CBIZ MHM Executive Education Series Key Issues Facing

CBIZ & MHM Executive Education Series™ Key Issues Facing Public Companies in 2019 Rich Howard, Brad Hale and Mark Winiarski December 19, 2018 Questions? Email cbizmhmwebinars@cbiz. com 1

About Us • Together, CBIZ & MHM are a Top Ten accounting provider • Offices in most major markets • Tax, audit and attest and advisory services • Over 2, 900 professionals nationwide A member of Kreston International A global network of independent accounting firms MHM (Mayer Hoffman Mc. Cann P. C. ) is an independent CPA firm that provides audit, review and attest services, and works closely with CBIZ, a business consulting, tax and financial services provider. CBIZ and MHM are members of Kreston International Limited, a global network of independent accounting firms. Questions? Email cbizmhmwebinars@cbiz. com 2

Before We Get Started… • Use the control panel on the right side of your screen to: • Change your audio mode • Submit questions • Download handouts • If you need technical assistance: • Call support at 877 -582 -7011 • Email us at cbizmhmwebinars@cbiz. com Questions? Email cbizmhmwebinars@cbiz. com 3

CPE Credit This webinar is eligible for CPE credit. To receive credit, you will need to answer polling questions throughout the webinar and be joined for the entire webinar time. External participants will receive their CPE certificates via email within 15 business days of the webinar. Questions? Email cbizmhmwebinars@cbiz. com 4

Disclaimer The information in this Executive Education Series course is a brief summary and may not include all the details relevant to your situation. Please contact your service provider to further discuss the impact on your business. Questions? Email cbizmhmwebinars@cbiz. com 5

Presenters Rich, based in our Orange County, CA office, is MHM’s Director of Quality Control. He is also a member of our Executive Committee and Professional Standards Group and Deputy Chairman of the Board of Directors of Kreston International, our global network of accounting firms. Rich is also the Regional Attest Practice Leader for the West Region with overall responsibility for the operations of the audit practices in California, Arizona, Colorado and Utah. Rich also leads our SEC practice RICH HOWARD, CPA West Region Attest Practice Leader nationwide. Rich joined the organization in 2002, following 14 years at a then Big Five firm, where he was an audit partner. 949. 450. 4402 • rhoward@cbiz. com Questions? Email cbizmhmwebinars@cbiz. com 6

Presenters Brad is a shareholder in our Tampa Bay office. Prior to joining the firm, he spent seven years in public accounting with a Big Four firm 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 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 Hale, CPA MHM Shareholder Questions? Email cbizmhmwebinars@cbiz. com Brad is a member of MHM’s Professional Standards Group where he performs internal consultations on complex private or public company engagements, as well as focuses on the firm’s SEC audit methodology. 727. 572. 1400 x 355 • bhale@cbiz. com 7

Presenters Located in our Kansas City office, Mark is a member of our Professional Standards Group (PSG). Mark's role includes instructing in our national training program, presenting as a subject matter expert at webinars and conferences, and preparing MHM publications on accounting and auditing issues. As a PSG member, Mark consults with clients and engagement teams across the country in many areas of accounting and auditing. Mark has served clients as an auditor, consultant and advisor in numerous industries including manufacturing, distribution, mining, retail sales, services and software. MARK WINIARSKI, CPA 816. 945. 5614 • mwiniarski@cbiz. com • @KCWini MHM Shareholder Questions? Email cbizmhmwebinars@cbiz. com 8

Agenda 01 Key Overall Themes 02 Perspectives of Keynote Speakers 03 SEC Practice Issues 04 SEC Regulatory Matters 05 FASB Activities 06 PCAOB Activities Questions? Email cbizmhmwebinars@cbiz. com 9

TIME FOR A POLL QUESTION ABCDE- WHAT IS YOUR ROLE IN YOUR ORGANIZATION? CFO Financial Reporting Accounting Public Accountant (Auditor/Consultant) Other Questions? Email cbizmhmwebinars@cbiz. com 10

KEY OVERALL THEMES Questions? Email cbizmhmwebinars@cbiz. com 11

Themes Cybersecurity, Cryptocurrencies Helping eco-system improve quality Adoption of new standards Need for new talent/skills Global issues (Brexit, LIBOR, trade wars) Emerging technologies (AI, blockchain, data analytics) Questions? Email cbizmhmwebinars@cbiz. com 12

PERSPECTIVE OF KEYNOTE SPEAKERS Questions? Email cbizmhmwebinars@cbiz. com 13

Organizations Represented – Keynote Speakers • AICPA • Barry Melancon, President & CEO • Cindy Fornelli, Executive Director, CAQ • SEC • Jay Clayton, Chairman • Wes Bricker, Chief Accountant • FASB • Russell Golden, Chairman • IASB • Hans Hoogervorst, Chairman • PCAOB Board • • • William Duhnke, Chairman Jay Brown, Board Duane Des. Parte, Board Kathleen Hamm, Board James Kaiser, Board Questions? Email cbizmhmwebinars@cbiz. com 14

Barry Melancon – President & CEO • The World is Interconnected • Coordination of global regulation is important • USA has a role to play on the world stage • IFRS and how it impacts US companies • Audit regulation • Future of the Accounting Profession • • Workforce changes Geopolitical shifts Regulatory complexity – never been more complex Pace of change is accelerating • 41% of S&P 500 since 2000 are gone or merged • Technology is driving change • AI, machine learning, blockchain • How will people trust these tools? Questions? Email cbizmhmwebinars@cbiz. com 15

Barry Melancon – President & CEO • Trust in a digital economy • • There is a need for trust People don’t trust much today Accountants are in the trust business Huge opportunity to create trust • Cybersecurity risk management • Use of blockchains • Challenges with changing technology • Need to be committed to un-learning • Need to be able to re-learn • The new definition of literacy • The ability to un-learn and re-learn Questions? Email cbizmhmwebinars@cbiz. com 16

Cindy Fornelli – Executive Director, CAQ • Focus areas of the CAQ • Enhancing transparency • Auditors’ report and critical audit matters • Enhancing audit quality • Audit Quality Indicators (AQI) § Plan to release a framework in 2019 to promote consistency • Audit of the future • Emerging technologies – AI, robotic process automation • Cybersecurity – focus on risk management and controls • Talent • Audit committee effectiveness • Designed to assist in their oversight roles • Fighting fraud • Anti-fraud resources – free webcasts, etc. Questions? Email cbizmhmwebinars@cbiz. com 17

TIME FOR A POLL QUESTION AB- DO YOU WANT CPE CREDIT? Yes No Questions? Email cbizmhmwebinars@cbiz. com 18

Jay Clayton & Wes Bricker, SEC • Investor confidence – “trust” • Audit quality is the bedrock of our financial system • Accountants can contribute to building confidence • Adhering to high standards of ethics and integrity • Good example relates to ICOs • Certain protections do not exist in this space • Big difference in the type of companies and funding in ICO market vs. stock market • Joint statement of SEC & PCAOB on China • Reminder that elements of Issuers are not subject to inspection • Unclear as to the timing of this statement or what it was intended to accomplish Questions? Email cbizmhmwebinars@cbiz. com 19

Jay Clayton & Wes Bricker, SEC • “Bricker Blueprint” unveiled • Flowchart of the financial reporting system (beginning to end) • Designed to illustrate our integrated system • Need for several parties to coordinate to achieve high quality • Quality starts at the beginning (with the books and records) • Available on the SEC website • Capital markets around the world are not the same • For high performing capital markets • Need to align incentives to get the behavior you want • Need to build in quality at the front end (beginning with preparers) • Focus on the prevention of errors Questions? Email cbizmhmwebinars@cbiz. com 20

Jay Clayton & Wes Bricker, SEC • Other comments about disclosures • Brexit risks • Chairman Clayton thought it has not been understood or was underappreciated • Companies should be focused on the risks and potential impact, if material • Cybersecurity risks • Need to appreciate the risks and consider needed expertise • Forward looking vs. backward looking (not just when a breach occurs) • Technology • Can be a company’s ally rather than its opponent • Automation can help improve quality but human intelligence will always be needed • Non-GAAP measures and KPIs • Investors need and want additional information • Needs to be of a similar quality to GAAP information • Subjected to rigorous controls to ensure completeness and accuracy Questions? Email cbizmhmwebinars@cbiz. com 21

Russell Golden – Chairman, FASB • The big projects are done, now focused on the future • The future is broken into 3 phases • Phase 1 – short term • Phase 2 – medium term • Phase 3 – long term • Short term • Education – helping make the standards work • Requires people to understand apply them • Focused on training and answering questions • TRG, webcasts, web portal, CPE provider forum Questions? Email cbizmhmwebinars@cbiz. com 22

Russell Golden – Chairman, FASB • Medium term • Improving the standards – identifying issues • Doing significant research before deciding on a standard • Areas of focus • • • Segments Performance measures Liabilities & equity Income taxes Hedging • Long term • Understanding the future • • • Started a multi-year study Goal of raising awareness and developing a plan Standards should be able to adapt to future business models No plans to address cryptocurrencies Intention to collaborate with IASB to maintain convergence Questions? Email cbizmhmwebinars@cbiz. com 23

TIME FOR A POLL QUESTION AB- DO YOU WANT CPE CREDIT? Yes No Questions? Email cbizmhmwebinars@cbiz. com 24

Hans Hoogervorst – Chairman, IASB • Will we be prepared for the next global financial crisis? • Last global financial crisis occurred 10 years ago • What caused the financial crisis? • Global debt • In 2008, global debt was at it highest level in history (260% of GDP) • Global debt has continued to grow and is currently at 318% of GDP • Why? • Monetary policy has kept interest rates low and made debt cheap • Central banks have been hesitant to raise rates due to high debt levels • Accounting standards were also blamed • Are we headed for another crisis? Questions? Email cbizmhmwebinars@cbiz. com 25

Hans Hoogervorst – Chairman, IASB • Changes made should help with transparency to investors • Are accounting standards appropriate • IFRS standards developed will help prevent another crisis • New standards accelerate the identification and recognition of losses • Financial instruments (IFRS 9) § Improving credit quality risk management processes § Incurred loss model provided the ability to delay recognition of inevitable losses § Expected loss model will accelerate the recognition of losses • Insurance contracts (IFRS 17) § No more up front profit and less earnings management • What is next? • Goodwill – most controversial topic • IASB desires to help investors evaluate the success of acquisitions • Impairment model is generally too little, too late • Acquisition goodwill tends to be masked by enterprise goodwill • Should it be removed from balance sheets? • Should they consider reinstituting an amortization model? • Stay tuned! Questions? Email cbizmhmwebinars@cbiz. com 26

William Duhnke & PCAOB Board • Example of regulatory change • First time all of the Board members attended this conference • All 5 Board members are new • Complete turnover of leadership at the PCAOB • Top priorities • • Firm QC systems Cybersecurity risk Re-inventing the PCAOB Being less opaque and communicating more Questions? Email cbizmhmwebinars@cbiz. com 27

William Duhnke & PCAOB Board • PCAOB Board shared its views and plans • Inspections • Taking a “clean sheet” approach • Looking at how they are conducted, what they look at and how they communicate the results • Short term changes expected • • • Looking at Firm’s QC processes with an emphasis on preventive measures Looking at the QC standards More engagement with audit committee members Reporting – streamline the timeliness and how findings are communicated Creating new role called “Transformation Leader” Focusing on AQIs • New auditing standards • Estimates and fair value – 2018 • Use of other auditors – mid 2019 Questions? Email cbizmhmwebinars@cbiz. com 28

William Duhnke & PCAOB Board • PCAOB Board shared its views and plans • Focus on technology in an audit • Evaluate how issuers and auditors are using technology • Determine if the standards impede the use of technology • Philosophy on enforcement • Essential part of the mission • Last tool or last resort after other efforts have failed • Committed to global engagement • Participating in IFIAR • Joint inspections • Broker dealers stay tuned • Proposed legislation could change jurisdiction Questions? Email cbizmhmwebinars@cbiz. com 29

TIME FOR A POLL QUESTION AB- DO YOU WANT CPE CREDIT? Yes No Questions? Email cbizmhmwebinars@cbiz. com 30

SEC PRACTICE ISSUES Questions? Email cbizmhmwebinars@cbiz. com 31

Highlights from OCA Sagar Teotia, Deputy Chief Accountant: • New Accounting Standards • • Revenue Recognition Leases Credit Losses Income taxes Questions? Email cbizmhmwebinars@cbiz. com 32

Highlights from OCA Marc Panucci, Deputy Chief Accountant: • Auditor’s Reporting Model • Phase 1 complete but Phase 2 will be more challenging (CAMs) • ICFR • Management going beyond view of compliance exercise • Auditor Independence • Digesting comment letters on proposed standard Questions? Email cbizmhmwebinars@cbiz. com 33

TIME FOR A POLL QUESTION DID THE ADOPTION OF TOPIC 606 HAVE AB- A MATERIAL IMPACT ON YOUR FINANCIAL STATEMENTS? Yes No Questions? Email cbizmhmwebinars@cbiz. com 34

Highlights from OCA Jenifer Minke-Girard, Deputy Chief Accountant: • IASB • Materiality • Primary financial statements • IOSCO • Audit quality examining the role of the audit committee Questions? Email cbizmhmwebinars@cbiz. com 35

Technical Accounting Topics • ICFR • Revenue recognition • Leases • Credit losses • Tax reform Questions? Email cbizmhmwebinars@cbiz. com 36

Technical Accounting Topics • ICFR • Evaluation of operating effectiveness • Interplay with risk assessment • Nature, timing, and extent of tests • Persuasiveness of evidence • Evaluation of control deficiencies • Eyes of a prudent official • Potential magnitude • Compensating controls • Material weakness disclosures • Go further than the “what” and explain the “why” Questions? Email cbizmhmwebinars@cbiz. com 37

Technical Accounting Topics • Revenue recognition (Topic 606) • Principal vs Agent • Scenarios in which physical control is never obtained • Identifying performance obligations • Evaluation of highly interdependent or highly interrelated § Two-way dependency • Significant financing component • Purpose of an up-front payment or payment plan if other than financing Questions? Email cbizmhmwebinars@cbiz. com 38

Technical Accounting Topics • Leases • Minimum lease payments • Payments tied to an index • Initial rate or rate at transition? • Costs to put a leased asset into use • Costs to fulfill a lease Questions? Email cbizmhmwebinars@cbiz. com 39

Technical Accounting Topics • Credit losses • Guidance for write-offs at individual loan level or portfolio level • Determining when a loan is uncollectible • LIBOR • Interaction with subsequent events Questions? Email cbizmhmwebinars@cbiz. com 40

Reporting Topics • Brexit • LIBOR • Cybersecurity • Non-GAAP • Revenue Recognition Questions? Email cbizmhmwebinars@cbiz. com 41

Reporting Topics • Brexit • Not expected to impact a significant number of companies • How much supply chain is really flowing through Britain • If impacted: • Risk factors and disclosures should not be boiler plate • Be specific with the way in which this could have a material impact on your business Questions? Email cbizmhmwebinars@cbiz. com 42

TIME FOR A POLL QUESTION DID YOUR COMPANY RECEIVE A COMMENT LETTER IN THE CURRENT YEAR? AB- Yes No Questions? Email cbizmhmwebinars@cbiz. com 43

Reporting Topics • LIBOR • The expectation is that LIBOR will be phased out • Uncertainty about what the new standard will be • If debt and/or hedging is impacted by LIBOR • Read agreements to understand backstop • Conduct an internal risk assessment • Draft disclosure such that investors can understand what the fallout would be for your company Questions? Email cbizmhmwebinars@cbiz. com 44

Reporting Topics • Cybersecurity • SEC is seeing more tailored, less boiler plate disclosure • Don’t lose sight of the controls around cybersecurity breaches • Assess design of the controls and how people outside of the finance function communicate breaches • Be thoughtful about trading practices • Clearly articulate the Board’s role in overseeing this risk Questions? Email cbizmhmwebinars@cbiz. com 45

Reporting Topics • Non-GAAP Measures • Continue to raise the bar regarding quality of information • Importance of properly designed controls • Communicate why the information is useful to investors and why management uses it for decision making • Should not just be a way to show the company in a better light • Board/Audit committee involvement is critical • Biggest area of misuse: • Individually tailored accounting principles Questions? Email cbizmhmwebinars@cbiz. com 46

Reporting Topics • Individually tailored accounting principles • Does the adjustment shift from accrual basis to cash or other modified basis? • Does the adjustment add transactions reflected on another company’s books? • Does the adjustment reflect parts but not all of an accounting principle? • Does the adjustment render the measure inconsistent with the economics or terms of the arrangement? Questions? Email cbizmhmwebinars@cbiz. com 47

Reporting Topics • Revenue Recognition • Comments and focus have largely been in the area of significant judgments • Performance obligations – clear and transparent disclosure of how they were identified • Timing of revenue recognition – point in time vs. over time and measure of progress • Principal vs. agent • Disaggregation of revenue • Continue to improve disclosures • Ongoing monitoring (i. e. areas that may be immaterial) Questions? Email cbizmhmwebinars@cbiz. com 48

Comment Letter Trends • Non-GAAP measures • MD&A • Revenue recognition • Fair value disclosures • State sponsors of terrorism • Intangible assets and goodwill • Acquisitions & business combinations • Income taxes • Segment reporting • Contingencies Questions? Email cbizmhmwebinars@cbiz. com 49

Comment Letter Process • Navigating the comment letter process 50% of registrants reviewed each year Reviewed every 3 years at a minimum More subject to review if filing transactions Focused on significant judgments or disclosure omissions Equal opportunity commenting (not only aggressive stances) MD&A receives the most (most judgment) Monitor current events and how they are impacting your company • Point out materiality early • Take the time to respond • Answer to entire question and reference authoritative guidance • • Questions? Email cbizmhmwebinars@cbiz. com 50

SEC REGULATORY MATTERS Questions? Email cbizmhmwebinars@cbiz. com 51

SEC Rulemaking • Disclosure effectiveness initiative • Considering changes to Rules 3 -05, 3 -10, and 3 -14 • Focus on what is most costly to companies • Goal is to get draft releases out in 2019 • Quarterly reporting requirements • • Is there undo emphasis on short-term thinking? Can the earnings release and 10 -Q be streamlined? Should all companies follow the same reporting cadence? Draft release for comment should be issued shortly Questions? Email cbizmhmwebinars@cbiz. com 52

SEC Rulemaking • Seeking waivers under Rule 3 -13 • SEC’s ability to grant relief to disclosure requirements • Would like to strive to increase transparency of waivers • Most common requests: • • 3 -05 (Financial statements of acquired businesses) 3 -09 (Financial statements of significant subs) 3 -10 (Financial statements of guarantors) 3 -14 (Financial statements of real estate acquisitions Questions? Email cbizmhmwebinars@cbiz. com 53

SEC Rulemaking • Focus on capital formation • Offering more diverse investment opportunities • Expansion of the definition of a smaller reporting company • DUSTR • Streamlining of rules, more clean-up than anything Questions? Email cbizmhmwebinars@cbiz. com 54

SEC Rulemaking • Capital Markets Update • IPOs are generally larger • Strong equity market since election night 2016 • S-1 comments focused on non-GAAP • Divided government • Flattening of the yield curve • Trade war Questions? Email cbizmhmwebinars@cbiz. com 55

FASB Activities Questions? Email cbizmhmwebinars@cbiz. com 56

Effective Dates 2018 2019 2020 Revenue PBEs Others (annual) Others (interim) Financial Instruments Recognition & Measurement PBEs Others (annual) Others (interim) Leases Early adoption PBEs Others (annual) Others (interim) Hedging Early adoption PBEs Others (annual) Others (interim) Early adoption SEC Filers Other PBEs Credit Losses Questions? Email cbizmhmwebinars@cbiz. com 2021 2022 Others 57

Leasing Update – Transition Modified Retrospective: Financial Statements Year ended December 31, 2019 Reported based on: 1 Adjust 2019 2018 2017 Topic 8421 opening retained earnings Alternative Modified Retrospective: W E N Financial Statements Year ended December 31, 2019 Reported based on: 1 Adjust 2019 2018 2017 Topic 842*1 Topic 840 opening retained earnings Questions? Email cbizmhmwebinars@cbiz. com 58

Leasing Update – Lessor Practical Expedient • Combine a lease and nonlease (Topic 606) component if: • Timing and pattern of transfer are the same, and • Lease component would be an operating lease if accounted for separately • Apply the accounting guidance associated with the predominant component Questions? Email cbizmhmwebinars@cbiz. com 59

Leasing Update – Lessor Practical Expedient • Sales Tax • Elect to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price • Excludes taxes on gross receipts of lessor and property taxes • Absent the election a lessor evaluates whether they are the primary obligor of the taxes to decide if the tax amounts are presented gross in the revenues Questions? Email cbizmhmwebinars@cbiz. com 60

Leasing Update – Lessor Changes • Lessor Costs • Lessee payment of costs directly to a third party on behalf of the lessor are excluded from variable payments • Lessee reimbursement of costs to the lessor are included in variable payments • Variable Payments • Variable payments allocated to a nonlease component should be recognized according to the accounting requirements applicable to the nonlease component Questions? Email cbizmhmwebinars@cbiz. com 61

Further Lessor Improvements Coming Soon… • Exception for determining the fair value of the underlying asset if the lessor is not a manufacturer or dealer • Fair value can be cost • Requested by financial institutions and captive finance companies • Depository institutions may present sales-type and direct financing leases as investment activity in the statement of cash flows Questions? Email cbizmhmwebinars@cbiz. com 62

Adoption Process • Pre-adoption controls • • Wo rk w acro ith and ss a ll te train ams Completeness and accuracy Incremental borrowing rate Software solution implementation and data migration Journal entry posting • Post-adoption controls • Disclosure • Criteria for procurement group • Computation controls Questions? Email cbizmhmwebinars@cbiz. com 63

The Incremental Borrowing Rate Challenge The rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. • Rates need to be specific to: • Related currency (foreign operation) • Type of lease • Timing of rate estimates: quarterly? • Example case: Public utility Will banks start to provide some information? Questions? Email cbizmhmwebinars@cbiz. com 64

Practical Application Comments Transition is the worst… Materiality? Communicate, communicate Oral leases? ? Software solutions are not an easy fix Manual processes are common SAB 74 Disclosure Document, document Questions? Email cbizmhmwebinars@cbiz. com 65

TIME FOR A POLL QUESTION ABCD- HAVE YOU EARLY ADOPTED IMPROVEMENTS TO HEDGE ACCOUNTING? Yes I plan to No Not Applicable Questions? Email cbizmhmwebinars@cbiz. com 66

Improvements to Hedging Activities – ASU 2017 -12 • Popular standard for early adoption • Key changes: • Increases eligibility for hedge accounting • Simplify effectiveness testing – Qualitative assessment • Eliminates reporting of ineffectiveness • Eliminates contemporaneous documentation requirement • Allows designation of backup long-haul methods • Adoption advice: • • Discuss the plan and elections with your auditor Train stakeholders Reviewing your hedging system Set a timeline (3 months? ) Questions? Email cbizmhmwebinars@cbiz. com 67

Hedge Accounting SOFR • New permissible benchmark interest rate for hedge accounting: • The overnight index swap (OIS) rate based on the secured overnight financing rate (SOFR) was added as • Effective public business entities fiscal year, including interim therein, after Dec. 15, 2018 • All others annual period one year later • Early application is permitted if improvements to hedging (ASU 2017 -12) are already adopted Board is discussing transition issues Questions? Email cbizmhmwebinars@cbiz. com 68

Hedge Accounting Exposure Draft Coming Soon • Clarifications: • Hedged forecasted transactions and hedged risk are distinct • Hedged risk may change and the company may retain hedge accounting • Designated hedged forecasted transactions should not be designated too broadly • If revised risk results in the hedge no longer being highly effective hedge accounting ceases • Hindsight may be applied in identifying hedging transactions • Must first identify transactions based on original documented hedged risk and it must be related to other risks with insufficient transactions based on the original documented hedged risk Board is discussing the last-of-layer method Questions? Email cbizmhmwebinars@cbiz. com 69

Current Expected Credit Loss (CECL) Model • Improvements • Deferred transition date for private companies • Exclude operating lease receivables • Proposed improvements • • • Accrued interest Recoveries Extensions and inputs impact on contractual term Vintage disclosures Transfers from: • Loans held-for-sale to held-for-investment • Debt securities available-for-sale to held-to-maturity Questions? Email cbizmhmwebinars@cbiz. com 70

Cloud Computing Arrangements • Capitalize implementation costs for hosting arrangements accounted for as a service in the same manner as internal use software • Amortize costs over the non-cancellable term plus renewal options that are reasonably certain to be exercised • Presentation consistent with the service expense • Effective public business entities fiscal year, including interim therein, after Dec. 15, 2019 • All others annual period one year later • Early application is permitted Questions? Email cbizmhmwebinars@cbiz. com 71

Goodwill and Intangible Assets Projects • Extend the private company accounting alternatives to not-for-profits • Invitation to comment regarding: • • Scope and optionality Goodwill amortization period Impairment testing Subsuming certain intangible assets into goodwill Questions? Email cbizmhmwebinars@cbiz. com 72

Other Projects • Disclosure Framework • Taxes • Inventory • Government assistance • • • Insurance contracts (implementation and support) Segments Financial performance reporting Liabilities and equity Simplifications • Consolidations • Cash flows • Debt classification • Disclosure improvements Questions? Email cbizmhmwebinars@cbiz. com 73

PCAOB Activities Questions? Email cbizmhmwebinars@cbiz. com 74

Auditors Reporting • Form AP successes • 37, 000 searches have been performed • Phase 1: Reporting Model – Tenure Disclosure • High compliance • Phase 2: Critical Audit Matters (CAMs) effective for: • Large accelerated filers audits for years ending on or after June 30, 2019 • All others audits for years ending on or after Dec. 15, 2020 Questions? Email cbizmhmwebinars@cbiz. com 75

Critical Audit Matters • Communicated (or required to be communicated) to the audit committee, and • Relate to accounts or disclosures material to the financial statements, and • Involve challenging, subjective, or complex auditor judgement • Scope exceptions for: • Brokers & Dealers • Certain investment companies Questions? Email cbizmhmwebinars@cbiz. com • Benefit plans • Emerging growth companies (ECGs) 76

TIME FOR A POLL QUESTION HAVE YOU HAD A CONVERSATION ABOUT CAMS WITH YOUR AUDITOR? ABCD- Yes Discussion is scheduled No Not Applicable Questions? Email cbizmhmwebinars@cbiz. com 77

Critical Audit Matter Takeaways • CAMs should be of interest to investors and involve significant management judgement • CAMs are not necessarily a subset of critical accounting policies • A significant deficiency is not in and of itself a CAM because it does not relate to the financial statements • Material weaknesses are not addressed directly by the Board because they are already public information Questions? Email cbizmhmwebinars@cbiz. com 78

Critical Audit Matter Takeaways • Dry runs have resulted in good discussions • CAM could be ¾ of a page long • But will be specific (i. e. not “revenue recognition” or “goodwill”) • Seeing around 2 per report in the limited population of dry runs • Common CAMs: • Long revenue cycle estimates • Large Level 3 Investments • Contingencies • Acquisition/Derecognition contracts Questions? Email cbizmhmwebinars@cbiz. com 79

PCAOB Ongoing Activities • Execute on the commitment to improve audit quality • Increase transparency and interaction with stakeholders • Communicate best practices • Key inspection focuses on: • • Systems of quality control Use of technology Auditors reporting model Continued issues with review controls Investor protection is the “North Star” Questions? Email cbizmhmwebinars@cbiz. com 80

PCAOB Enforcement • Priorities • Investigations into significant audit violations • Lack of due professional care or skepticism • Independence • Non-cooperation with inspections and enforcement • Trends • Issues with global network firms (GNF) non-US affiliates • Improper documentation alteration • Engagement quality reviewer compliance Questions? Email cbizmhmwebinars@cbiz. com 81

Other Projects • Strategic Plan Update • Auditing Accounting Estimates, Including Fair Value Measurement • To be recommended to the Board Dec. 20 th • Supervision of Audits Involving Other Auditors • Likely to be addressed in 2019 Keeping Pace with New Technology Questions? Email cbizmhmwebinars@cbiz. com 82

Innovation Questions? Email cbizmhmwebinars@cbiz. com 83

Data Analytics • Data is everywhere and growing, it is affecting everything we • do Impact on auditors • • Visualize risk analysis Potential to analyze 100% of a population Automate analytics But what is the value proposition? • AICPA is looking at modernizing standards • Existing standards do not facilitate adoption Questions? Email cbizmhmwebinars@cbiz. com 84

Emerging Technologies • Novel • Embryonic • Powerful Blockchain could do for transactions between businesses what ERP did for transactions within a business Biggest challenges include: • • Participation Getting people to understand it The speed of development Staying agnostic Questions? Email cbizmhmwebinars@cbiz. com Tar get be quick suc w ces ins to sfu l 85

? QUESTIONS Questions? Email cbizmhmwebinars@cbiz. com 86

If You Enjoyed This Webinar… Upcoming Courses: • 1/10: Fourth Quarter Accounting and Financial Reporting Issues Update • 2/12: Eye on Washington – Quarterly Business Tax Update Recent Publications: • Prepare Your Accounting Year-End Processes for the End of 2018 • Brace for Accounting Challenges if There’s an Infrastructure Boom • Six Questions Tech Companies Should be Asking About Revenue Recognition • FASB Releases Consolidation Relief • How to Make Sure You're in Compliance with the GDPR Questions? Email cbizmhmwebinars@cbiz. com 87

THANK YOU CBIZ & Mayer Hoffman Mc. Cann P. C. cbizmhmwebinars@cbiz. com Questions? Email cbizmhmwebinars@cbiz. com 88