Returning Value Blog

In December 2020, Richard Jones stepped up as chairman of the Financial Accounting Standards Board (FASB). After meeting with stakeholders in early 2021, Jones identified a list of high-priority projects that he plans to tackle under his leadership.

The statement of cash flows essentially tells you about cash entering and leaving a business. It’s arguably the most misunderstood and underappreciated part of a company’s annual report. After all, a business that reports positive net income on its income statements sometimes doesn’t have enough cash in the bank to pay its bills. Reviewing the statement of cash flows can provide significant insight into a company’s financial health and long-term viability.

Your company’s financial statements should be transparent about any restrictions on cash. Are your reporting practices in compliance with the current accounting guidance?

Businesses and not-for-profit entities capitalize machines, furniture, buildings, and other property, plant, and equipment (PPE) assets on their balance sheets. Here’s a refresher on some common questions about how to properly report these long-lived assets under U.S. Generally Accepted Accounting Principles (GAAP).

Auditing standards require a year-end risk assessment. One potential source of risk may be a small business’s reliance on the owner and other critical members of its management team. If a so-called “key person” unexpectedly becomes incapacitated or dies, it could disrupt day-to-day operations, alarm customers, lenders, and suppliers, and drain working capital reserves.

As your company plans for the coming year, management should assess your strengths, weaknesses, opportunities, and threats. A SWOT analysis identifies what you’re doing right (and wrong) and what outside forces could impact performance in a positive (or negative) manner. A current assessment may be particularly insightful because market conditions have changed significantly during the year — and some changes may be permanent.

As the year-end approaches, it’s a good idea for calendar-year entities to review the guidelines for recognizing revenue and expenses. There are specific rules regarding accounting cutoffs under U.S. Generally Accepted Accounting Principles (GAAP). Strict observance of these rules is generally the safest game plan.

The coming audit season might be much different than the seasons of yore. As many companies continue to operate remotely during the COVID-19 pandemic, audit procedures are being adjusted accordingly. Here’s what might change as auditors work on your company’s 2020 year-end financial statements.

Many companies are struggling as a result of shutdowns and restructuring during the COVID-19 crisis. To add insult to injury, some have also fallen victim to arson, looting, or natural disasters in 2020.

The COVID-19 crisis is causing private companies to re-evaluate the type of financial statements they should generate for 2020. Some are considering downgrading to a lower level of assurance to reduce financial reporting costs — but a downgrade may compromise financial reporting quality and reliability. Others recognize the additional risks that work-from-home and COVID-19-related financial distress are causing, leading them to upgrade their assurance level to help prevent and detect potential fraud and financial misstatement schemes.