Hot Button Issues

“Hot Button” Issues for SEC/ SEC Comment Trends


  • Revenue recognition
  • Equity and stock based compensation
  • Common Stock Valuation
  • Complex financial instruments and related assumptions
  • Acquisition – Business Combination
  • Investment
  • Related Party Transactions
  • Disclosure Quality and Completeness


Other Areas to Consider


  • Goodwill and intangible assets with related impairment charges, if any
  • Foreign exchange conversion
  • Contingencies
  • Inventory valuation and reserves
  • EPS and dilutive EPS
  • MD&A and related party transactions
  • Segment reporting
  • Recently issued accounting standards
  • Compensation and related disclosures
  • Pro Forma Issues


Equity/ Stock Based Compensation


  • Audit the Cap table and ensure all stock ownership records are up to date
  • Understand the terms of all warrants and convertible instruments and determine how filing an IPO will affect its treatment
    • Review the articles of incorporation and By-laws
    • Understand and evaluate the capital structure
    • Identify and all related party transactions and contracts
    • Prepare for SEC comments on Common Stock Valuation


Quarterly Financial Information and Financial Statement Disclosures


  • Preparation of quarterly financial statements
  • Flux Analysis
  • Review Financial statement disclosures – prepared in accordance with US GAAP and includes disclosures specific to SEC registrants:
    • Segment Reporting
    • Management basis if accounting judgment
    • Compute EPS for all periods
    • Any rational for non-GAAP measures
      •  Resolve and address all other critical accounting issue matters