CFO Essentials Newsletter - June 2012

June 2012

RISKSINTERNALCONTROLS

I.T.MANAGEMENT

FINANCIALREPORTING

TECHNICALACCOUNTING

REGULATORYREPORTING

M&A

TAX

RESOURCEMANAGEMENT

CASHFLOW

RESOURCE MANAGEMENT____________________________________________________________

An Effective People Management Culture is Imperative to Success in Business

FINANCIAL REPORTING____________________________________________________________

Specific Procedures and Processes are Foundational to the Audit Committee’s Execution of its Responsibility Over Risk Management

I.T. MANAGEMENT____________________________________________________________

ERP Software Implementations - Consider Among the “7 Habits” to Ensure Success

Essential BriefingsSEC ISSUES GUIDANCE ON THE

IMPLEMENTATIONOF THE JOBS ACT

Contents______________________________________________________________________________________________________________________________________________________

ESSENTIAL BRIEFINGS2 SEC ISSUES GUIDANCE ON THE IMPLEMENTAT ION

OF THE JOBS ACTOn May 3, the staff of the SEC updated its FAQ, Generally Applicable Questions on Title I of the JOBS Act. The following is a brief summary of some of the key provisions.

______________________________________________________________________________________________________________________________________________________

RESOURCE MANAGEMENT4 AN EFFECT IVE PEOPLE MANAGEMENT CULTURE IS

IMPER AT IVE TO SUCCESS IN BUSINESSPeople are the driver of the business success. Any organization’s biggest and one of the most valuable assets are its employees. How to manage valuable employees effectively is a difficult and challenging issue to deal with on your daily operation.

______________________________________________________________________________________________________________________________________________________

FINANCIAL REPORTING6 SPECIF IC PROCEDURES AND PROCESSES ARE

FOUNDAT IONAL TO THE AUDIT COMMIT TEE ’S E XECUT ION OF I TS RESPONSIBIL I T Y OVER RISK MANAGEMENT Since the SEC first recommended that publicly held companies establish audit committees in 1972, the responsibilities and authority of the audit committees have increased tremendously through the additional rules and recommendations issued by the National Commission on Fraudulent Financial Reporting, Blue Ribbon Committee and Sarbanes-Oxley Act.

______________________________________________________________________________________________________________________________________________________

I.T. MANAGEMENT9 ERP SOF T WARE IMPLEMENTAT IONS – CONSIDER AMONG

THE “7 HABITS” TO ENSURE SUCCESS CFOs, you are well aware of the emotional response that the letters “ERP” can bring to executives and board members. The response is often not pleasant. That does not have to be the case.

June 2012

1 | SingerLewak June 2012

E S S E N T I A L B R I E F I N G S

SEC ISSUES GUIDANCE ON THE IMPLEMENTATION OF THE JOBS ACTBY JIM PITRAT, CPA | CO-MANAGING [email protected] | 310.477.3924

On May 3, the staff of the SEC updated its FAQ, Generally Ap-plicable Questions on Title I of the JOBS Act. The following is a brief summary of some of the key provisions:

•Generally, all non-convertible debt securities issued over the prior three-year period must be counted against the $1 bil-lion debt limit, in determining whether a company has lost its EGC status. - The Staff will not object if a company does not count debt securities in which securities issued in a private place-ment and therefore subject to restrictions on resale are exchanged for newly regis-tered non-convertible debt securities having terms identi-cal to the original restricted securities.

•The Staff at the SEC believes view that Asset Backed Securi-ties issuers do not qualify for EGC status.

•The Staff of the SEC generally believes that investment com-panies also do not qualify as

EGCs, but a business develop-ment company may qualify as an EGC.

•Even if gross revenues exceeded $1 billion in prior years, a com-pany could qualify as an EGC, even if gross revenues exceeded $1 billion in the most recent year.

•The Staff believes that it would be appropriate for financial institutions to use the same approach in calculating gross revenue as that used by finan-cial institutions to determine their status as a “smaller report-ing company.”

• If a predecessor company did not qualify as an EGC because its first sale of common equity

securities occurred on or before December 8, 2011, the succes-sor company also would not qualify.

•Staff comment letters and issuer responses thereto on confidential draft submissions will be publicly released on EDGAR no earlier than 20 business days following the effective date of the registration statement

•The Staff will not object if an EGC presents the ratio of earn-ings to fixed charges in a regis-tration statement for the same number of years for which it is required to provide selected financial data under the JOBS Act’s.

•EGCs must comply with XBRL.

June 2012 SingerLewak | 2

Even if gross revenues exceeded $1 billion in prior years, a company

could qualify as an EGC

•The effective date for the defi-nition of an EGC applies only to whether the first sale of com-mon equity securities pursu-ant to an effective registration statement occurred on or before December 8, 2011. A company, therefore, otherwise eligible for EGC treatment would not be disqualified if it issued only debt securities on or before that date.

•An EGC not qualifying as a smaller reporting company is required to include three years of audited financial statements in its Form 10-K.

•An entity that has lost its EGC status because of a disqualify-ing event established by the JOBS Act may not regain its EGC status.

•The Staff will deem the EGCs to be public entities (i.e., because they qualify as “issu-ers” under Section 2(a) of the Sarbanes-Oxley Act), and thus not excluded from compli-ance with the provisions of the FASB ASC applicable to public entities.

• If an EGC initially chooses to take advantage of the extended transition period for complying with new or revised financial accounting standards, the Staff will not object if the entity later decides to opt out of the extended adoption and transi-tion period.

• If an EGC discovers a material error in its financial statements after initial submission of a draft registration statement on a confidential basis, then the EGC may elect to submit a confidential draft amendment to the registration statement that corrects the error.

•While EGCs are required to furnish only the disclosures concerning executive com-pensation that are required of smaller reporting companies, EGCs are not permitted to fol-low the provisions applicable to smaller reporting companies in management’s discussion and analysis (MD&A), which limits the discussion to the latest two years. The discussions in filings on Form 10-K, would have to cover the three-year period.

This PCEB constitutes a sum-mary of some key provisions of the FAQ addendum, and not a full analysis. We recommend a full and thorough review of the FAQ.


An EGC not qualifying as a smaller reporting company is required to include three years of audited financial

statements in its Form 10-K


AN EFFECTIVE PEOPLE MANAGEMENT CULTURE IS IMPERATIVE TO SUCCESS IN BUSINESSBY KEVIN YEH | MANAGER, ASSURANCE & [email protected]

People are the driver of the busi-ness success. Any organization’s biggest and one of the most valuable assets are its employees. How to manage valuable employ-ees effectively is a difficult and challenging issue to deal with on your daily operation.

Managing people effectively means motivating and engaging them so they feel valued and im-portant. Team leaders first have to evaluate your team members current position and what’s the next goal your coached team

members to reach and what’s the strategic way to get there. Some-times, team leaders are more

focusing on telling what the team members should do on current situation but have no thought for the future long term goal. People management is a dynamic pro-cess that if carrying out properly, could benefit the business for all sizes. Below are some tips for consideration to build up effec-tive people management.

•KNOW YOUR TE AM MEMBERS AND LE T THEM KNOW YOU Why effective people management is so difficult?

One of the most challenging issues is to build up a trust relationship. Letting team member to know you and management style is as important as to know their strength and weakness. Knowing each team member could help you to arrange resources and place the right person on the right place. But to let them know you could help to build up a more transparent communication channel to resolve issues on a timely manner.

•TRE AT PEOPLE PROFESSIONALLY AND RESPECTFULLY You would like your team members to respect you as a leader and at the same time, you should show your respect to them, as the way you like to be treated. It is beneficial to set up a firm and fair approach to team members and live with it as a constant guideline to deal with issues came up.

R E S O U R C E M A N A G E M E N T

Managing people effectively means

motivating and engaging them so they feel valued

and important


•SE T UP E XPECTAT ION AND RE V IE W PROCESS People have different level of knowledge and skill set and will not all perform equally, but they all can get better. Com-

municate the expectation in an appropriate manner and allow them to have time to execute and provide feedback on what they do right and room to im-prove. One-to-one discussion and review with each member

should be held regularly to look back the performance and look forward the goals for the im-mediate future.

•ENCOUR AGE INPUT AND DELEGATE BY LE VEL The best way to really engage team members is to ask them for input to problem solving. Less effective leaders only focus on the role of decision maker. By asking them for their advice or suggestions, they will feel fully engaged and more willing to be part of it. Delegation of work based on members’ level is a win-win if done properly. Delegation should also provide an opportunity for another person to grow and develop their skills.

•RE WARD AND RECOGNI T ION It’s important to recognize a job well done and to remember

happy employees are always leading to high productivity. Public recognition provides more incremental value to the employee satisfaction. Even the employees who are not recognized are motivated to achieve recognition in the future.

Effective people management required constant attention and regular evaluation on both you and your members’ current posi-tion to be sure you are working effectively with each your mem-ber. This will help you and your members to grow and develop on a long term relationship and to create a momentum to be successful in a business environ-ment.

The best way to really engage team members is to ask them for input to

problem solving. Less effective leaders

only focus on the role of decision maker.


SPECIFIC PROCEDURES AND PROCESSES ARE FOUNDATIONAL TO THE AUDIT COMMITTEE’S EXECUTION OF ITS RESPONSIBILITY OVER RISK MANAGEMENTBY CONNIE WONG | SENIOR MANAGER, ASSURANCE & [email protected]

Since the SEC first recommended that publicly held companies establish audit committees in 1972, the responsibilities and authority of the audit commit-tees have increased tremendously through the additional rules and recommendations issued by the National Commission on Fraudulent Financial Reporting,

Blue Ribbon Committee and Sarbanes-Oxley Act.

The responsibilities of audit com-mittees are generally to:

•Oversee the financial reporting process, which includes review of complex or unusual transac-tions, review highly judgmen-tal areas, review annual and quarterly financial statements, approve related parties trans-

action and select accounting policies and principles

•Oversee the internal control assessment process

•Oversee the internal audit function

•Engage and review the external auditors’ performance, which includes discussing all matters that are required to be commu-nicated under generally accept-ed auditing standards with the external auditors and approval of non-audit services

•Monitor compliance with laws

and regulations and results of management’s investigation

F I N A N C I A L R E P O R T I N G

Wouldn’t it have been great if when my home computer crashed, that I could have gone to a

library or friend’s house, or even my cell

phone, and recovered the lost basketball schedule –

in seconds?

The risk of losing

documents, photos and

files on our personal

computers and business

networks through viruses

or hardware malfunctions

has become too great and

hard to manage


•Provide an open avenue of communication between inter-nal audit, external audits and the board of directors

•Establish procedures related to confidential, anonymous submissions of concerns by employees regarding account-ing and auditing matters

•Review and discuss the com-pany’s practices with respect to enterprise risk assessment and management

•Any other responsibilities as requested by the board of directors

Among the above listed respon-sibilities, risk assessment is a relatively new item as it was not explicitly called out until Sar-

banes-Oxley Act. Sarbanes-Oxley Act utilizes a risk-based approach which requires management to perform detailed analysis to iden-tify risks around the business, especially those that are related to financial reporting. Audit com-mittees are then responsible to oversee this process.

There are so many risks associ-ated with a business, establish-ing procedures and processes will help management and audit committees to properly assess and manage the risks that are most relevant to the business. Below are some steps or procedures that management and audit commit-tees can consider to integrate the risk-based approach.

STEP 1 : Management shall first identify all principal busi-ness risk. That shall include both financial and operational risk.

Sarbanes-Oxley Act utilizes a risk-based

approach which requires management to perform

detailed analysis to identify risks around

the business, especially those that are related to

financial reporting


STEP 2 : After identifying the risk, management shall then as-sess the likelihood of occurrence and the projected impact on the company assuming an “event” involving that risk were to oc-cur, as well as the impact from a financial reporting aspect. This will enable management to link business risk to financial report-ing to implement Sarbanes Oxley Act.

STEP 3 : After identifying the high risk events, i.e. the risk as-sessment part, management then has a roadmap to focus on the significant risk to further analyze internal controls around the risk, including risk implications and any mitigating actions, i.e. the risk management part. Assess-

ment of sufficient insurance cov-erage will usually be considered as well.

STEP 4 : Policies shall also be set up to ensure timely updates to the risk assessment whenever new lines of business or products

are launched. Annual review of the risk assessment will also be helpful.

Implementing enterprise risk management program will help management to better allocate resources to risks that are most significant to the business and to be prepared for the unexpected.

Policies shall also be set up

to ensure timely updates

to the risk assessment

whenever new lines of

business or products are

launched. Annual review

of the risk assessment will

also be helpful.


CFOs, you are well aware of the emotional response that the let-ters “ERP” can bring to execu-tives and board members. The response is often not pleasant. That does not have to be the case. If there is one thing we can con-

firm from our years of experience with ERP selection and imple-mentation project management,

it is that more often successes are assured from ERP upgrades/projects when you use the “begin with the end in mind” strat-egy (thank you Steven Covey). This sounds simple, but it takes strategic leadership and mindful management of an ERP upgrade project team’s activities - to achieve. Simply, when you take on an ERP upgrade, we strongly recommend that the leadership or steering committee first develop key objectives as to what is to be achieved, and how success of these objectives will be measured. Then, more specifics need to be developed re: what the “end” will look like, from a reporting and process improvement perspec-

tive. And, consider the specific information needs and data fields that will be critical for capture in the ERP solution, as well as how they will be used in assessment of the business’ performance. These are but a few of many things that we recommend people consider when taking on a critical ERP upgrade project.

WHAT’S AHEAD: Next month we’ll hit on a deeper discussion about these recommended activi-ties, and by September we’ll be sharing these and some ERP suc-cess stories in our CFO Essentials Roundtables – stay tuned!

If there is one thing we can confirm from

our years of experience with ERP selection and implementation project management, it is that

more often successes are assured from ERP

upgrades/projects when you use the “begin with

the end in mind” strategy

I . T . M A N A G E M E N T

ERP SOFTWARE IMPLEMENTATIONS – CONSIDER AMONG THE “7 HABITS” TO ENSURE SUCCESSBY BOB GREEN, CPA.CITP | PARTNER/PRACTICE [email protected]

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SingerLewak is a leading regional accounting services firm in California with offices in Los Angeles, Orange County, Woodland Hills, Monterey Park, San Diego, Silicon Valley and San Francisco. Serving California since 1959, SingerLewak has established a reputation for excellence as professionals with unparalleled expertise in the Accounting and Management Consulting industry. Providing the services of a large firm with a blended environment of practices, industry specializations and particular attention to hands-on service, SingerLewak continues to demonstrate leadership and industry growth year-over-year. Our client relationship approach and industry excellence is renowned.

We are nationally recognized as active community and professional services partners, working among many sectors of the business world. Our core services deliver results whether it’s auditing, accounting, entrepreneurial business services, tax preparation, business manage-ment, SEC filings, transactions, enterprise risk manage-ment, forensic accounting, business valuation, litigation support, or consulting.

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CFO Essentials Newsletter - June 2012

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