT Security Officer

This conference is made possible thanks to the

following: USF Lynn Pippenger School of Accountancy

Uday Murthy, Director

Katie Davis, Conference Coordinator

Denise Gelia, Office Staff

Sarah Moyer, Office Staff

Beta Alpha Psi, Delta Gamma Chapter

Accounting Circle Board of Directors

Luke Buzard, TECO Energy, Board Chair

Rachel Hardy, KPMG, CPE Conference Chair

CPE Conference Committee Members

Bryce Faraguna, PwC

Kathy Howe, TECO Energy

Jamil Jones, Deloitte

Cathy Leone, Resources Global Professionals

Lauren Martin, Cherry Bekaert

Jon Minch, Grant Thorton

Tanya Pavlik, 1 Source Partners

Ron Tambasco, True Partners Consulting, LLC

Sponsorship Chairs

Elizabeth Eriksen, Raymond James Financial

Michael Jerman, PwC

Thank you to all of our sponsors!!

Integrating Risk Management and Strategy

Bill ThomasManaging Director

Dan JulevichSenior Director, Internal Audit and

Enterprise Risk Management

2 © 2015 Protiviti Inc. An Equal Opportunity Employer M/F/Disability/Vet. CONFIDENTIAL: This document is for your company's internal use only and may not be copied nor distributed to another third party.

ERM establishes the oversight, control and discipline to drive continuous improvement of an entity’s risk management capabilities in a constantly changing operating environment.

ERM – A Simple Definition


Enterprise Risk Management

Risk isn’t blameless, but if someone pushes the accelerator…the car doesn’t go on its own

• Review

• Inform

• Advise

• Monitor/Measure

• Control

• Review

• Inform

• Advise

• Monitor/Measure

• Control

ERM Can:

• Initiate

• Decide

• Initiate

• Decide

ERM Can’t :


Latest News…..Current State of Risk Management…..

AICPA 2015 Report on the Current State of Enterprise Risk Oversight (2/15):

• Maturity of risk oversight has leveled off, with more mature models in public companies and FSI organizations

─ 25% of companies report “complete” ERM processes in place; 52% report status as “not at all” or “minimally” in place

• “Significant” opportunities remain to strengthen approaches to identifying risk and align oversight with strategy

─ 68% of companies report that Boards are “extensively” involved

o Significantly higher for public companies and large organizations

• Risk Oversight leadership is more formalized

─ 32% of companies have a CRO; 56% at FSI companies

─ 45% have a management risk committee

─ 58% have formal risk policies, statements; 48% have explicit guidelines for defining risk (e.g., scales)

AICPA 2015 Report on the Current State of Enterprise Risk Oversight (2/15):

• Maturity of risk oversight has leveled off, with more mature models in public companies and FSI organizations

─ 25% of companies report “complete” ERM processes in place; 52% report status as “not at all” or “minimally” in place

• “Significant” opportunities remain to strengthen approaches to identifying risk and align oversight with strategy

─ 68% of companies report that Boards are “extensively” involved

o Significantly higher for public companies and large organizations

• Risk Oversight leadership is more formalized

─ 32% of companies have a CRO; 56% at FSI companies

─ 45% have a management risk committee

─ 58% have formal risk policies, statements; 48% have explicit guidelines for defining risk (e.g., scales)


Latest News…..

2015 Protiviti NC State’s ERM Initiative noted…..

• Sudden changes remind us that risk assessment and scenario planning and are crucial…what’s emerged……

─ Cyber risk and related Reputation Risk Management

─ Commodity price fluctuations(e.g., oil)

─ Currency instability

• Maybe we missed a few things we thought we understood…..

─ Geopolitical “hot spots” in areas previously thought to be stable

─ Renewed focus on business relationships and vendor risk management

─ Regulation and increasing enforcement activities

2015 Protiviti NC State’s ERM Initiative noted…..

• Sudden changes remind us that risk assessment and scenario planning and are crucial…what’s emerged……

─ Cyber risk and related Reputation Risk Management

─ Commodity price fluctuations(e.g., oil)

─ Currency instability

• Maybe we missed a few things we thought we understood…..

─ Geopolitical “hot spots” in areas previously thought to be stable

─ Renewed focus on business relationships and vendor risk management

─ Regulation and increasing enforcement activities


Latest News…..What Does the Board Think?

• 48.2% of boards assign risk oversight to the audit committee; 33.9% assign risk oversight to the full board

• 51.5% of directors indicated that the full board should have primary responsibility for risk oversight

Source: 2014-15 NACD Public Company Governance Survey

• 72% of directors are “very confident” they can monitor operational risk and internal fraud.

• 15% of directors are “very confident” they can monitor cyber risk (gulp).

Source: Corporate Board Member Magazine, First Quarter 2015 “What Directors Think”

• 48.2% of boards assign risk oversight to the audit committee; 33.9% assign risk oversight to the full board

• 51.5% of directors indicated that the full board should have primary responsibility for risk oversight

Source: 2014-15 NACD Public Company Governance Survey

• 72% of directors are “very confident” they can monitor operational risk and internal fraud.

• 15% of directors are “very confident” they can monitor cyber risk (gulp).

Source: Corporate Board Member Magazine, First Quarter 2015 “What Directors Think”


A Multiple Lines of Defense Model Can Clarify Everyone’s Role…

The board and CEO must have mutual understanding of the value contributed by the independent function with the intent of preserving its independent role within the organization

Positioning of risk management/compliance functions entails several important principles:

• Viewed as a peer with business line leaders

• Direct reporting line to the CEO

• Reporting line to the board or a committee of the board with no access constraints

• Mandatory and regularly scheduled executive sessions with the board or a board committee

• Formalized escalation process should exist

In summary, clearly defined positioning of these functions and how they interface with business management

Positioning of risk management/compliance functions entails several important principles:

• Viewed as a peer with business line leaders

• Direct reporting line to the CEO

• Reporting line to the board or a committee of the board with no access constraints

• Mandatory and regularly scheduled executive sessions with the board or a board committee

• Formalized escalation process should exist

In summary, clearly defined positioning of these functions and how they interface with business management


Getting to the Core of Risk Management

What we don’t know may be more important than what we do know


Are We Flying Blind, But We Just Don’t Know It Yet?

Adapting is a game every organization must play to be successful in a rapidly changing business environment

Think about it! What will be the effect of:

“Everyone has a plan until they get punched in the mouth.”Mike Tyson, Former Heavyweight Champion

• Disruptive technological developments?

─ Consolidation to create friendlier, more intelligent devices─ Increased mobile connectivity. bigger/thinner TVs, 3D displays and

speech recognition ─ Hybrids in automotive industry─ Solar energy in the power industry─ Bandwidth availability

• Disruptive market forces?

─ Significant demographic changes─ Political and social instability─ Increased regulation

• Emerging new and/or unexpected threats?

─ Cybersecurity issues─ Catastrophic natural disasters─ Terrorist events like 9/11



Enabling activities to operationalize ERM

ERM Framework


Limitations in the Time-Honored Risk Map…

Risk maps, heat maps and risk rankings based on subjective assessments of severity and likelihood of occurrence often leave an organization with a list of risks and little insight as to what to do next

PROS

• Provide an overall picture

• Seems simple and understandable enough

• Some view it as a rough risk profile

CONS

• A common complaint: Rarely surfaces an “aha”

• Qualitative descriptions of severity/likelihood are understood differently by different people

• Intersections on map are mean averages of widely dispersed views

• Subjects risks with different characteristics, including time horizon, to a common grid

• Doesn’t consider speed to impact and response readiness

• Doesn’t consider the complexities of the extended enterprise


Alternative Assessment Criteria Increases the Value of the Process

• Financial loss

• Strategic objectives achievement

• Operational impact

• Reputation

• Financial loss

• Strategic objectives achievement

• Operational impact

• Reputation

Impact

• Speed with which the impact of the risk event is realized

• Speed with which the impact of the risk event is realized

Velocity

• The period of time over which the consequences of the risk event are experienced

• The period of time over which the consequences of the risk event are experienced

Persistence



Risk Management Concepts

Risk Culture:

“set of encouraged and acceptable behaviors, discussions, decisions and

attitudes toward taking and managing risk within an institution.”

Source: Risk Management Association



Themes of Successful Risk Cultures

High-level executive involvement and support vital

ERM lead is independent, supported by small, focused group

ERM lead drives the process, business units own risk and IA validates

Proactive emphasis

Consistency of risk language/frameworks important

Integration with core management activities a key success factor

Board risk oversight driven by broader Board participation


Components of an Effective Risk Culture

Does your culture support your words regarding risk management?Does your culture support your words regarding risk management?

• High Impact “Top to Bottom” Message

• Consistent Messages

• Open Discussion on Risk, Compliance, Behavior

• High Impact “Top to Bottom” Message

• Consistent Messages

• Open Discussion on Risk, Compliance, Behavior

Tone

• Alignment of “subcultures”

• Reinforcement

• Prioritization of Risk Culture

• Alignment of “subcultures”

• Reinforcement

• Prioritization of Risk Culture

Drivers

• Stated Values, Codes

• Ethics Program

• Clear Oversight and Communications

• Stated Values, Codes

• Ethics Program

• Clear Oversight and Communications

Tangibles

• Experienced Values

• Belief Systems

• Risk Taking Behaviors and Warning Signs

• Experienced Values

• Belief Systems

• Risk Taking Behaviors and Warning Signs

Intangibles


Man Versus Geological Time…Commentary on Risk Culture?

Strategy for a Utility: Operate a nuclear power station in Japan near a quake zone by the ocean located up a bluff between 14 and 23 feet above sea level

Key Assumptions

Presume a worst case scenario of an earthquake causing a tsunami of more than 20 feet as extremely low risk

Contrarian Statement

A 40+ foot tsunami hits the plant location site, a 1,000 year event based on geological studies

Implication Statement

Evaluate the plant’s safety planning in light of a catastrophic tsunami scenario, including its back-up power facilities for avoiding a fatal loss of power


Decision-makers use their best and informed judgment to take risks. When the potential effect is outside their authority level, they escalate the decision to more senior management – in the same way they make purchasing decisions.

The consideration of risk is an integral and essential element of decision-making and management in general. It is not a separate discipline.

Management considers the potential risks introduced to other departments/business units when considering changes to its processes.

Management shares the kind of information that signals risk events which allows the company to resolve emerging issues before they become crises.

Management recognizes that when they make decisions they have to consider what might happen (i.e., the risk), assess it (upside and downside), and if it is at an unacceptable level, act to modify it.

Management accountability for risks and risk mitigation is clearly established.

Risk management is embedded in processes and strategies.

Management has an adequate respect for risk. Risk management requirements are neither too lax nor too stringent.

The Senior Executive Team establishes a culture that values employees who proactively identify risks and/or potential issues.

Measuring Risk Culture…9 Statements to Consider



…is the most difficult task of risk management and internal control

Managing Tension Between Value Creation and Protection

For risk management and internal control to function when a crucial decision-making moment arises, directors and executive management must be committed to making it work

1

Aligning the governance process, risk management and internal control toward striking the appropriate balance is crucial in this regard

2

The objective is to balance the entrepreneurial activities and control activities of the organization so that neither one is too disproportionately strong relative to the other

3

This task is fundamental to managing risk culture

4


Risk Management Concepts

A risk appetite statement is a guidepost to management and the board of directors of the core risk strategy arising from the strategy-setting process”

“Would you tell me, please, which way I ought to go from here?""That depends a good deal on where you want to get to.""I don't much care where –""Then it doesn't matter which way you go.”

- Alice in Wonderland


Risk Appetite Statement Objectives

COMMUNICATE, REVISIT AND REVISE!

Risk appetite is a deceivingly complex topic and challenge for organizations to establish. Taking an objectives based approach may help you get there.

Risk appetite is a deceivingly complex topic and challenge for organizations to establish. Taking an objectives based approach may help you get there.

Risk Appetite

Risk Tolerances

Define what risk appetite means to the organization.Communicate the level of risk the organization is willing to take in the pursuit of strategic objectives.Link to strategic planning and priorities.Establish why the organization is developing a risk appetite statementAlign with enterprise risk managementMeet regulatory requirements

Define what risk appetite means to the organization.Communicate the level of risk the organization is willing to take in the pursuit of strategic objectives.Link to strategic planning and priorities.Establish why the organization is developing a risk appetite statementAlign with enterprise risk managementMeet regulatory requirements

Strategy

Risk Appetite


It’s a Wrap….

Sooner or later, something fundamental in your business world will change

• ERM can be central to knowing when to change Strategy

The ERM structure really matters

Boards look to ERM to enable Risk Oversight

Consider innovative ways to evaluate risk

• Your risk profile is unique

Support an effective risk culture, and,

Whatever you do, don’t do this.....



Q&A


Confidentiality Statement and Restriction for Use

This document contains confidential material proprietary to Protiviti Inc. ("Protiviti"), a wholly-owned subsidiary of Robert Half ("RHI"). RHI is a publicly-traded company and as such, the materials, information, ideas, and concepts contained herein are non-public, should be used solely and exclusively to evaluate the capabilities of Protiviti to provide assistance to your Company, and should not be used in any inappropriate manner or in violation of applicable securities laws. The contents are intended for the use of your Company and may not

be distributed to third parties.

Revenue Recognition:Where to Start

Presented by:

Brad Hale, Managing Director & Shareholder,

CBIZ MHM

Today’s AgendaBackground

The Business Side

Topic 606 - High level overview

Example: Software Company

Transition Resource Group

1

2

3

4

5

Background

Reasons for the New GuidanceThe FASB and the IASB initiated a joint project to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS that would:

1.Remove inconsistencies and weaknesses in existing revenue recognition standards and practices. U.S. GAAP has a multitude of Industry and transaction specific standards. IFRS has two standards on Revenue Recognition IAS 11 and IAS 18.

2.Provide a more robust framework for addressing revenue recognition issues. Weaknesses exist in both set of standards.

3.Improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets.

4.Simplify the preparation of financial statements by reducing the number of requirements to which entities must refer.

The Business Side

Example• Company X contracts with a customer to build a new

building for $1 million on 12/1/2014. Company X has completed two similar buildings in this area.

• If construction is completed in 6 months, Company X receives a $300,000 bonus.

• If construction goes beyond 6 months, Company X gets no bonus.

Guidance: To include variable consideration in the estimated transaction price, the entity has to conclude that it is probable that a significant revenue reversal will not occur in future periods.

Industries Subject to Largest ImpactThose entities that are currently subject to significant industry

guidance are likely to experience the most significant impact.• Telecommunication

• Software

• Construction/Aerospace and Defense

• Real Estate

• Entertainment and Media

• Multiple Deliverable Contracts

Impact will be Far-reaching within the 4 WallsThe impact from the adoption of the new revenue recognition standard will likely be complex and far-reaching and involve many different functions within an organization.

• Information systems may require adjustment

• Standard “sales” contracts and other sales agreements should be evaluated in light of the changes

• Sales incentives/commissions should be considered

• Internal control processes may need updating

• Executive compensation arrangements

• Debt covenants

• Tax implications

• Supply chain

Impact will be Far-reaching outside the 4 WallsThe impact from the adoption of the new revenue recognition standard will likely be complex and far-reaching and involve many different players outside an organization.

• Attorneys• Drafting of contracts, purchase agreements, compensation agreements

• Bankers• Covenant reporting

• Underwriting

• Transaction Advisors• Diligence on assumptions

• Investors• Understanding areas of judgment

• Assessing comparability

Topic 606- High level overview

Core principle: The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods, or services, to customers in an amount that reflects the consideration to which the entity expects to be entitled, in exchange for those goods or services.

Five steps to apply the core principle:1. Identify the contract(s) with a customer2. Identify the performance obligations in the contract3. Determine the transaction price4. Allocate the transaction price to the performance obligations in the

contract5. Recognize revenue when (or as) the entity satisfied a performance

obligation

Core Principle and the Five Step Process:Basic Observations

• On the surface the five step process does not seem overly complex and arguably, it appears to include much of what is currently done to determine revenue recognition.

• However, each of the five steps will require significant judgments by management and auditor in applying the underlying principles included in the new guidance.

• The transfer of “control” to the customer becomes the driving issue in evaluating the appropriateness of revenue recognition under the new guidance.• Currently, the evaluation of “risk and reward” often drives the

determination of revenue recognition. While it remains an important consideration, it is no longer determinant under the new guidance.

1. Identify the Contract with the CustomerA contract is an agreement between two or more parties that creates enforceable rights and obligations.

• The entity can identify the payment terms for the goods or services to be transferred.

• The contract has commercial substance (that is, the risk, timing, or amount of the entity’s future cash flows is expected to change as result of the contract).

• It is probable that the entity will collect the consideration to which it will be entitled in exchange for the goods or services that will transferred to the customer.

The Five Step Process

2. Identifying Performance ObligationsA performance obligation is a promise in a contract with a customer to transfer to the customer:

• A good or service (or bundle of goods or services) that is distinct.

• A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.

Generally explicit but may also include promises that are implied by an entity’s customary business practices, published policies or specific statements, if at the time of entering into the contract those promises create a valid expectation of the customer that the entity will transfer a good or service to the customer.


2. Identifying Performance ObligationsA promised good or service is considered distinct if both of the following conditions are met:

• The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (that is, the good or service is capable of being distinct).

• The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the good or service is distinct within the context of the contract).


3.Determining the Transaction PriceThe transaction price is the amount of consideration that an entity expects to be entitled to in exchange for transferring promised goods or services to a customer. Issues that impact the determination of the transaction price include the following:

• Fixed consideration

• Variable consideration

• Constraining estimates of variable consideration

• The existence of a significant financing component in the contract

• Non cash consideration

• Consideration payable to a customer


4. Allocating the Transaction Price The objective when allocating the transaction price is for an entity to allocate the transaction price to each performance obligation (or distinct good or service) in an amount that depicts the amount of consideration which the entity expects to be entitled in exchange for transferring the promised goods or services to the customer.

To meet the allocation objective, an entity shall allocate the transaction price to each performance obligation in the contract on a relative stand-alone selling price basis.

• Relative selling price is best evidenced by the observable price of a good or service when sold separately in similar circumstances and to similar customers.

• If a stand-alone selling price is not directly observable, an entity shall estimate the standalone selling price.


4. Allocating the Transaction Price When estimating the relative stand-alone selling price, management should maximize the use of observable inputs. The following are some possible estimation methods (not all inclusive):

• Adjusted market assessment approach

• Expected cost plus a margin approach

• Residual approach (in certain circumstances)


5. Recognize Revenue When a Performance Obligation is SatisfiedAn entity shall recognize revenue when (or as) the entity satisfies a performance obligation by transferring a promised good or service (that is, an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset.

• Control of an asset refers to the customer’s ability to direct the use of and obtain substantially all of the remaining benefits from the asset. Indicators that a customer has obtained control are as follows:

• The entity has a right to payment for the asset

• The entity transferred legal title to the asset

• The entity transferred physical possession of the asset

• The customer has the significant risk and reward of ownership

• The customer has accepted the asset


5. Recognize Revenue When a Performance Obligation is SatisfiedPerformance Obligations Satisfied Over Time

• An entity transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognizes revenue over time if one of the following criteria are met:• The customer simultaneously receives and consumes the benefits

provided by the entity’s performance as the entity performs.

• The entity’s performance creates or enhances an asset (WIP) that the customer controls as the asset is created or enhanced.

• The entity’s performance does not create an asset with an alternative use to the entity and the entity has a right to payment for performance completed to date.


5. Recognize Revenue When a Performance Obligation is SatisfiedPerformance Obligations Satisfied at a Point in Time

• If a performance obligation is not satisfied over time, an entity satisfies the performance obligation at a point in time. The specific point in time is dependent on when the customer obtains control of the promised asset and the entity satisfies the performance obligation.


The objective of the disclosure requirements (Topic 606) is for an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

• The disclosure requirements found in the new revenue recognition guidance are significantly in excess of what is currently required under U.S. GAAP.

Disclosures

An entity shall disclose qualitative and quantitative information about all of the following:

• Its contracts with customers

• The significant judgments, and changes in the judgments made in applying the guidance in Topic 606 to those contracts

• Any assets recognized from the costs to obtain or fulfill a contract with a customer

Disclosures


• Derives its revenues primarily from the sale of perpetual software licenses and related services.

• Most contracts are sold in combination with a service license agreement to provide customer support and maintenance services (post-contract customer support or “PCS”), which usually includes software updates.

• PCS provides customers with rights to unspecified software updates that the Company chooses to provide on a when and if available basis.

• VSOE has not been established as products/services are not sold separately.


• Current GAAP• ASC 985-605-25-70: If sufficient vendor-specific objective

evidence does not exist to allocate the fee to the separate elements and the only undelivered element is postcontractcustomer support, the entire arrangement fee shall be recognized ratably over either of the following:

a. The contractual postcontract customer support period for those arrangements with explicit rights to postcontract customer support

• Revenue for the perpetual licenses is recognized on a straight-line basis over the service contract term


2. Identifying Performance Obligations(1) Software license

(2) Technical support

(3) Software updates on an if-and-when available basis

Note: In practice software updates may or may not be a separate performance obligation. In some circumstance they may be considered a single performance obligation with technical support, or as a product warranty, which is not a separate performance obligation.


3.Determining the Transaction Price• Fixed consideration – Contract price

• Variable consideration – N/A

• Constraining estimates of variable consideration – N/A

• The existence of a significant financing component in the contract – N/A

• Non cash consideration – N/A

• Consideration payable to a customer – N/A


4. Allocating the Transaction Price Determine standalone selling price to calculate allocation of transaction price:

(1) Software license – 70%

(2) Technical support – 20%

(3) Software updates on an if-and-when available basis – 10%

• In practice many companies will account for technical support and software updates as “combined” performance obligations because they will be recognized ratably over the length of the support period.

• However, in some cases the software updates may be recognized over time by a different measure, for instance if an entity almost always releases a software update in November, then the transaction price allocated to the “if-and-when” available update may be recognized ratably each November.


5. Recognize Revenue When a Performance Obligation is Satisfied(1) Software license

• Recognition would be upfront for 70% of the transaction price when the customer obtains the software and has the right to use it.

(2) Technical support and (3) if-and-when available software updates

• 30% of the transaction price is recognized ratably over the period that support is provided per the terms of the contract.


Transition Resource Group

Effective Date of Adoption (Based upon FASB Exposure Draft)• Public Entities

• Annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.

• Nonpublic Entities• Annual reporting periods beginning after December 15, 2018

and interim periods within annual periods beginning after December 15, 2019

Early adoption by both public and nonpublic entities as early as original public adoption date (annual reporting periods beginning after December 15, 2016 and interim periods therein).

THE ACCOUNTING CIRCLE - USF

Will Congress Grant the States Remote Seller Collection Authority?

Fred Nicely, Council On State Taxation

May 28, 2015

Agenda

• Why The Fuss?

• History – Timeline

• Post Quill - States’ Self-Help Measures

• Dormant Commerce Clause and Due Process Clause

• Colorado’s Notification and Reporting LAw

• States and Businesses work on Streamlined Sales & Use Tax Agreement

• Federal Legislation Initiatives

2

Why All The Fuss

3

Why All The Fuss?

• 45 states plus District of Columbia impose sales and use taxes• Over 9,000 local jurisdictions – administered by the state except in AL, AZ, CO and LA• Retailers required to collect and remit sales tax to states where retailer has physical presence (Quill v. North Dakota)• Use tax is owed by consumer when retailer does not collect the sales tax

Why All The Fuss?

It’s All About the Money:

• Brick-N-Click collecting tax in all states where present – losing sales to Internet sellers• Small sellers losing sales to Internet retailers• State and local governments:

• Do not want to audit consumers (i.e., voters) • Need revenue

• Dr. Fox study in 2009 estimated by 2012 states would lose a combined $11.2 billion in uncollected sales/use tax revenue from electronic commerce

Historical Timeline

6

1921 – WV imposes first sales tax

1933 – Depression era – 11 states enact sales/use taxes

1944 – Early US SCt cases (McLeod, General Trading & Int’l Harvester)

1954 – Miller Bros.

1960 – Scripto

1967 – Nat’l Bellas Hess

1977 – Complete Auto

1992 – Quill

1994 – DMA talks

Timeline of Sales Tax Nexus Developments

1998 – ITFA enacted, creating ACEC

1999 – NTA Electronic Commerce Tax Project Final Report

2000 – ACEC recommendations; SSTP forms; Federal SST proposals

2002 – SSUTA adopted

2005 – SST Governing Board formed

2011 – Federal legislation proposed bypassing SSUTA

2013 – Marketplace Fairness passes U.S. Senate

2015 – DMA decision – Justice Kennedy questions Quill

Timeline of Sales Tax Nexus Developments

Dormant Commerce Clause and Due Process Clause

9

Distinguishing The Commerce Clause

• The Congress shall have power “to regulate Commerce…among the several States”• Focus is discrimination against and burden on commerce, versus

Due Process focus on protection of individual rights

• Complete Auto, 430 U.S. 274 (1977)• Substantial Nexus

• Non-Discriminatory (against interstate commerce)

• Fairly Apportioned• Internal Consistency

• External Consistency (not arbitrary)

• Fairly Related to Services Provided (not one-to-one relationship)

Due Process and Commerce Clause Tests Distinguished

• Quill Corp. v. North Dakota, 504 U.S. 298 (1992)

- Due Process Clause nexus ("minimum contacts") is different from Commerce Clause nexus ("substantial nexus")

- Due Process Clause – Fundamental fairness as interpreted by the U.S. Supreme Court (not Congress)

- Commerce Clause nexus, at least with sales/use taxes, requires physical presence

- Commerce Clause – Subject to Congressional oversight

Page 11

Daimler AG v. Bauman, 134 S. Ct. 746 (2014).

• Conduct of U.S. sub on behalf of foreign parent corporation does not create

general jurisdiction over foreign corporation

Goodyear Dunlop Tires v. Brown, 131 S. Ct. 2846 (2011).

• No general jurisdiction over foreign subs of U.S. parent corporation because

subs lacked “continuous and systematic general business contacts” with

forum state.

J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011).

• Lead opinion says defendant must “purposefully avail itself of the privilege of

conducting activities within the forum state, thus invoking the benefits and

protections of its laws.”

Walden v. Fiore, 134 S. Ct. 1115 (2014).

• Two professional gamblers could not force defendant to litigate in NV for

alleged conduct that took place in GA even though the conduct impacted

defendants in forum state.

Nexus: Don’t Forget the Due Process Clause

Post Quill -States’ Self-Help Measures

13

States’ “Self-Help” Legislative Efforts

States’ efforts to force remote vendors to collect sales tax:

• Use Tax 1099-like Information Reporting (CO & NC)

• Amazon Laws NY’s 2008 law: Click-through nexus statutes(agreement with resident to refer customers via an internet link orotherwise) and rebuttable presumption of nexus

• Affiliate Nexus Laws [MTC Model Statute based on CA]

• In-State Delivery Arrangements: Arrangements, with other than acommon carrier, to facilitate delivery of property to in-state customerat an in-state location

• Indiana 2014 proposed legislation (did not pass)

States’ “Self-Help” Legislative Efforts

States’ efforts to force remote vendors to collect sales tax:

• Use Tax Notification: Requirement to notify customers ofrequirement to report use tax (e.g., CO, KY & OK)

• Warranty Nexus: In-state contractors performing warranty &repair work

• Marketplace Facilitator – New York (recently rejected) andWashington (HB 2224) have proposals to attribute nexus if salesmade through a facilitator (e.g. E-Bay)

• Credit Card Processor - Washington has proposed legislationthat would assert nexus from the use of a credit card processor orother payment facilitator (HB 2224)

• Factor Nexus – Washington also has proposed legislation torequire remote sellers with more than $267k in sales to collect

Agency Litigation

• Scripto

• Tyler Pipe

• Teachers as Agents – Scholastic & Troll Cases• CA, CT, KS and TN have found nexus; AR, MI and Ohio have not

• Most Recent – Internet Links• Click-through laws talk about “affiliates” but really asserting an

agency relationship

• Passive solicitation (advertising) v. active solicitation (door-to-door)

• Law held by New York’s highest court not to be facially unconstitutional (versus “as applied”)

• Amazon.com

• Overstock.com

16

Click-Through Nexus Laws – Part 1

State Effective Date Affiliate Threshold Statute

AR (rebuttable presumption) Oct. 24, 2011 More than $10,000 Ark. Code Ann. § 26-52-117

CA (rebuttable presumption) Sept. 15, 2012 More than $10,000 (and more than $1 million in annual in-state sales)

Cal. Rev. & Tax. § 6203(c)

CT (irrebuttable presumption) July 1, 2011 More than $2,000 Conn. Gen. Stat. § 12-407(a)(12)(L)

GA (rebuttable presumption) Oct. 1, 2012 More than $50,000 Ga. Stat. Ann. § 48-8-2(8)(K)

IL (now rebuttable) July 1, 2011; Jan. 1, 2015 More than $10,000 35 ILCS 105/2 and 110/2; amended by 2014 IL SB 352

KS (rebuttable presumption) July 1, 2013 More than $10,000 K.S.A. 79-3702(C)

LA (rebuttable presumption) Not Passed - pending More than $50,000 HB 355 (Only passed House W&M)

ME (rebuttable presumption) Oct. 9, 2013 More than $10,000 Me. Rev. Stat. Ann. § 1754-B(1-A)(C)

MI (rebuttable presumption) Oct. 1, 2015 More than $10,000 (and more than $50,000 in annual in-state sales)

Mich. Comp. Laws § 205.52b

MN (rebuttable presumption) July 1, 2013 More than $10,000 Minn. Stat. § 297A.66(4a)

Click-Through Nexus Laws – Part 2State Effective Date Affiliate Threshold Statute

MO (rebuttable presumption) Aug. 28, 2013 More than $10,000 Mo. Rev. Stat. § 144.605(2)(e)

NV (rebuttable presumption) Not Passed - pending More than $10,000 SB 382 – only introduced

NJ (rebuttable presumption) July 1, 2014 More than $10,000 N.J. Rev. Stat. § 54:32B-2

NY (rebuttable presumption) June 1, 2008 More than $10,000 N.Y. Tax Law § 1101(b)(8)(vi)

NC (rebuttable presumption) Aug. 7, 2009 More than $10,000 N.C. Gen. Stat. § 105-164.8

PA Reg. Sept. 1, 2012 None specified Tax Bulletin 2011-01; proposed legislation in 2013 (HB 1043) did not pass

RI (rebuttable presumption) July 1, 2009 More than $5,000 R.I. Gen. Laws § 44-18-15

TN (rebuttable presumption) July 1, 2015 More than $10,000 HB 644 – pending Gov. signature

VT (rebuttable presumption) When adopted in 15 other states. More than $10,000 Vt. Stat. Ann. tit. 32, § 9701(9)(I) (H.B. 436)

WA (?) Not Passed - pending More than $10,000 (or factor nexus w/$267,000 WA sales)

HB 2224 (Pending in House Finance)

Additional Click-Through States Based on 2015 BBNA SurveyALABAMA NEW MEXICO

ARIZONA NORTH DAKOTA

DISTRICT OF COLUMBIA NEW MEXICO

HAWAII NORTH DAKOTA

IOWA SOUTH DAKOTA

LOUISIANA – LEGISLATION PENDING

WASHINGTON – LEGISLATION PENDING

NEVADA – LEGISLATION PENDING WEST VIRGINIA

WYOMING

Sales Tax – “Click-through” Nexus Provision Source – BBNA2015 Survey of State Tax Administrators

Click-Through/Remote Nexus Litigation

• Performance Marketing Ass’n, Inc. v. Hamer (Ill. Cir. Ct., Cook County 2012)

• The Cook County Circuit Court held Illinois' "Amazon" law violated the Commerce Clause and the Internet Tax Freedom Act ("ITFA")• Held that the law violated the Commerce Clause

because it required retailers with no substantial nexus to register and collect sales and use taxes

• Also held that the law violated the ITFA as a "discriminatory tax" on e-commerce

• The Illinois Supreme Court affirmed the decision without addressing the Commerce Clause – dissent argued the Court should have addressed the Commerce Clause

• Illinois changed its law and it now: 1) applies to more than just Internet links and 2) has a rebuttable presumption

21

Fairly Recent Legislation – Nexus Presumed created by Commonly Owned “Affiliate”

5% direct or indirect ownership• NY (2009)

Parent/Sub – 80% vote or value, Brother/Sister – 50% vote or value• AR (2010) • CO (2010)• GA (2012)• VA (2012)

A “substantial ownership interest” is defined with reference to 15 U.S.C. §78p, which is more than 10% ownership.

• OK (2010)• SD (2010) • UT (2012)

50% ownership in affiliate• CA (2010)(50% vote)• TX (2011)

Noteworthy – Regulation• Pennsylvania

Affiliate Nexus

• Some states, such as Ohio and Pennsylvania, have had an affiliate nexus laws for several decades• OH: SFA Folio (652 N.E.2d 693 (Ohio 1995)) – retailer

accepting isolated returns from catalog sales does not create nexus

• PA: Bloomingdale’ s By Mail (567 A.2d 773 (Pa. 1989)) –Local stores were not agents of the catalog company

• In general, these laws provide that nexus is established based on the presence of a related entity in the state• Definition of “related” differs for each state

• Some states require the related entity to perform certain actions in the state, such as: sell a similar line of products; advertise, promote, or facilitate sales for the retailer; maintain an office, distribution facility, warehouse, or storage place to facilitate delivery of the retailer’s sales; use the same/similar trademarks; or deliver, install, assemble, or perform maintenance services for the retailer’s purchasers within the state

23

Affiliate Nexus Litigation

• New Mexico Tax & Rev. Dept. v. Barnesandnoble.com LLC, No. 31,231 (N.M. Ct. App., April 18, 2012)• Barnesandnoble.com LLC (“B&N”) is Internet retailer with no physical

presence in NM• Barnes & Noble Booksellers, Inc. (“Booksellers”), an affiliate, owned

and operated 3 physical bookstores in NM• NM issued an assessment for gross receipts tax and interest against

B&N based on Booksellers’ in-state activities• Department’s hearing officer ruled in favor of B&N• Department appealed to the NM Court of Appeals• The Court of Appeals reversed the trial court and held that there

was substantial nexus with NM due to in-state activities by the affiliate’s stores that created goodwill for a shared trademark

• This case has been appealed to the New Mexico Supreme Court, Dkt. No. 33,627

24

Colorado’s Notification and Reporting Law

25

Alternative Approaches

Colorado's Law – Different Approach - 2010• Two Provisions To “Encourage” Remote Seller Collection

• Non collecting seller notification requirement – must tell purchaser transaction subject to sales/use tax and provide link to CO DOR website.

• Non collecting seller reporting requirement – must send annual report to its Colorado purchasers (1099-like) by first class mail and to the CO DOR.

• No other state has incorporated Colorado’s “1099-like”annual reporting

Disclosure/Reporting – Enacted Laws

27

Effective Date Type of Disclosure De minimis

Exception?

Colorado

§ 39-21-112

3/10/2010 To purchaser (at time of sale and at end of year) and to

revenue department

Yes, by Colo. Code Regs. 39-21-112.3.5

(less than $100,000 in sales)

Oklahoma

Tit. 68, § 1406.1

7/1/2010 To purchaser (at time of sale) Yes, by OAC Rule 710:65-21-8 (less than

$100,000 in sales)

South Dakota

§ 10-63-1 et seq.

7/1/2011 To purchaser (at time of sale) Yes (less than $100,000 in sales)

Tennessee

§ 67-6-515

3/23/2012 To purchaser (at time of sale in an email and at end of year)

No, however, law is limited to seller using fulfillment affiliate in

TN

Vermont

§ 9783

5/24/2011 –repealed when

Amazon law eff.

To purchaser (at time of sale) Yes (less than $100,000 in sales)

DMA v. CO DOR – Docket 13-1032, cert. granted 7/1/2014 (from 10th Cir. Ct. of Appeals, 735 F.3d 904); Decided 3/3/2015

Held: Justice Thomas explains that DMA’s suit does not “restrain” Colorado from assessing, levying or collecting a tax within the context of how “restrain” is used for purposes of the TIA. Case remanded back to 10th Circuit to see if non-jurisdictional comity doctrine is still a viable argument.

Justice Kennedy gives “unqualified” concurrence to majority opinion; however, he goes out of his way to say Quill needs reconsidered – it “now harms States to a degree far greater than could have been anticipated earlier.”

Justice Ginsburg joined by Justice Breyer and partially by Justice Sotomayor also concur on the understanding that this case does not address whether refund claims are barred by the TIA. She also indicated the Court’s decision is consistent with Hibbs.

DMA’s Majority, Concurrence and Dissenting Opinions

State & Businesses Work on Streamlined Sales & Use Tax

Agreement

29

Streamlined Sales & Use Tax Agreement (SSUTA)

• SSUTA approved November 2002 by the Implementing States, and amended since

• Agreement came into effect on October 1, 2005 (at least 10 states with 20% of the U.S. population)

• Provisions are based on simplification, uniformity and technology principles:

o Simplification (e.g., state-level administration of tax)o Uniformity (e.g., uniform definition of “lease,” lease sourcing rule) o Technology (e.g., certification of tax calculation software)

• Balancing interests of state sovereignty

Best Practice: Reduce Complexity

• Reducing complexity provides a win-win The existing state and local sales and use tax system creates

burdensome and unnecessary complexity

This complexity imposes substantial costs on vendors, states, and consumers

A simple sales tax system offers the potential to promote equitable and nondiscriminatory taxation, lower rates, reduce administrative burdens, and improve compliance

Goals of the Streamlined Sales Tax Effort –Sec. 102 of SSUTA

A. State level administration of sales and use tax collections

B. Uniformity in the state and local tax basesC. Uniformity of major tax base definitionsD. Central electronic registration system for all member

statesE. Simplification of state and local tax ratesF. Uniform sourcing rules for all taxable transactionsG. Simplified administration of exemptionsH. Simplified tax returnsI. Simplification of tax remittancesJ. Protection of consumer privacy

22 Full Member States2 Assoc. Member States

Federal Legislation Initiatives

34

Federal Legislation: Overview of the Proposals

Since 2005, the following types of legislative bills have been introduced:

• Main Street Fairness Acts (MSFA)

• Marketplace Equity Act (MEA)

• Marketplace Fairness Acts (MFA)• Includes Remote Transaction Parity Act

• Online Sales Simplification Act (draft)

• 1099-Sales Reporting to States (testimony)

• Prohibit Unauthorized Shipments (testimony)

• Others?35

Federal Legislation: Mutual Goal of the Proposals

Provide the states with sales/use tax collection tools:

• by requiring remote sellers selling goods for delivery into a state where the remote sellers do not have a physical presence (i.e., substantial nexus) to take some action to collect a tax and/or report the transaction to the destination state

36

Most Federal Legislation has also Required:

• States to enact some minimum level of simplification/uniformity over the taxes they wish to receive remote collection authority

• Provide a small seller exception for businesses with annual gross remote sales below some amount• Proposed as just a US threshold

• Also proposed as a US threshold and a state threshold

37

Main Street Fairness Acts

38

Granted collection authority over remote sellers to Streamlined states in compliance with the Agreement

Required the states to provide the most simplification and uniformity of the proposals

Included a small seller exception

Allowed access to Court of Federal Claims to challenge Gov. Board action deemed arbitrary or capricious

Marketplace Equity Act

39

Granted collection authority over remote sellers to any state that meets the minimum simplification requirements

Minimal simplifications required by states No specific preference given to SSUTA statesNo requirement for “free “softwareAllowed states to pick one of three rates:Blended tax rateHighest tax rateDestination tax rate

Small seller exception anticipated to be $1,000,000 in remote sales or less than $100,000 in remote sales in a particular state.

Marketplace Fairness Acts Grants the states collection authority over remote sellers if a state meets the bill’s minimum

simplification requirements:

Automatic authority granted to Streamlined states

Non-Streamlined states need to (list not all-inclusive): Provide single-entity administration (including audit) of state and local taxes that the

state specifies it is seeking remote seller collection authority File single return for all jurisdictions Uniform state/local tax base and SSUTA sourcing for specified taxes; Provide “free” software and certification procedures for such providers Liability relief for remote sellers and certified software providers if incorrect information

provided by state

Small seller exception of $1,000,000 in remote sales (aggregated)

Passed the U.S. Senate in 113th Session of Congress (S. 743, vote: 69-27)

Rep. Chaffetz (R-UT) drafting revised MFA (Remote Transactions Parity Act) to require: 1) CSP audits, 2) include CSP installation costs, 3) preemption of alternative nexus approaches for sales/use tax, and 4) phased down small-seller exception - $10 million in gross sales (not remote sales)

40

Online Sales Simplification Act (Draft) -Also know as “Hybrid-Origin Sourcing”

State may impose or require collection of sales/use tax on a remote sale only if: State is the origin state (seller’s location) for the remote

sale, and State is party to a tax distribution/clearinghouse

agreement In general, origin state’s tax rate and exemptions

apply (exceptions for business, vehicles, vessels and aircraft)

Remote seller defined, essentially limited to a seller with: 1) physical presence in a state or 2) an exclusive agent in a state.

41

Potential Compromise?

• Is there a compromise option that takes components of the Marketplace Fairness Act and Online Sales Simplification Act?

42

1099-Sales Reporting to States (Testimony)

Sellers not collecting the destination state’s sales/use on an interstate sale would be required to send notice of its purchasers’ transactions to the destination state and to each respective purchaser

Purchasers expected to report tax on their taxable transactions to the state

43

Prohibit Unauthorized Shipments (Testimony) Sellers must collect the destination state’s

sales/use on an interstate sale, otherwise federal law would prohibit seller from shipping goods to that state

Webb-Kenyon Act, aka the Liquor Law Repeal and Enforcement Act, 27 U.S.C. § 122, prohibits transportation of liquor unless it complies with destination state’s laws

Can the 21st Amendment that provides a legal basis for this law be extended to all goods?

44

Leading Obstacles Is it down to a battle over sourcing

methodology?

Traditional Destination Sourcing Proposed Hybrid-Origin Sourcing

Is it a tax increase?

Should other options be considered by Congress?

Can the U.S. Senate and U.S. House pass an agreed to tax bill?

Is it too late with the upcoming Presidential election?

45

What might we all be missing from SSUTA Model -

• Taxability matrix• A state database that tells sellers what is and what is not taxable• A list of uniformly defined products & services – may eventually

include more

• Liability relief for sellers for errors in how something is taxed

• Simplified exemption administration under MFA• Removal of good faith

• Simplified return for multiple states • Required notice for rate changes• Some uniformly defined products in multiple states

47

Questions?

Fred Nicely

Council On State Taxation

[email protected]

202-484-5213

© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. FOR INTERNAL USE ONLY.

What’s New in Norwalk? A Look at What the GASB Has Been Up To

USF Accounting Circle ConferenceMay 28, 2015

© 2015KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NSS

Agenda

New GASB Standards

Statement 68, Accounting and Financial Reporting for Pensions – an amendment to GASB Statement No. 27

Statement 69, Government Combinations and Disposals of Government Operations

Statement 72, Fair Value Measurement Application

Current GASB Technical Projects

1


Effective Dates – Issued GASB Statements

2

• No. 68, Accounting and Financial Reporting for Pensions• No. 69, Government Combinations and Disposals of Government Operations**• No. 71, Pension Transition for Contributions Made Subsequent to the

Measurement Date

June 30, 2015

• No. 72, Fair Value Measurement and ApplicationJune 30,

2016

**Effective as of the previous December 31

GASB Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27


Overview of Statement No. 68

4

Statement No. 68 • Issued in June 2012

• Effective for fiscal periods beginning after June 15, 2014

Objectives • Primary objective is to improve accounting and financial reporting for pensions

• Result of a review of the effectiveness of existing standards for pensions

• Replaces the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, and Statement No. 50, Pension Disclosures


Statement No. 68

5

Scope Applies to pensions that are provided to employees of state and local governments through pension plans that are administered through trusts that have the following characteristics:

• Contributions from employers and nonemployer contributing entities, and earnings on those contributions, are irrevocable

• Plan assets are dedicated to providing pension benefits to plan members in accordance with benefit terms

• Plan assets are legally protected from creditors of employers and nonemployer contributing entities and the plan administrator

Statement No. 67, Financial Reporting for Pension Plans – an amendment of GASB Statement No. 25, provides accounting and financial reporting guidance for pension plans


Key Concepts of Statement No. 68

• Establishes procedures for measuring and recognizing obligations associated with pensions as liabilities and the cost of pensions as expenses, deferred outflows of resources, or a deferred inflow of resources. A net pension liability should be recorded Measured as the portion of the actuarial present value of projected benefit payments

that is attributed to past periods of employee service (total pension liability), net of the pension plan’s fiduciary net position (net plan assets)

6



• Identifies the methods and assumptions to be used in determining the net pension liability

Timing and frequency of actuarial valuations Total pension liability should be determined by:

An actuarial valuation as of a measurement date,

Or, the use of update procedures to roll forward to the measurement date amounts from an actuarial valuation as of a date no more than 30 months and 1 day earlier than the employer’s most recent fiscal year-end.

Selection of assumptions The selection of all assumptions used in determining the total pension liability and

related measures should be made in conformity with Actuarial Standards of Practice issued by the Actuarial Standards Board.

7



• Identifies the methods and assumptions to be used in determining the net pension liability (continued)

Discount Rate Should be a single rate that reflects the following:

a) Long-term expected rate of return on the pension plan investments that are expected to be used to finance the payment of benefits to the extent:

Pension plan investments are projected to be sufficient to make projected benefit payments

Pension plan assets are expected to be invested using a strategy to achieve that return

b) Or, a yield or index rate for 20-year, tax exempt general obligation municipal bonds with an average rating of AA/Aa or higher to the extent that the conditions in (a) are not met.

Projected benefit payments Entry age actuarial cost method is the method used to attribute the actuarial present

value of projected benefit payments to periods of service

8



• Enhances note disclosure and required supplementary information requirements for employers whose employees are provided with defined benefit pensions and defined contribution benefits through a qualified trust.

Disclosure are dependent on the type of plan (Single Employer, Agent, or Cost Sharing)

9

GASB Statement No. 69, Government Combinations and Disposals of Government Operations


Overview

11

• Issued in January 2013

• Effective for periods beginning after December 15, 2013

• Primary objective is to provide accounting and financial reporting guidance for government combinations and disposals of government operations.

Statement No. 69

Objective


Types of Government Combinations

GASB 69 identifies three types of government combinations:

• Combination of legally separate entities with no significant exchange of consideration, and either• Two or more governments cease to exist as legally separate entities

and are combined to form one, or• A legally separate government or nongovernmental entity ceases to

exist and the operations are absorbed into a continuing government

Government merger

• Combination in which a government acquires another entity or operations of another entity in exchange for significant consideration

Government acquisition

• Involves combination of operations rather than legally separate entities in which no significant consideration is exchanged

• Can be a transfer of operations to a continuing government or a newly formed government

Transfer of operations

12


Recognition and Measurement for Government Combinations

GASB 69 provides the following accounting for the three types of government combinations:

• Assets and liabilities are recognized at their carrying value as of the merger date• Adjustments for:

• Accounting principles• Impairment of capital assets• Eliminations

Government merger

• Assets and liabilities are recognized at acquisition cost as of the acquisition date with the following exceptions:• Employee benefit arrangements• Landfill and pollution remediation liabilities• Investments and derivatives reported at fair value• Deferred outflows and deferred inflows

Government acquisition

• Assets and liabilities are recognized at their carrying value as of the merger date

• Reporting is similar to government mergersTransfer of operations

13


Disclosures

All Combinations

• Brief description of the combination and entities involved

• Date of the combination

• Primary reasons for the combination

Mergers and Transfers of Operations

• Amounts recognized as follows:• Total assets –

current assets, capital assets and other assets

• Total liabilities-current and long-term amounts

• Total deferred outflows and total deferred inflows

• Total net position• Brief description of

significant adjustments

• Initial amounts recognized if adjustments were made

Government Acquisitions

• Brief description of consideration provided

• Total amount of net position acquired

• Brief description of contingent consideration arrangements

Disposals of Operations

• Identification of the operations and circumstances leading to the disposal of those operations

• Disclose the following information:• Total expenses• Total revenues• Total

governmental fund revenues and expenditures

14

GASB Statement No. 72, Fair Value Measurement and Application


Overview

16

• Issued in February 2015

• Effective for periods beginning after June 15, 2015

• To address accounting and financial reporting issues related to fair value measurements

• Provides guidance for determining a fair value measurement for financial reporting purposes

• Also provides guidance for applying fair value to certain investments and disclosures related to fair value measurements

Statement No. 72

Objective


Fair Value Measurement

Defines fair value The price that would be received to sell an asset or paid to transfer a liability in

an orderly transaction between market participants at the measurement date

Described as a exit price

Assumes a transaction takes place in a government’s principal market, or a government’s most advantageous market in the absence of a principal market

Assumes the general market participants would act in their economic best interest

Should not be adjusted for transaction costs

17



To determine a fair value measurement, a government should consider the unit of account of the asset or liability

Unit of account refers to the level at which an asset or liability is aggregated or disaggregated for measurement, recognition, or disclosure purposes

Example

Investment held in brokerage account – each individual security

Investment in mutual fund – each share of the mutual fund held

18



Statement requires the use of a valuation technique that is appropriate under the circumstances and for which sufficient data are available to measure fair value:

• Uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities, or a group of asset and liabilities.

Market Approach

• Reflects the amount that would be required to replace the present service capacity of an asset

Cost Approach

• Converts future amounts (such as cash flows or income and expenses) to a single current (discounted) amount

Income Approach

19

Should be applied consistently, though a change may be appropriate in certain circumstances

Should maximize the use of observable inputs and minimize the use of unobservable inputs



Establishes a hierarchy of inputs to valuation techniques

20

• Inputs with quoted prices (unadjusted) in active markets for identical assets or liabilities Level 1 Inputs

• Inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectlyLevel 2 Inputs

• Unobservable inputsLevel 3 Inputs


Fair Value Application

Requires investments to be measured at fair value Provides a definition of an Investment A security or other asset that

Is held for the purpose of income or profit; and

Has a present service capacity based solely on its ability to generate cash or to be sold to generate cash

Examples of investments not measured at fair value: Money market investments, 2a7-like external investment pools, investments in

life insurance contracts, and synthetic GICs

In certain circumstances net asset value per share (NAV), or its equivalent, can be used if an investment does not have a readily determinable fair value.

Donated capital assets, donated works of art, historical treasures, and similar assets should be reported at acquisition value

21


Fair Value Disclosures

Required to disclose the level of fair value hierarchy and valuation techniques

Disclosures should be organized by type of asset or liability reported at fair value

Additional disclosure required for investments that are valued using NAV

22

Current GASB Technical Projects


GASB Current Agenda

24

** Project on hold

GAAP Hierarchy

Other Post Employment Benefits

Fiduciary Responsibilities

Accounting for Leases

Tax Abatement Disclosures

Asset Retirement Obligations


Research Agenda Projects

25

Debt Disclosures

Debt Extinguishments

Financial Reporting Model

Going Concern Disclosures

Questions?

SEC Update

Jeff JaramilloDirector, National Office SEC Services,Deloitte & Touche LLP

May 28, 2015

2The Dbriefs Financial Reporting series presents:Quarterly Accounting Roundup: An Update on Important Developments Copyright © 2014 Deloitte Development LLC. All rights reserved.

• SEC update

- Current landscape

- Enforcement initiatives

- SEC rulemaking

- Disclosure Effectiveness

- Cybersecurity

- SEC comment trends

• Question and answer

Agenda

Current landscape


SEC update

Key personnel changes

• Commissioners

• Directors of Division of Corporation Finance/Enforcement

• Chief accountants

Current agenda

• Toughen Enforcement

• Clear backlog of rulemaking commitments under Dodd-Frank and JOBS Acts

• Disclosure reform

Current landscape

Enforcement initiatives


SEC update

Financial Reporting and Audit (“FRAud”) Task Force• Identify violations related to financial statements, reporting and disclosures, and audit failures• Monitor restatement activities and analyze industry performance trends• Use of technology and tools for “data mining” and data analysis

Other policy-related initiatives• Admission of wrong-doing• “Broken windows” policy

Enforcement initiatives

FY 2014 FY 2013 FY 2012

Number of enforcement actions 755 686 734*

Orders for penalties and disgorgements $4.2 billion $3.4 billion $3.1 billion

*One less than the highest amount filed in fiscal 2011.


SEC update

• September 22, 2014 – SEC announces largest payment to date of $30 million

• Payment to an individual in October 2013 for approximately $14 million

• Confidentiality and non-disclosure agreements

Enforcement initiativesWhistleblower awards under the Dodd-Frank Act

Whistleblower Program Annual Report – Issued November 15, 2013

http://www.sec.gov/about/offices/owb/annual-report-2013.pdf

FY 2011 FY 2012 FY 2013 FY 2014

Whistleblower tips received 334 3,001 3,238 3,620

Disclosures & F/S2013 – 17.2%

Offering Fraud2013 – 17.1%

Manipulation2013 – 16.2%

Penalty more than$1 million

10%-30% awardOriginal Information

• Became effective on August 12, 2011

SEC rulemaking


SEC rulemakingFinal and proposed rules

Dodd-Frank Act

• Continued effort on required rulemakings

• Complex rulemaking

• Many mandated actions require interagency coordination

• Recent rulemaking

• Conflict Minerals

• Proposed CEO pay ratio disclosures

• Pay-for-performance disclosures

JOBS Act

• Report on review of disclosure for simplification and modernization (Disclosure Effectiveness)

IFRS

Disclosure effectiveness


SEC updateDisclosure effectiveness

What is it?

• Excessive disclosure that obscures relevant information

What has the SEC staff done lately?

• Reviewed Regulation S-K requirements and issued report in December 2013 recommending a comprehensive approach to disclosure reformhttp://www.sec.gov/news/studies/2013/reg-sk-disclosure-requirements-review.pdf

What’s next?

• Division staff to review rules and regulations to simplify and modernize them

− “Phase” 1: Reviews of Regulation S-K and S-X (proxy disclosures in later phase)

− Concept release (in what may be a series of them) in the near future

− Staff welcomes input and comments from issuers and investors on how to improve disclosure and make it more effective. Information that is submitted will become part of the public record.https://www.sec.gov/spotlight/disclosure-effectiveness.shtml


Format Scope Content

• EDGAR• XBRL• Core disclosure regime

• Financial statements• Periodic reports & earnings

releases• Proxy (phase 2 of project)

• Other entities’ financial statements

• Overlapping disclosures:‒ Same information‒ Similar but not identical

requirements• Industry-related

SEC Standard-setters (FASB) Preparers

• Comprehensive review of Regulations S-K and S-X

• Simplification project• Disclosure framework project

(Boards)• Framework for preparers to

evaluate disclosures

• Be concise• Focus on matters that are

relevant and material

SEC updateDisclosure effectiveness

Likely to require changes to rules/guidance Under current rules

Potential considerations in SEC’s disclosure effectiveness project include:

Participants in disclosure effectiveness:


Consider for upcoming filings:

• Relevance

− Emphasis on important information and focus your disclosure

− Risk factors

◦ Tailored and specific to registrant

◦ How risks would affect the registrant if they come to pass

• Materiality of disclosures

− Eliminate immaterial, outdated information (for example, disclosure that is no longer material that was previously added in response to SEC comment letter)

• Redundancy

− Critical accounting estimates and significant accounting policies

− Use cross-references

− Interim financial information in quarterly filings

• Presentation of information

− Executive summary in MD&A

− Use of charts and graphs instead of narrative presentation

SEC updateDisclosure effectiveness – what registrants can do now

Cybersecurity


SEC updateCybersecurity

March 26, 2014 Roundtable

• Four panels comprised of preparers, investors, accounting firms, government officials outside the SEC, market exchange representatives

Themes

• Need to understand not only threats but vulnerabilities (and actors’ motivations)

• Not an IT solution subject to a one-time fix; but a risk that needs to be mitigated like other business risks

• Needs attention of board of directors and senior management but structures to address cybersecurity risks vary

• Current cybersecurity-related disclosures seen as “boilerplate”

SEC Chairman noted that cybersecurity risks are “first on the Division of Intelligence’s list of global threats, even surpassing terrorism.”

SEC comment trends


SEC comment trendsFiling reviews

About 9000 registrants

- Focus on 2500 registrants that comprise 98% of market cap

• All issuers reviewed at least 1 out of every 3 years

• Percentage of issuers reviewed:

• Continuous reviews of large financial services registrants

• Use of data analytics in the review of filings

• Staff is listening to analyst/earnings calls, reviewing press releases, websites, social media andissuing comments

• Comments are posted to EDGAR 20 days after completion of review

FY08 FY09 FY10 FY11 FY12 FY13

39% 40% 44% 48% 48% 52%


SEC Comment Trends

• Insights into focus areas from SEC comment process

• Comments related to IPOs and FPIs

• Eight Edition- November 2014

• Industry Appendices:

- Consumer & Industrial Products

- Energy & Resources

- Financial Services

- Health Sciences

- Technology

- Telecommunications


Income taxes

SEC comment trends

• Division staff continues to issue comments related to disclosures about:

− The potential tax and liquidity ramifications regarding the repatriation of foreign earnings

− Valuation allowances

◦ Sufficiency and timing (including reversals of valuation allowances)

− Rate reconciliation

◦ Break out line items

◦ Effects of foreign jurisdictions with low tax rates

− Unrecognized tax benefits

• Discussed tax provision disclosures in MD&A could be improved

− Avoiding boilerplate disclosures and instead:

◦ Start with income tax rate reconciliation and describe material items

◦ Discuss significant foreign jurisdictions

− Statutory and effective rates

− Current and future impact of reconciling items

◦ Provide meaningful disclosures about known trends and uncertainties


Fair value

SEC comment trends

Comment trends consistent with prior years

• Mainly related to:

− Initial fair value measurements in business combinations

− Testing for impairments of many types of assets

− Inputs when impairment indicators (or other “red flags”) exist but no impairment charge has been recorded

Other considerations

• Division staff evaluates fair value hierarchy disclosures

− Appropriateness of classification of assets and liabilities in the fair value hierarchy

− Completeness and consistency of disclosures against classification because classification drives related disclosures

• Division staff reminded registrants to:

− Continue disclosing information related to recurring fair value measurements

− Include disclosures related to nonrecurring items (that are often missing)


Revenue recognition

SEC comment trends

• ASU 2014-09: Revenue from Contracts with Customers

• On April 1, 2015, the FASB voted to defer the effective date by one year

• Now effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.

Focus areas:

• Disclosure of revenue recognition policy for significant revenue streams

• Detailed breakdown of revenue by product/ service line

• Gross versus net revenue reporting

− SEC staff has focused on which party is the primary obligor and has inventory risk

• Multiple-element arrangements– Identification of and allocation of consideration to each unit of accounting

– Selling Price for each deliverable (i.e., VSOE, third-party evidence, or estimated selling price)

– Period over which revenue is recognized


SEC comment trendsRestatements and ICFR

• Significant focus of SEC staff (reviews & enforcement)• Frequent restatements

− Cash flow statements• Internal Control over Financial Reporting (ICFR)

− The “could” factor”◦ Not limited to the size of the error identified◦ Immaterial misstatements “could” indicate a Material Weakness

− Must disclose material changes in ICFR- especially if expect to remediate at year-end


SEC comment trends

Management’s discussion and analysis (MD&A)• Disclose material trends and uncertainties – two-pronged approach

• Enhanced liquidity and capital resources, critical accounting policy disclosures

• Consistency with other communications (e.g., non-GAAP measures)

• Focus on clarity (e.g. use of tables and charts)

Segment Reporting

• Continued Focus, including the SEC and PCAOB

• Chief Operating Decision Maker (CODM) package

- Consider whether CODM is someone other than CEO

- SEC staff’s focus is evolving due to new technology:

• Historically SEC placed emphasis on CODM package- no longer determinative (still significant) factor

• Staff will consider total mix of information

• Aggregation of operating segments still a focus: consider both quantitative and qualitative factors


SEC comment trendsNon-GAAP financial measures and financial metrics

• Non-GAAP Measures:

• Explain why the non-GAAP measure is useful to investors, clearly label, provide appropriate context

• Reconcile to appropriate GAAP measure

• Avoid “undue prominence” of a non-GAAP financial measure

• Consistency between registrant’s SEC filings and information disclosed outside of filings

• Financial Metrics

• Are used to “tell a registrant’s story,” but should include sufficient information and context to notmislead investors- balanced discussion

• Clearly define metrics and explain how calculated (including assumptions and limitations)

• Explain how used by management and why important to investors

• Describe how a metric is related to current or future results of operations

• Example industry metrics: same-store sales; online users in Technology companies; number of visitors to website in Retail companies; occupancy and average rental rates in Real Estate companies; gross merchandise volume in E-Commerce companies, etc.

Question and answer

This presentation contains general information only and Deloitte is not, by means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this presentation.

About DeloitteDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a detailed description of DTTL and its member firms. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

Copyright © 2014 Deloitte Development LLC. All rights reserved.36 USC 220506Member of Deloitte Touche Tohmatsu Limited

THREATS AND SOLUTIONS

May 28, 2015

CYBERSECURITY IN FINANCIAL SERVICES:

Privileged and Confidential

1

May 2015

CONFIDENTIAL

2

SECURITY TOPICS

• The Threat

• RJ Protective Measures

• Your Protective Measures

• Support Available Now

• 2015 and Beyond

May 2015

CONFIDENTIAL

3

THE THREAT

2014 Verizon Data Breach Investigation Report

May 2015

CONFIDENTIAL

4

THREATS / EXAMPLES

• “Account Takeover” / Wire Fraud

• Lost/Stolen Device

• Insider Threat

• High Profile Client Data

May 2015

CONFIDENTIAL

5

INFORMATION SECURITY STRATEGY

• Best protective measures money can buy• Creative solution design and engineering• Lifecycle management of solutions

• Assume protective measures may fail• Real time detection of anomalous activity• Situational awareness: environment, threats, and RJ businesses

• Build foundation of relationships based on trust and teamwork• Invest in technical training, cross-training, and leadership dev• Hire great talent that fits our high performance team culture

• With Vendors• With RJF partners• With IT

Protect

Detect

Develop

Partner

May 2015

CONFIDENTIAL

6

RJ CYBER THREAT CENTER

• Command Center

• Cross-Functional Team

• Partner Organizations

• Security Analytics Engine

• Incident Handling

May 2015

CONFIDENTIAL

7

SOLUTIONS

1. MobileIron for mobile access to RJ email/calendar/contacts2. Global Protect “Always On” VPN for mobile access to RJNet

(Pilot)3. Secure Messaging (aka “[PROTECT]”)4. Sophos Antivirus5. Investor Access “Risk Based Authentication” Upgrade

(removes SiteKey function)6. Vendor Management Risk Assessment Process7. Branch Security and Privacy Awareness Visit8. CISO Client Event Presentation9. ID Theft Monitoring (sponsored by Privacy Office)10. Client Approved Brochures

(RJNet/PracticeManagement/ManageClientRelationships/ClientServiceDelivery/Campaigns/ProtectingYourClientsInformation)

May 2015

CONFIDENTIAL

8

2015 (AND BEYOND) SOLUTIONS*

1. Next generation of Antivirus / Endpoint protection2. Expanded deployment of Global Protect3. Elimination of Advisor Access VPN Dependency (aka “Reverse

Proxy”)4. Branch Security Health Check Visit5. Investor Access: High risk transaction “step up” authentication6. Advisor Access: alternative forms of Two Factor Authentication

(e.g. replace hard token with biometric voiceprint)7. Advisor Access: High risk transaction “step up” authentication

*Illustrative; subject to change

Numbers, People and Conflict:The Challenges We All Face

By: Walter Pavlo

“Eliminating opportunity for unethical behavior: Rewards you may never see”

Walt Pavlo, MBA

Mike Tyson

“Everyone has a plan ‘till they get punched in the mouth”

Opportunity Pressure

Rationalization

The Fraud Triangle

MCI Reseller

Access to Network

Payment for Service

A Great Job With A Great Company

Accounts Receivable Portfolio

Three Types of Carrier Accounts

Tier One- Low Risk/ High Volume/ Very Low Profit Tier Two - Low Risk / High Volume / Low Profit Tier Three - High Risk / Low Volume / High Profit

Revenue

Tier One / Tier Two - 80% of Revenue Tier Three - 20% of Revenue

Profit

Tier One / Tier Two - 20% of Profit Tier Three - 80% of Profit

A Business Decision Is Made

Loose credit policy

Equipment leased

Buildings leased

Intangible product – long distance

Rapidly growing products

Debit/Prepaid cards

International calling plans

900 Business (Porn, Gambling, Fortune Telling)

Profits exceed 100%

Rising Default Rate

Tier 3 Resellers Not Paying

Corporate Breaking Point

Cooking the books Misuse Of Promissory Notes Using Unapplied Cash Re-dating Invoices Smoothing Bad Debt Applying Credits Ahead Of Contracts Delaying Credits After Contracts

Director (Mentor) left department

Memo stating bad debt would be $80 million

Negative executive management response

Debt would be $15 million

Promoted to Senior Manager

Sought someone to confide in

Looking For Help

The Set Up

Approached Indebted tier three resellers

Pressure to pay up or be disconnected

Introduced European Angel Investor

Pay $2 million debt to MCI $250,000 fee Repay $2 million in weekly payments ($10K) 25% ownership in company All payments sent to Cayman Islands

My Role At MCI

Appeared debt was paid

Covered customer invoice

Customers believed in their new partner

Letters sent indicating $0 account balance

There seemed to be no victim

Consequences

Personal Admission of Guilt Wire fraud

Money laundering

Obstruction of justice

41 months federal prison time

3 years supervised release & restitution

Company

Employees

Shareholders

Common themes leading to ethical lapses

Loyalty to supervisor

Unchecked success

Goal memorization

Blind precedents

Isolated teams or performers

Source: Walmart

Reducing the opportunity for unethical behavior means ...

Asking questions when the news is good

Setting aside biases that make jobs easier

Establishing controls and procedures to deter unethical behavior

Putting people first

Knowing efforts have rewards even if they are unseen

The Importance of Audit Quality

D. Keith WilsonDeputy Chief Auditor

USF Accounting Circle ConferenceMay 28, 2015

First, a Caveat

The views expressed are my own views and do not necessarily reflect the views of the Board, its members, or staff.

2!

Topics

Why audits are important Observations from audit oversight Standard-setting developments Opportunities and challenges for auditors

3

Why Are Audits Important?

Trust

Capital Formation

Growth,Innovation,and Jobs

4

Auditor Traits that Engender Trust

TRUST

Independence

Professional Skepticism

Technical CompetenceIntegrity

Objectivity

5

Observations from Audit Oversight

Internal control over financial reporting (ICFR)

Fair value measurements and other estimates

6

Audit Challenges Regarding ICFR

“Management Review” Controls

Internally-produced Data

& Reports

Use of Work of Others

7

Critical Thinking on ICFR is Important

Risks

Controls

Use of Others

8


Risks• What are the risks (assertions, accounts,

disclosures, locations)?• What are the points in the processes where

misstatements can occur?

Controls

Use of Others

9


Risks

Controls • How do the controls address the risks (prevent

or detect misstatements)?• Do they depend on other controls?• How are they evidenced?

Use of Others

10


Risks

Controls

Use of Others• What is their level of competence and objectivity?• What is the level of risk associated with the controls?• What is the nature and scope of the work performed

by the others?

11

Fair Value Measurements and Other Estimates

Evaluating the reasonableness of the assumptions

Evaluating the appropriateness of the methods used

Testing the underlying data

12

GAAP Compliant Reasonable Unbiased

Recently Adopted Standards

Related parties effective FY’s beg. on or after Dec. 15, 2014,

and interim reviews therein

Reorganized standards effective Dec. 31, 2016, subject to SEC

approval

13

Staff Guidance Issued

Practice Alert 12 – Auditing revenue Practice Alert 13 – Going concern Guidance on audits of SEC-registered

broker-dealers

14

Current Standard-setting Projects

Fair value and estimates Specialists Other auditors Transparency—disclosure of engagement

partner and other participants Going concern Auditor’s reporting model

15

Opportunities and Challenges for Auditors Using/coping with technology Maintaining focus on quality Building on core values

16

Questions?

GAAP UpdateA summary of hot topics affectingaccounting and reporting

May 29, 2015

www.pwc.com/cfodirect

The inside scoopFinancial Accounting Standards Board

www.pwc.com

2

FASB overview

Highlights

• Continued focus on reducing complexity

• Revenue Transition Resource Groupcontinues to debate implementationissues

• Convergence not achieved onfinancial instruments, leases orinsurance

• Private company accounting alternatives available

“With a balance of foundational andsimplification projects, we aim to make financial reporting more relevant to investors while making financial statements less costly to prepare.”

FASB Chairman, Russ Golden

3

On the docket

An active environment

• 2014 was a busy year for the FASB

- New standards issued on various accounting topics, including revenue and several private company accounting alternatives

• Reprioritized agenda, adding a mix of long-term foundational and short-term simplification projects

• Finalizing remaining major projects—financial instrument measurement, financial asset impairment, leases and insurance—is apriority for 2015

Highlights:

1. Convergence projects

2. Foundational projects

3. Simplification initiative

4. Private company alternatives

4

Standards effective in 2015 for calendar year-endpublic companies

Several private company accounting alternatives also effective in 2015

Effective in 2015

Discontinued operations

Development stage entities

Repurchase agreements

Service concession arrangements

5

Standards effective in 2016 and after for calendaryear-end public companies

*FASB proposed a one-year deferral for effective date of new revenue standard, with early adoption permitted as of the original effective date

Effective in 2016 or after Effectivedate

Earlyadoption

Going concern 2016 Yes

Extraordinary items 2016 Yes

Consolidation 2016 Yes

Debt issuance costs 2016 Yes

Revenue 2017* No*

6

Highlights of FASB’s current agenda

Active agenda items 20152016 orbeyond

FI: Classification & measurement

FI: Impairment

FI: Hedging

Leases

Insurance: Short- and Long-duration

Disclosure framework

Goodwill and Intangibles

Revenue recognition: amendments/clarifications

Simplification projects * *

* There are various simplification projects in the pipeline; expected timing varies by project

Expected issuance

7

Highlights of EITF’s current agenda

Issue Title Status

14-A Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions

Final standard

14-B Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)

Final standard

15-A Application of the Normal Purchases and Normal Sales Scope Exception to Certain Electricity Contracts within Nodal Energy Markets

Exposure draft

15-B Recognition of Breakage for Prepaid Stored-Value Cards Exposure draft

15-C Employee Benefit Plan Simplifications Exposure draft

15-D Effect of Derivative Contract Novations on Existing Hedge Accounting relationships Added to agenda

15-E Evaluation of Contingent Put and Call Options Embedded in Debt Instruments Added to agenda

15-F Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments Added to agenda

8

Where does it stand - Simplification

Simplification

FASB is focused on identifying areas of U.S. GAAP where it canreduce cost and complexity while maintaining or improving the usefulness of the information

Recently issued

• Extraordinary items

• Debt issuance costs

• Defined benefit plan measurementdate

On the horizon

• Income taxes

• Share-based payments

• Inventory measurement

• Classification of debt

• Equity method accounting

• Measurement period adjustments

9

Where does it stand - PCC

Private Company Council

• Several private company accounting alternatives finalized in 2014

• More recently, PCC’s role has been moving closer to one of an advisory body for the FASB

PCC alternatives

• Goodwill

• Hedge accounting

• VIE guidance

• Intangible assets

Current activities

• Assisting FASB with simplification projects, including stock-based compensation

• Advising FASB on otherprojects

• Partnership accounting10

The inside scoopSimplification initiative

www.pwc.com

11

Simplification projects

2

Project Simplification Status

Extraordinary

items

Removed the concept of “extraordinaryitems” from U.S. GAAP

Final standard

Presentation of debt issue costs

Debt issue costs reflected as a reduction of the underlying debt instead of as an asset

Final standard

Measurement datefor defined benefitplans

Allows measurement of defined benefit plan assets and obligations as of the month-end closest to an entity’s fiscal year-end. A similar practical expedient is available for interim remeasurements of significant events.

Final standard

Inventory measurement

Inventory valued at the lower of cost andnet realizable value

Redeliberations

Classification of deferred taxes

All deferred tax assets and liabilitiesclassified as noncurrent

Exposure draft comment period

Deferred taxes on intercompany asset transfers

Eliminate exception for recognizingdeferred taxes on intercompany transfers ofassets

Exposure draft comment period

12

Simplification projects

3

Project Simplification Status

Share-based payments

Simplifies various aspects of share-basedpayment accounting. Topics relate to valuationand classification of awards, employee andemployer income tax consequences, cash flowpresentation, and certain private companyelections.

Exposure draft coming soon

Equity method of accounting

Removes requirement to account for “basis differences”, including disclosure requirements. Eliminates requirement to retroactively accountfor an investment that becomes newly qualified for use of equity method accounting.

Exposure draft coming soon

Measurement Simplifies the accounting for adjustments made Exposureperiod adjustments during the measurement period to provisional draft comingin a business amounts recorded in a business combination. sooncombination

Balance sheet classification of debt

Principles-oriented approach for classifying debt as either current or noncurrent based on contractual terms of debt arrangement.

Initial deliberations

13

The inside scoopEmerging Issues TaskForce

www.pwc.com

14

On the docket

Added to agenda

Discussion held

Consensus for

exposure

Final consensus

Final ASU

Issue Title Status

14-A Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions

Final ASU

14-B Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)

Final ASU

15-A Application of the Normal Purchases and Normal Sales Scope Exception to Certain Electricity Contracts within Nodal Energy Markets

Consensus-for-exposure

15-B Recognition of Breakage for Prepaid Stored-Value Cards Consensus-for-exposure

15-C Employee Benefit Plan Simplifications Consensus-for-exposure

15-D Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships Added to agenda

15-E Evaluation of Contingent Put and Call Options Embedded in Debt Instruments Added to agenda

15-F Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments Added to agenda

15

Navigating the new landscape

Discontinued operations

16

Discontinued operations overview

Impacts

• Captures only strategic shifts that have a major effect

• Fewer disposals anticipated to qualify

• Significant continuing involvement or continuing cash flows will no longer preclude discontinued operations presentation

• Incremental disclosures will be required

Reduces costs for preparers by changing the criteria

Focused on disposal transactions which represent a significantstrategic shift

Talking theory

Getting feedback

Issued4/2014

Coming soon

17

What does it look like

Asia(Disc Ops)

Africa

Oceania

Europe

The Americas

The standard

A discontinued operation is a component or group of components that has been disposed of or is classified as held for sale, and “represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.”

Examples of a strategic shift could include disposing of a:

• Major line ofbusiness

• Major geographical area of operations

• Major equitymethod investment

• Other major parts ofan entity

18

On the horizon

Financial instruments (classification and measurement)

19

Provide a consistent, comprehensive frameworkfor classifying andmeasuring financial instruments

Reduce complexity in accounting for financial instruments

Provide users decision-useful information about financial instruments

Classification and measurement overview

Impacts

• Loans, debt securities, and financial liabilities largely unchanged

• Bifurcation retained

• Equity securities:

- FV-NI with practicabilityexception

- Single step impairment model for equity securities under practicability exception

• Not converged with IFRS

Talking theory

Getting feedback

Coming soon

20

What is affected

Financial instruments expected to be impacted

• Equity securities

• Financial liabilities under theFVO

*Note that the presentation and disclosure of financial instruments will also be impacted

Mostly impacts investments in equity securities and financial liabilities under the fair value option

Financial instruments not expected to be impacted

• Loans

• Debt securities

• Financial liabilities notunder the FVO

• Equity method investments

21

Comparison to existing guidance

• Trading (intent to sell)

• Available-for-sale (residual category)

• Fair value option

• Equity securities without readilydeterminable fair value:

• Cost method (if not within the scope of the equity method)

• Two step impairment model:

• Is fair value below cost(i.e., is the investmentimpaired)?

• Is the impairment other-than-temporary?

• Fair value option

Existing guidance Proposed guidance

• Equity securities with readilydeterminable fair values to be classified as follows:

• Equity securities with readily determinable fair values:

• Measured at FV-NI

• ASC 320 classification categories for equity securities (i.e., trading or AFS) will no longer exist

• Equity securities without readily determinable fair value:

• FV-NI with practicability exception formeasurement:

• Cost less impairment, adjusted +/- forobservable price changes

• One step impairment model:

• Is fair value below cost (based onassessment of prescribed qualitative indicators)?

• Concept of “other-than-temporary” will no longer exist

• If practicability exception is not elected for non-marketable equity securities then measurement at FV-NI is required

Equity securities

22

Comparison to existing guidance

Existing guidance Proposed guidance

• Generally amortized cost unless FVO is elected

• If FVO is elected:

• Periodic changes in fair value reflected in net income

• No changes to current U.S. GAAP, unless FVO is elected

• If FVO is elected:

• Change in fair value due to own credit recognized in OCI

• All other changes in fair valuerecognized in net income

• Change in own credit can be measured as excess above a base market rate (e.g., a risk free rate)

• Alternative methodologies to measure own credit can be used ifmore representationally faithful

Financial liabilities

23

On the horizon

Financial instruments(Impairment)

24

Recognize losseson a more timelybasis

Model based onan expected lossapproach

Impairment overview

Impacts

• Changes determination of losses from incurred loss approach to expected loss approach

• Could impact regulatory capitalrequirements, key financial metrics

• Convergence will not be achieved

− FASB - Single measurement lifetimelosses at inception except for availablefor sale debt securities

− IASB - Dual measurement lifetime losses upon trigger

Talkingtheory

Gettingfeedback

Comingsoon

Current “incurred lossmodel” – criticized fordelaying timely lossrecognition

25

Who is affected (FASB)

Scope of the standard

Financial assets, including:

• Loans

• Debt securities

• Loan commitments

• Trade receivables

• Lease receivables

• Reinsurance receivables

• Financial guarantees

The scope is designed to replace all of the differentimpairment models we have today

Specifically excluded

• Loan receivables held for sale

• Financial assets where fair value option is elected

26

How does it work – (FASB)

Overview of the FASB model

The Current Expected Credit Loss model (CECL)

• Single measurement objective for assets held at amortized cost – no “trigger”

• Balance sheet approach

• Based on estimate of future contractual cash flows not expected to becollected

27

How does it work – (FASB continued)

Available for sale (“AFS”) Debt Securities*• Recent change to proposed approach during FASB re-deliberations: moved

from a CECL model to a modified impairment model for these securities.

• New approach is similar to the other-than-temporary (“OTTI”) impairmentaccounting model under ASC 320 with the following changes:

– Modified approach will require impairment losses to be accounted foras an allowance subject to future reversal upon credit improvements

– Duration of loss is no longer a consideration in determining whether asecurity is impaired

– Forecasts of future recoveries post balance sheet date not to be incorporated in the impairment analysis.

– Impairment for credit losses cannot exceed the difference between FVand amortized cost

* The FASB classification and measurement project retains measurement of changes in fair value through OCI for available for sale debt securities 28

How does it work – (FASB continued)

Purchased Credit Impaired assets (PCI)

(Assets with significant deterioration in credit quality since origination)

Upon acquisition

• Basis “grossed up” to reflect expected loss estimate on Day 1

• Initial credit loss will never be recognized in income

• Changes (+ / -) going forward recognized immediately in income

Establish Day 1 allowance(i.e. estimate contractual cash flows not expected to be collected)

29

On the horizon

Hedging

30

Hedging overview

IASB update – IFRS 9

• Issued in November 2013

• Convergence with U.S. GAAP not achieved

• Many of the changes made will be wellreceived by preparers

FASB resumes deliberations

• Board votes to pursue targeted improvements

• FASB staff to develop project plan

Align hedge accounting moreclosely with riskmanagement activities

Simplification ofhedge accounting

Talking theory

Getting feedback

Coming soon

31

Where are we

Timeline

• FASB exposed simplified hedge accounting in 2008 and 2010 but did not issue a new standard

• FASB issued a discussion paper in 2011 to obtain views on IASB’sproposed model

• IASB issued its final standard on the general hedge accounting model in November 2013

• In January 2014 , FASB finalized simplified cash flow hedgeaccounting approach for nonpublic companies

• IASB issued a discussion paper on macro hedging in April 2014

Looking ahead

• FASB to resume work on hedge accounting, including presentation and disclosure, in response to stakeholder outreach

32

On the horizon

Leases – U.S. GAAP

33

Leases overview – U.S. GAAP

Impacts

• Balance sheet will be grossed up for lessees

• Financial metrics and debt covenants maybe impacted

• Subsequent remeasurement may require additional effort

• Elements of a contract may be a lease and will now be on balance sheet for lessees

• Redeliberations continue and are differentfrom exposure draft

• IASB approach differs (substantially forlessees)

Talking theory

Getting feedback

Coming soon

Improve, simplifyand converge thefinancial reportingfor leases

Create a model that provides a faithful representation of leasing transactions forboth lessees and lessors

34

Who is affected

In scope Out of scope

Short-term leases with

lease term of less than 12

months (lessees only)

Leases to explore/use

resources (minerals, oil,

natural gas)

Leases of intangible biological

assets

Any party toa lease

35

Comment letter feedback

Number of comment letters received

640+

36

New proposed updates to the model

Recent discussions

At the March 2014 joint FASB/IASB board meeting, theboards tentatively decided to adopt models that differ fromthose in the exposure draft, and diverge from one another

Lessee

FASB – Lease classification principle used today to determine pattern of income statementrecognition with all leases on balance sheet

IASB – All leases as financings

Lessor

FASB & IASB – Lease classification based ontransfer of risk and rewards

FASB – Transfer control to lessee in order torecognize an up front sales margin

37

Comparison to existing guidance - Lessee

Existing guidance

Evaluate lease to determine whether on balance sheet (capital lease)

Lessee

Evaluation is rules based focused on

• Transfer of ownership• Bargain purchase option• Lease term• Minimum lease payments

Proposed guidance

Virtually all leases on balance sheet. Evaluate lease to determine income statement presentation of financing (TypeA) or straight line (Type B)

FASB – While all leases (other than short-term leases) will be on balance sheet, lease classification will be similar to existing guidance

Generally, today’s operating leases will be straight-line and today’s capital leases will be a financing

IASB – All leases will be similar to finance leases today

38

Comparison to existing guidance - Lessor

Existing guidance

Evaluate lease to determine whether a net investment is substituted for the leased asset (direct financing/sales type lease)

Proposed guidance

FASB – Derecognize asset and record receivable (includes guaranteed residual) and unguaranteed residual, record profit on derecognized asset only if control transfers and income on receivable and residual (Type A)

IASB – Record profit on derecognized asseteven if control does not transfer (Type A)

Asset remains on balance sheet, income is recorded straight-line (Type B)

Lessor

Evaluation is rules based following the same criteria as lessee above (plus two additional criteria)

Evaluation will be similar to existing guidance

39

What companies are doing now

Assess lease

portfolio

Bestrategic

Be proactive

Build internal

awareness

Unprecedented changes are coming

• Will affect most companies

• Financial statement ratios will change

•

•

Systems and controls will need to be evaluated

Many functional areas will be affected

Actions to consider

• Monitor developments

• Identify the key stakeholders

• Identify and catalog all leases

• Identify contracts affected

• Estimate the impact

• Consider potential changes in leasing strategy

40

What are the next steps

Looking forward

• FASB/IASB staff to continue evaluating stakeholder concerns• Boards continuing their discussion in 2015• Final standard expected in H2 2015• Effective date of 2018/19• Final aspects will likely change from current proposal• Early preparation remains critical due to extent of impacts

Where to find additional informationIn brief 2014-04, Leasing project deliberations settle some issues, but differences remain

PwC Point of View – Lease accounting - Enhancing the financial reporting model Dataline

2013-13, Leases – The Great Divide: The new leases landscape

PwC Webcast – October 9, 2013 - Leases: Consensus remains elusive…What now?

41

Navigating the new landscape

Consolidation

42

Consolidation overview

Impacts

• Consolidation conclusions could change for VIEs and voting interest entities

• More limited partnerships will be VIEs• Asset managers apply “power” and

“economics” for the first time• Decision makers with “at market” and

“commensurate” fees and no other interests won’t consolidate entities that are VIEs

• Related party tiebreaker is narrowed in certain circumstances (when there is s single decision maker)

• There is some relief for how interest held byrelated parties are considered by a decision maker in the VIE model

• Money market funds scoped out

Talking theory

Getting feedback

Coming soon

Issued 2/2015

All companies will have a new way to evaluate consolidation since both VIE and votingmodels will be different. Consolidation conclusions anddisclosures maychange.

The changes areintended to provide reliefto asset managers from consolidating funds but apply to all companies. Therefore, non-financial companies will also be impacted.

43

Who is affected

Companies across all industries will be impactedMany consolidation assessments will need to be revisited since both VIE and voting interest models will be different. Consolidation conclusions and disclosures may change.

Specifically excluded

• Registered MMFs pursuant to Rule 2a-7 of the Investment Company Act of 1940

• Unregistered MMFs that are “similar”in structure (purpose and design) andtargeted outcome (low risk of “breaking the buck”)

• Additional disclosures required forfinancial support arrangements and support given to MMFs

Money marketfunds (“MMF”)

Scopedout

44

How does it work – summary of changes

Principal versus agent concepts embedded throughout theVIE model

Scope exception Variableinterest

Variable interest entity

Primary beneficiary

Related party

tiebreaker

More decision maker fee contracts will not be variable interests

New rules on when limited partnerships are VIEs

New approach to consider equity holders decision makingrights

Economic analysis excludes market basedfees, and may need to consider interests held throughrelated parties

Related party tiebreaker application is narrowed insomesituations

Registered andsimilar unregistered money market funds scoped out

45

Voting interest model

No separate voting model for limited partnerships and similar entities

Remove rebuttable presumption of general partner control

Kick-out rights may give control to a limited partner

Substantive participating right definition remains unchanged under voting model

46

On the horizon

Disclosure Framework

47

Disclosure framework overview

Impacts

• Intent to make disclosures more effective and reduce disclosure overload

• Could change how the board determines disclosure requirements going forward

• Management may need to reassessexisting footnote disclosures

• Applies to all entities except pension plans

Getting feedback

Talking theory

Coming soon

Increase disclosure effectiveness – focus on information most important to the users of financialstatements

Reduce volume of unnecessary disclosure – no more “disclosure overload”

48

On the horizon

Goodwill Impairment

49

Goodwill impairment overview

Impacts

• FASB is considering simplifying the goodwill impairment model

• Four alternatives are beingconsidered, including:

A. PCC model

B. Amortization with impairment

C. Direct write-off

D. Simplified impairment test

• View B and View D are receiving themost interest

Intended to reduce cost and complexity

Provide relevant information to financial statement users

Talking theory

Getting feedback

Coming soon

50

Questions...

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2015 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

Contacts:Jason Natt, Partner

Office: 305-381-7651

Cell: 305-906-1820

[email protected]

Brian Wiegmann, Director

Office: 305-375-7328

Cell: 813-545-8683

[email protected]

51

Cary D. McMillanChief Executive OfficerTrue Partners Consulting

Governance and Accounting Priorities of a Portfolio Company

May 29, 2015

My Background

CEO & Board Member, True Partners Consulting

Nationwide Tax Advisors

Chicago, New York, Los Angeles, San Jose, Tampa, Denver, Dallas and London

2

My Background Managing Partner - Arthur Andersen Chicago Office

until November 1999, Audit Partner and CPA

Executive Vice President and Board Member – Sara Lee Corporation, 1999-2004

Sara Lee Corporation, CFO, 1999-2001

CEO, Sara Lee Branded Apparel, 2001-2004 $7 billion division with 75,000 employees

3

Our Company True Partners Consulting is a tax and business advisory firm

that uses a different approach to tax services

Pyramid

Continuity

Partnering

TPC provides an atmosphere for its employees that celebrates and promotes collaboration, responsiveness, and innovation

4

Cary D. McMillanPrivate Equity Experience

Waud Capital Partners

Greenhill Capital Partners

Prospect Partners

Morgan Stanley

And Many More…

5

Different Stakeholders Public Company

The SEC defines the relationship, disclosure and reporting between the company and its shareholders

PE Company

The PE firm defines it, changes it whenever they want and if they’re not getting what they want sends in people to get it

6

Growth Strategy Public Company

Focus on organic or “same store” growth

Acquisitions often viewed as pending failures

PE Company

EBITDA causes acquisitions to appear to be free

Merger integration (i.e., cost cutting) plays to PE firms strength

Low cost of debt has helped fuel roll-ups

7

Cash Flow Public Company

That’s Treasury’s problem

PE Company

Cash flow is the focus, and everything associated with it – collections, working capital, etc.

8

Time Public Company

Quarterly focus

PE Company

Time is the enemy of IRR

Sense of urgency

Less time to react, doesn’t matter how many hours it takes, want it quickly

Fewer excuses, results oriented

9

Your Job Public Company

Manage the team, according to SEC rules and timeframes

PE Company

Less staff, roll up your sleeves and get the job done

Flat organization, more variations in your job, look at risk taking as a positive

10

How Decisions Are Made

Public Company

Budgeting/bonuses

Private Company

Keeping the family members happy

PE Company

Growing EBITDA – Simple - Clear

11

Planning for the Future Public Company

Timeframe is undefined, or “forever”

PE Company

There WILL be an exit

12

May 29, 2015

The real consistent inconsistency is the BLAH, BLAH, BLAH!

Goals

• Gain confidence in networking ability

• Increase willingness to take risks

• Have targeted approach to connecting

• Position yourself using social media

• Eliminating “no” & “too busy”

A Look Ahead

• Networking

• Mishaps

• Positioning Yourself

Who am I?

• 50 minutes of presentation

Ground Rules

• Interactive• Ask questions• Formal Q&A at end• Parking Lot• #Blah2015

Who am I?

• Top FSU Graduate under 30

Who am I?

• “Tampa Bay’s Master Networker”-TBBJ

• Chair, University of Tampa Board of Counselors

• “Rising Star” by Tampa Bay Times

• Leadership Tampa (‘12), Tampa Bay (‘11), Tampa Connection (’10)

• Chair, Early Learning Coalition of Hillsborough County

Aakash M. Patel | President & Founder

Who am I?

right?

Agenda

• Networking

• Mishaps


BLAH, BLAH, BLAH

• Be proactive

Networking

• Leverage your network

• Add Value

• Have a follow-up plan

Be Proactive

B

Leverage Your Network

B

L

Add Value

B

L

A

Have a Follow-Up Plan

B

L

A

H


• EMAIL


• EXCEL

BLAH, BLAH, BLAH

• Be proactive

Networking

• Leverage your network

• Add Value

• Have a follow-up plan

Agenda

• Networking

• Mishaps


Overcoming Mishaps

• Be aware• Level set• Act on it• Humility

Be Aware

• Things are not always as they appear

• Not everyone gets in on 1st try

• Success is not the same to all people

Level Set

• Playing field

• Start your own

• Join another

Act on It

• Plan

• Include others (where appropriate)

• Act for success, not revenge

• Let others join

Humility

• Accepts

• Learn

• Laugh

• Change (or not)

Overcoming Mishaps

• Be aware• Level set• Act on it• Humility

Agenda

• Networking

• Mishaps


Positioning Yourself

• Business

• Lifestyle• Active on Social Media• Have Determination

Business

• Contact sport

• Business is done with “friends”

• Be the experts in your field

Clients

Lifestyle

• Either you are active or not

• Consistency

• Work it in, as opposed to it being work

Active on Social Media

• Who is on ?

• Who has a Business Page?

• Who is on ?

Social Media Statistics (con’t)

Elevate, Inc. | Affiliations

Have Determination

• Don’t give up

• Ask for assistance

• Take a chance

• Enjoy the ride

Have Determination

Positioning Yourself

• Business

• Lifestyle• Active on Social Media• Have Determination

Agenda

• Networking

• Mishaps


Goals – How Did We Do?

• Gain confidence in networking ability

• Increase willingness to take risks

• Have targeted approach to connecting

• Position yourself using social media

• Eliminating “no” & “too busy”

Source: mcprodigal.prodigalreturns.com

Is there anything I left out?

http://elevate-inc.com/@Elevate_Inc

[email protected]

4115 W. Spruce St., Tampa, FL 33607

Contact Us

May 29, 2015

Auditing in a World of Big Data

USF Accounting Circle CPE Conference

May 29, 2015

Jason Guthrie

* The views expressed in this presentation are those of the presenter and do not necessarily represent the position of EY.

Page 2

What is Big Data?Categories and sources of data

Auditing in a world of Big Data

Page 3

What is Big DataThe 3 Vs

Volume

2.3 trillion gigabytes of data created

each day

Variety

30 billion pieces of

content are shared on

Facebook each month

Velocity

NYSE captures 1TB of trade info

each trading session


Page 4

The analytics process

Capture

DataPerform

AnalyticsObtain

Insight

Relevant

Data

Appropriate

Data Sources

Analyze

Results

Rules or

Algorithms

Descriptive

What happened?

Predictive

What will happen?

Prescriptive

What should happen?


Page 5

The hype of Big DataGartner’s technology hype cycle


Page 6

What are others saying?

► Our clients are investing heavily in technology and they are asking what we are doing to leverage their investments and challenging the waywe audit

► They are expecting us to provide relevant business insights and enhanced dialogue

Our Clients

► Regulators are asking questionsabout our use of data analytics as we renew our focus on quality and professional skepticism

► Standard-setters (IAASB and AICPA) are questioningwhether changes to standardsare required

Regulators &Standard Setters

► Mandatory firm rotation creates the need for data analytics to enhance efficiencyof transition

Markets


Page 7

Impact of Big Data on the audit


Page 8

Issues related to Big Data in the audit

Datacapture

Auditevidence

Analyticsintegration


Page 9

Regulatory and auditing standards impact

► Substantive analytical procedures

► Validating the data used for analytics

► Defining audit evidence

► Relevance of internal control testing

► Level of precision


Page 10

How to prepare auditors to use Big Data

Image: http://www-01.ibm.com/software/data/infosphere/hadoop/data-scientist.html


1

From a 6 to 4 Day Close

Kristin Allen & Stephanie LifshinMay 29, 2015

Jabil’s Journey: 6-5-4 Close

Why Close Faster?

What’s in it for You?

3

Enhance Business Partnering

Data Analysis & Business

Insight

Data Prep & Reporting

Incorrect systems use (duplication of processes)

Issue Resolution (Invoice / PO errors)

Margin Reporting

Excel Reporting Margin Analysis

Understanding cost drivers on the line

Cost / Benefit Analysis of CAPEX

Working capital management

Business Interpretation

Speaking to BU / Op’sManual Processes

ReduceWaste

IncreaseValue-Add

Current State

Future State

4

How Many Workdays Does it Take Your Company to Have Final Closing Numbers?

6 or more22%

5 Days30%

4 Days27%

3 or less21%

Source: Strategies to Simplify the Accounting Closing Process

Posted By Peeriosity On December 20, 2012

27% of Jabil Finance time was spent crunching numbers

Quantifying the Impact

5 Ways We Achieved our Journey

1. Built a Strong Foundation

7

A Solid Foundation is the Key to Success

8

“Like any major change, the finance transformation has been challenging at times, but ultimately extremely important; these changes will make us better business partners to business and operations.

A little like the development of the mobile phone, we are moving from a functional solution to a smart, integrated, technology driven solution.”

Forbes Alexander

The Evolution of Finance at Jabil

9

The Journey: Number Cruncher to Business Partner

Develop & Deploy the Vision

Develop Systems that Support the

Process

Create Space & Define / Implement Baseline Practices

IncreaseValue-Add

Sustain Gains & Drive Continuous

Improvement Mindset

Create Space & Define / Implement Baseline Practices

10

OrganizationOrganization Organization

Process Performance Measurement

Policy

Data TechnologyPeople

Business

Partnering

► Finance Document Control implementation

► Global Business Centre

► Global Business Services (SSC)

► International Procurement Office (IPO)

► Master Data Management

► Systems Strategy

► Managed Competencies

► Human Development

► Master Analyst Qualification

► Line of Sight

► Cognos Controller

► TM1

► Business Intelligence

► Line of Sight Metrics

► Management Reporting Baseline

► LEAN six sigma – Partnering with Operations

► Maturity Assessment

► Transformation Roadmap

Our Current State (“Foundation”) in 2012

11

2010 2012201120092008 2013 2014

► Finance Transformation Initiated

► LEAN six sigma: Partnered with Operations

► Global Business Services (Shared Service Centre, GBS): First Site Implemented

► Master Data Management Project Kick-Off

► Finance Document Control Implemented

► Management Reporting Baseline Developed

► Business Intelligence Go-Live

► Systems Strategy Defined

► Maturity Assessments Kick-Off

► Global Business Centre: First Customer Integrated

► Competency Framework Developed & Communicated

► Cognos Controller Go-Live

► Master Analyst Qualification Pilots

► Lean Training

► Finance Executive Strategy Session

► Line of Sight Communicated

► Transformation Roadmap Defined

► TM1 Go-Live

2008 2009 2010 2011 2012

► Intercompany (Global Services / Early Cut-off)

► Annual Operating Plan – Phase 1 Go-Live

► 6-5-4: 6 to 5 Days

► 6-5-4: 5 to 4 days

► GBS Second Site Launch

► SAP Material Ledger Pilots

► AOP –Phase 2 Go-Live

2013 2014

Putting it all Together: “A Ha” MomentKey:

LEADERSHIP COMMUNICATION

SYSTEMS & PROCESSES LEAN SIX SIGMA

12

Started with the end in mind

Commitment from the top is crucial!

Built a foundation that addressed

people, processes & technology

Recognized that change is a

journey

What Worked for Us

2. Kept it Simple

14

Simplicity & Patience are Virtues: A Day Can Take a Year!

15

Set Realistic Goals- Incremental steps for Fundamental changes

- Improve and stabilize

Provide Tools to meet the Goals- LEAN techniques Value stream mapping

Removing waste & identifying quick wins

“Work smarter, not harder”

K.I.S.S.

16

Oct Close 20123 months



Plant Selects Reduction

• Recommended Practices & Timeline

• Manage by Exception

• Move up Intercompany Summary

Quick Wins

Financial Close Baseline

• Lean Events

• Standard Close Schedule

Automation

• Payroll

• Recon Tool and/or SAP Close Cockpit

• Goods In Transit & Purchase Price Variance

July 2012

6 day close 4 day close5 day close

Leverage existing projects*

People• Business Partnering Training

• Master Analyst Certification

• Competency Analysis & Gap Fulfillment

Processes• Global Business Services

• Intercompany

• Lean initiatives

Technology

• TM1

• Business Intelligence

3 day close

Prepare to -1 Prepare to -1 Prepare to -1

Our Original Timeline: One Day at a Time

High Difficulty & High Benefit

Celebrate!

17

LEAN Methodology: Root Cause Analysis

18

Anyone could do it: keep it simple!

It was hard, but not complicated- Work Smarter, Not Harder

Patience is a necessity- One day took a year

- Re-stabilize the foundation before moving on

Identify waste & remove it

What Worked for Us

3. Maintained Flexibility

20

If at First You Don’t Succeed, Try Again

21

The Power of the Voice of the Customer

What We Planned To Do

Reduce our external reporting close cycle by 1 day (submit on day 5 rather than day 6)

Increase automation

Payroll

Account reconciliations

Close checklist

Standardize processes

Implement baseline practices

Achieve a 3-day close cycle

What Actually Happened

Reduced our internal reporting close cycle by a day (submit on day 7 rather than day 8)

Increased automation

Goods in Transit

Cost Accounting

Removed competing priorities

Achieved a 4-day close cycle

Implemented standard approach for granting extensions

22

Flexibility is key!

Be open to adapting your approach to attain your end goal

You may not have all of the answers at the start – that’s ok!

Expect the unexpected

What Worked for Us

4. Empowerment Led to Acceptance

24

Plant Driven Changes Sense of Ownership

25

Oct Close 2012

3 months

Oct Close 2014

27 months

Oct Close 2013

15 months

Plant Selects Reduction

• Recommended Practices & Timeline

• Manage by Exception

• Move up IC Summary

Quick Wins

Financial Close Baseline

• Lean Events

• Standard Close Schedule

Automation

• Payroll

• Recon Tool and/or SAP Close Cockpit

• GIT & PPV

Enhancements

July 2012

6 day close 4 day close5 day close

Leverage existing projects*

People

• Business Partnering Training

• Master Analyst Certification

• Competency Analysis & Gap Fulfillment

Processes

• GBS

• Intercompany

• Lean initiatives

Technology

• TM1

• BI

3 day close

Prepare to -1 Prepare to -1 Prepare to -1

One Approach that did not Change

High Difficulty & High Benefit

Celebrate!

26

The Cascade Effect

Memphis The Memphis team recognised they were going to have problems reducing their time to close due to the length of time taken to conduct margin analysis

As a result, the team carried out a cross‐functional kaizen event involving a Continuous Improvement Manager, FTT, Lean Management, Finance, BU and Operations

A number of non‐critical tasks were removed allowing them to meet the 5‐day close & remove around 20 hours of work from their process

January FY13

27

Decentralized organizational structure is not a roadblock

Play to your company’s strengths- Empowered Finance teams

- LEAN mindset

Think Globally, Act Locally

What Worked for Us

5. Provided Support

29

Everyone is in it Together: It’s All or Nothing!

30

Our Support Network

Finance Transformation

Team

• Global team focused on improving the efficiency and effectiveness of Finance at a Plant & Corporate level

• 10 fully dedicated resources

Continuous Improvement Team

• Plant-focused, LEAN Six Sigma mentors for Finance

• 5 fully dedicated resources• 24 partially dedicated resources

Finance Systems SME Team

• Plant-focused, Finance Systems mentors for Finance

• 11 fully dedicated resources• 37 partially dedicated resources

All support other initiatives as well, but were there to help make the close process more efficient without sacrificing quality..

31

Corporate Driven Initiatives

32

Similar to a crew team, everyone needs to row together

Continuous communication and change management are necessary

Some will need more assistance than others

What You Need to Know to Shorten Your Close

33

Weaving the Threads Together

As a public company providing timely & accurate data is always critical . . .

. . . but producing it

more quickly to

free up time is better!

The Threads . .

Leadership

Systems & Processes

Communication

LSS Tools

LeadershipSystems & Processes

CommunicationLSS Tools

6-5-4 Close Achieved!

Providing a “vision” of what was needed was key. This included a video by the CFO. Sites saw people behaving differently.

Some changes were made to the corporate reporting processes (Intercompany, IC) which supported the reduced close .

The LSS tools training had been rolled out & had been practiced , but now there became a clear “point” to using them - to achieve the objective & make peoples lives easier!

Several “set piece” communications helped. Also taking lots of feedback on the IC process changes created engagement & ensured involvement.

Appendix

35

Tips You can Use

• Evaluate account reconciliation practices Risk Rank accounts based on potential for misstatement For low risk accounts, reconcile quarterly; recon completed by Senior or Staff accountant and reviewed by Senior or Manager (one level

up) For medium risk accounts, reconcile monthly; recon performed prior to close; recon completed by Senior or Staff accountant and

reviewed by Senior or Manager (one level up) For high risk accounts, reconcile monthly; recon performed prior to close; recon completed by Staff, Senior or Manager and reviewed

by Controller• Evaluate Journal Entry postings

Entries under $500 - do not book or book outside of close Use the recurring entry feature in SAP Use the reversing entry feature in SAP Based on account risk ranking (or JE amount thresholds), low-risk journals booked by Senior or Staff accountant and reviewed by

Senior or Manager (one level up) Medium-risk journals booked by Senior or Staff accountant and reviewed by Senior or Manager (one level up) High-risk journals booked by Staff, Senior or Manager and reviewed by Controller

• Account analysis - review account variances to identify exceptions outside of reconciliation process; interim account reviews and flux analysis• Utilize estimation techniques for non-quarter month-end closes (accruals and reserves)• Adhere to a well-defined close calendar / checklist with assigned responsibilities• Utilize BI to perform account analysis outside of the close process to identify issues in advance• Move non-critical activities to be outside of close• Close sub-ledgers and enable first run of trial balance on day one of the close cycle• Documented policies and processes

1

Top 5 Changes You Need to Know Related to Audit & Assurance

May 29, 2015

2

• Going Concern

• Internal Audit

• Letters for Underwriters

• Rescission of TPA 5250.15

• GASB 67 & 68• And maybe a little bit more

Top 5 Changes You Need to Know Related to Audit & Assurance

3

Issued June 2012

• Auditor should assess an entity’s ability to continue as a going concern for a “reasonable period of time” defined as “A period of time not to exceed one year beyond the date of the financial statements being audited.”

SAS 126 – Consideration of an Entity’s Ability to Continue as a Going Concern (AU‐C 341 & 570)

4

• An EOM paragraph should be added to the auditor’s report if the conclusion is that there is substantial doubt. Wording should include phrases “substantial doubt” and “going concern”.

• If auditor concludes that disclosures are inadequate, then a modified report should be issued.

SAS 126 – Consideration of an Entity’s Ability to Continue as a Going Concern (AU‐C 341 & 570)

5

Issued August 2014

• Requires an entity’s management to evaluate going concern conditions for a one year period beginning as of the date the financial statements are available to be issued

• Effective for the annual period ENDING after December 15, 2016

ASU 2014‐15 – Going Concern

6

• Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued).


7

• If management has plans that are expected to alleviate the going concern issues, then disclosures should be made to provide an understanding of the issues, plans and expected results

• If management plans are NOT expected to alleviate conditions, then language should be included in the footnotes indicating there is substantial doubt about the entity’s ability to continue as a going concern


8

Four Interpretations were issued January 2015:

• Requires auditors to use the definition of substantial doubt about an entity’s ability to continue as a going concern that is contained in FASB ASC 205‐40

• Defines Reasonable Period of Time as the time required by FASB ASC 205‐40

Auditing Interpretations related to Going Concern

9

Four Interpretations were issued January 2015:

• When performing interim reviews under AU‐C 930, the auditor must address going concern considerations

• When considering the possible effects on the financial statements and disclosures, the auditor should do so based on the requirements of the applicable financial reporting framework being used by the entity

Auditing Interpretations related to Going Concern

10

Issued February 2014

• The external auditor may be able to use the work of an internal audit department:

– Level of competency of internal audit function

– IA function’s organizational status

– IA applies a systematic and disciplined approach, including quality control

• Eff for periods ending after 12/15/14

SAS 128 – Using the Work of Internal Auditors (AU‐C 610)

11

Issued August 2014

• Amends and clarifies requirements when auditors are asked to issue “Comfort Letters” to requesting parties in connection with a nonissuer entity’s financial statements issued in a registration statement or other securities offering.

• Effective for comfort letters issued on or after 12/15/14. Early implementation is encouraged.

SAS 129 – Amendment to Letters for Underwriters and Certain Other Requesting Parties (AU‐C 920)

12

March 2015

• TIS 5250.15 required an entity to disclose a description of tax years that remain subject to examination regardless of whether an entity has uncertain tax positions.

• At a FASB/PCC meeting, they documented in minutes that their intention was that the disclosure of open tax years was only necessary of an entity has unrecognized tax benefits

• The AICPA deleted TIS 5250.15

Rescission of AICPA Technical Q&A 5250.15

13

AU‐C 9805 – Auditing Interpretation No. 1 – Auditor of Governmental Cost‐Sharing Multiple‐Employer Pension Plan

• Provides guidance to plan (not employer) auditors on auditing and reporting on schedules such as a schedule of employer allocations and either a schedule of pension amounts by employer or a schedule of collective pension amounts

Auditing Guidance for GASB 67 & 68

14

Schedule of Employer Allocations

15

Schedule of Pension Amounts by Employer

16

AU‐C 9805 – Auditing Interpretation No. 2 – Auditor of Governmental Agent Multiple‐Employer Pension Plan

• Provides guidance to plan (not employer) auditors on auditing and reporting on schedules such as a schedule of changes in fiduciary net position by employer.


17

AU‐C 9500 – Auditing Interpretation No. 2 – Auditor of Participating Employer in a Governmental Cost‐Sharing Multiple‐Employer Pension Plan

• Provides guidance on when an auditor of a cost‐sharing plan participating employer can rely on information (schedules) received from a plan auditor; therefore, determining whether to give an unmodified or possibly modified opinion


18

AU‐C 9500 – Auditing Interpretation No. 3 – Auditor of Participating Employer in a Governmental Agent Multiple‐Employer Pension Plan

• Provides guidance on when an auditor of a agent multiple‐employer plan participating employer can rely on information (schedules) received from a plan auditor; therefore, determining whether to give an unmodified or possibly modified opinion


19

AU‐C 9600 – Auditing Interpretation No. 1 – Auditor of Participating Employer in a Governmental Pension Plan

• Clarifies that a governmental pension plan is not considered a component of the employer for purposes of AU‐C 600. Therefore, it would not be appropriate for an employer auditor to make reference to the audit report of the governmental pension plan auditor


20

AICPA State & Local Government Expert Panel (SLGEP) Whitepapers:

• Employer sponsored agent and cost‐sharing multiple‐employer plans (2 whitepapers)

– Testing of information used in employer reporting (allocations)

• Single employer and cost‐sharing multiple‐employer plans

– Testing of census data


21

Recent Meeting Agenda Items:

• Audit of ICFR

• Municipal Securities

• Other Information

• Performance Audits

• Auditor Reports

• Attestation Standards (Clarified)

Auditing Standards Board Agenda

22

• Several proposals being studied that result in tougher requirements for both Reviewed Firms and Peer Reviewers

Peer Review Proposed Changes

23

Questions?

Documents

2015 University of South Florida Accounting Circle CPE ... · 2015 University of South Florida Accounting Circle CPE Conference . May ... 2015 USF Accounting Circle Conference