Annual Report Planning or Avoiding SEC March Madness

  • March 7th, 2013
  • Russell Weigel
  • Comments Off on Annual Report Planning or Avoiding SEC March Madness

RussellWeigelby Securities Litigation Expert: Russell C. Weigel, III[1]

Achievement of a timely filed annual report became more difficult and riskier in 2013 due to the SEC’s XBRL protocol implementation (the coding of financial statements). Greater filing difficulty is anticipated due to the additional time (perhaps double time) required to format financial statements according to the SEC’s XBRL protocol, while at the same time the SEC eliminated the grace period previously available for filing a delinquent XBRL report.

This double threat, a potential March 2013 EDGAR filing bottleneck for which the SEC promises no relief, I have named, “SEC March Madness.”

However, the risk of delinquent filing can be minimized if management takes appropriate steps at an early stage of the planning of its annual report. This Compliance Corner identifies certain planning matters that, if addressed early in the assembly of the annual reports’ components, may facilitate the reporting company’s avoidance of SEC March Madness. This list is not exhaustive, and all companies should seek competent legal and accounting advice as to their individual circumstances.

Tax Planning

1. Need a tax opinion? Consult your auditor whether it will require a tax opinion on any new matters that may have income tax impact before it will issue its audit opinion. Engage a tax expert well in advance of the year-end audit.

Audit Planning

2. Have a pre-audit planning meeting with the auditor. Arrive at decisions on timing and what the auditor will need to see in the way of supporting documentation. If the audit firm has changed during the fiscal year, make sure that the new auditor has access to all needed prior audit work files. If the audit engagement partner has changed, meet with the new engagement partner to insure proper continuity and expectations. Inform the auditor of the names of firms providing tax opinions or asset impairment appraisals.

3. Have inventory? Start the planning of the physical year-end inventory count and coordinate the timing and procedures with the audit firm.

4. Review the auditor’s prior year comment letter issued to management and determine if all items addressed in the letter have been remedied. Prepare appropriate documentation to support reasons why any items have not been corrected.

5. Is an independent appraisal needed? Examine the transactions that have added intangible assets to the financial statements. Determine if they are to be written off or whether an independent appraisal will be obtained. Have that appraisal done prior to the commencement of audit fieldwork.

6. Determine if any unusual or infrequent transactions exist requiring special disclosure or special handling on the face of the financial statements. Review the latest releases of the FASB and be sure to include any changes in the footnotes of the financial statements.

MD&A Planning

7. Identify and collect documentary support for the MD&A discussion of known trends pertaining to liquidity, capital resources, and results of operations. Disclosure of information that can affect revenues can and should include knowledge of product failures and limitations, where applicable.
Scheduling of Audit, Form 10-K Preparation, and Edgarization

8. Consult your EDGAR filing service as to its anticipated workload for the 10-K season. Calendar the date that it believes is its cutoff for your filing to be filed timely. Mid-March 2013 could be the latest time that some filing services are able to accept Form 10-K filing commitments in light of the additional time required for revisions to drafts and for completion of XBRL tagging.

9. Make sure that the audit can be completed and the Form 10-K drafted and reviewed by the auditors within the time required. Pick a target date for completion and request calendar commitments from the company’s legal counsel and auditors to ensure timely Form 10-K filing.
Getting an early jump on all of these items, plus any other items recommended by the reporting company’s experienced legal, accounting, and auditing team, is recommended to ensure the timely filing of the company’s Form 10-K. File the Form 10-K as soon after year end as possible.


[1] Special thanks to the following PCAOB accounting firms and EDGAR filers for their invaluable input: R.R. Hawkins & Associates International, a PC (rrhawkins.com), Salberg & Company, P.A. (salbergco.com), D. Brooks and Associates, P.A. (dbrookscpa.com), Seale and Beers, CPAs, LLC (sealebeers.com), Discount Edgar (discountedgar.com), and Issuer Direct Corporation (issuerdirect.com).


Tags: , , , , , , , ,

Comments are closed.