CFO Consulting Partners

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CFO Consulting Partners is a proud sponsor of the Philadelphia chapter of the Financial Managers Society (FMS)

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On May 12, 2021 CFO Consulting Partners sponsored a virtual presentation and panel discussion for the Philadelphia chapter of the Financial Managers Society (FMS). The session was entitled: Zeroing In On The New Normal and presented economic, legal/regulatory, and banking industry outlooks for the balance of 2021 and for 2022.

The presenters and panelists were:

Niso Abuaf
Managing Director & Chief Economist
Ramirez & Co.
(212) 378-7124
niso.abuaf@ramirezco.com

Paul Fitzgerald
Vice Chairman
Crown Bank
(908)659-2100
paul.fitzgerald@crownbank.net

Ned Hogan, Esq.
Shareholder
Stevens and Lee
(609)243-6434
ech@stevenslee.com

Eric Segal
Managing Director
CFO Consulting Partners
(609) 309-9307 ext.702
esegal@cfoconsultingpartners.com

Links to presentations:

Economic Outlook // Legal & Regulatory Update //  Banking Environment

ACG Philadelphia Virtual Trivia Night

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This Thursday! Network with your peers and participate in #VirtualTrivia to benefit Fuel the Fight, an organization born out of the #COVID pandemic that uses 100% of donations to buy meals from local restaurants which are delivered to health care workers or others in need.

February 25 at 5pm – Virtual – Open to Members & Non-Members

Sponsored by: Baker Tilly US, Bannockburn Global Forex, CFGI, CFO Consulting Partners, Clear Thinking Group LLC, Fidus Partners, F.N.B. Corporation, Milestone Partners, Murray Devine Valuation Advisors, Stifel Financial Corp., Texas Capital Bank, Troutman Pepper, Value Management Inc., White and Williams LLP

Mark Alvino, CFA, David DeMuth, Hillary Flouris, CPA, Lauren Harrington, Diana Kenneally, Joseph Marchese, Brian McAuley, Michael Miller, Kevin Murray, Brandon Schmoyer, Dimitrios Skambas, Amy Vulpio, Erica Wilson, Kaitlin Wilusz Long, ASA, CFA
Brandon Raphael, Matthew Arden, Shane Carroll, Matthew Cole
Stephanie McAlaine, Jen Simons, Bretany Pilko, Barbara Sredenschek TMA Philadelphia/Wilmington Chapter

#middlemarket #mergersandacquisitions #networking #privateequity #Philadelphia
https://lnkd.in/dnAR76q

Alan Gottlieb and David DeMuth, of First American Title & CFO Consulting Partners, will be moderating the Industrial and Logistics discussion on February 17, 2021.

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Alan Gottlieb and David DeMuth, of First American Title & CFO Consulting Partners, will be moderating the Industrial and Logistics discussion for the spring quarterly meeting on February 17, 2021. There will be three speakers for this discussion:

Tony Grelli, Founding Partner, Velocity Ventures

Matt Nunn, Principal, Trammell Crow Company

Richard Gorodesky, Senior Managing Director, Colliers International

Rob Milrod Appointed Mentor to Barclays Fintech Accelerator Powered by Techstars

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NEW YORK, NY, Feb. 4, 2021 — CFO Consulting Partners LLC, the Financial Management Consulting firm, announces the appointment of Rob Milrod as mentor to the Barclays Fintech Accelerator powered by Techstars. Rob will work with an impressive roster of nine startup founders and teams over three months culminating in an April 2021 demo day. Rob will partner with these early stage companies, as he does with our client base, bringing knowledge, experience, and perspective to financial strategy, planning and infrastructure. “I’m honored to be a mentor for the Barclays Fintech Accelerator powered by Techstars and in awe of the founders joining the 1st class of 2021,” said Rob Milrod, Director at CFO Consulting Partners LLC.

Are Your Clients Ready for The Upcoming Audit?

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Hope you are well, and we wish you a healthy and happy New Year.

Wanted to remind you of our audit readiness service. We can help your clients prepare for your review or audit by providing your clients with a full set of financial statements and supporting workpapers. Click HERE for our one-pager.

By way of a quick overview, we are CFO Consulting Partners, helping small and midsized public and private companies achieve financial success since 2006.

For more information, please email:

The Experts’ Guide to Cost Reduction & Capital Recovery for your Business

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The Talk Show Factory News Network

Cordially invites you to attend an online panel presentation:

The Experts’ Guide to Cost Reduction & Capital Recovery for your Business

On Zoom Video

December 15th, 9:30 AM to 10:45 AM

Who should attend: Business owners and the professionals that represent them.

CLICK HERE TO REGISTER:

The Business Experts’ Guide to Cost Reduction & Capital Recovery, December 15, 2020

Business owners must be more careful than ever to preserve capital and protect bottom lines. Please join us for this important event as our experts provide tactics for businesses to reduce costs.

The impact of recent tax law changes that are opening new opportunities to reduce taxes.

Tax credits that are available to generate working capital.

Cost-reduction strategies to reduce overhead substantially.

Methods to reduce rental costs through lease re-negotiations.

Presenters

Allan Tepper, Sr., Managing Director, CFO Consulting Partners

John Johansen, CPA, ABV, CFP, MBA: TaxFirst

Edward Flanagan, CPA / MBA | Senior Principal Consultant, Expense Reduction Analysts

Kim M. DiGiacomo, Senior Advisor, Stryde Savings/Growth Management Group

Part 3 of 3: Building a Stronger Financial Management Process: The Audit: Don’t Get Scared, Get Organized

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This is the third of a series of three short newsletters on how to stay ahead of finance process issues and prevent these challenges from becoming more significant problems.  Each newsletter has addressed a different aspect of these challenges: Producing Data, Garbage In, Garbage Out, and The Audit: Don’t Get Scared, Get Organized (today’s topic).

As noted in the first two newsletters, a strong finance team is critical to the success of any company.  One of the roles of the finance team is to prepare for and manage the external audit of the company’s financial statements.  Several of the points covered in the previous newsletter, regarding controls over spreadsheets and data management, will also be helpful in preparing for the audit, but we recommend some specific steps below.

Challenge – The External Audit Takes an Inordinate Amount of Time to Complete 

Many companies have experienced this, and it is human nature to blame the auditors, but there is usually more going on here.  Here are some of the symptoms:

  • Documentation requested by the auditors is difficult to locate or does not agree with the accounting records. Documents that do not support recorded amounts are considered errors by the auditors, so they need to expand their testing and the expanded testing often finds more errors.
  • The audit takes much longer than planned, so accounting firm staff are reallocated to other commitments and replaced by staff new to the audit.
  • Once problems start Auditors are no longer committed to deliverable dates and are reluctant to commit to new dates, audit cost overruns become obvious and a sore point in the relationship with the auditors.
  • Audit fatigue sets in on both sides and it becomes very difficult to manage the process.

Action Plan, Step One – Prepare Well in Advance for the Audit

  • Review issues experienced in the prior audit and take steps to correct them before the audit begins.  If certain transactions, or a class of transactions, have been challenging to audit in the past, or are new to the company, consider performing an ‘internal audit’ of those transactions so the issues with their documentation can be addressed before the audit begins.
  • Request a detailed timeline from the external auditors that includes key deliverables to and from them.  Last year’s listing of schedules ‘Prepared by Client’ is a good place to start.
  • If the audit includes multiple locations, make sure the reporting from the auditors at the other locations to the auditors in the center is included.  The auditors at the center, particularly at the staff level, may not see this as ‘their problem.’

Action Plan, Step Two – Proactively Manage the Audit

  • Insist on frequent (and brief) meetings between key audit firm and company personnel to assess progress.  These meetings should be more often than once a week during the “heat” of the audit, daily 15 minute ‘stand-up’ meetings are a good idea during this period.
  • The objective of these meetings is to timely find and address issues (e.g., exactly who is to give what to whom).
  • On a weekly basis these meetings should seek to reaffirm that all parties remain committed to the ultimate deliverable of a signed audit opinion on the required date.  Auditors may be reluctant to raise a concern about timing of completion in these meetings, as it can be a difficult conversation, but it is important to identify any potential problem early so it can be addressed.

Conclusion

A Company can achieve an effective and efficient audit by starting to plan well in advance of when the audit work is to be done and proactively managing the process from start to finish.

SEC Modernizes Disclosure for Banking Registrants

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Announcement of Final Rule

On September 11, 2020, the Securities and Exchange Commission announced that it has adopted rules to update and expand the statistical disclosures that bank and savings and loan registrants provide to investors, in light of changes in this sector over the past 30 years. The rules also eliminate certain disclosure items that are duplicative of other Commission rules and requirements of U.S. GAAP or IFRS. The rules replace Industry Guide 3, Statistical Disclosure by Bank Holding Companies (Guide 3), with updated disclosure requirements in a new Subpart 1400 of Regulation S-K (Subpart 1400). SEC Chairman Jay Clayton said “Guide 3 has not been substantively updated for more than 30 years. The changes we are adopting today are designed to elicit better disclosures for investors and add efficiencies to the compliance efforts of registrants.”  (https://www.sec.gov/news/press-release/2020-205)

Modernization of Statistical Disclosures for Bank and Savings and Loan Registrants

The rules update the disclosures that investors receive and eliminate overlap with Commission rules, U.S. GAAP or IFRS. The updated statistical disclosure requirements are codified as a new Subpart 1400 of Regulation S-K and Industry Guide 3, Statistical Disclosure by Bank Holding Companies is rescinded.

Disclosure Requirements

The Commission’s rules require disclosure about the following:

  • Distribution of assets, liabilities and stockholders’ equity, the related interest income and expense, and interest rates and interest differential (Average Balance, Interest and Yield/Rate Analysis and Rate/Volume Analysis)
  • Weighted average yield of investments in debt securities by maturity
  • Maturity analysis of the loan portfolio including the amounts that have predetermined interest rates and floating or adjustable interest rates
  • Certain credit ratios and the discussion of the factors which explain material changes in the ratios, or their related components during the periods presented
  • The allowance for credit losses by loan category
  • Bank deposits including average amounts and rate paid and amounts that are uninsured

A detailed discussion of the changes to each of the disclosure requirements follows in Appendix A.

Applicability

The new rules apply to bank and savings and loan registrants. Guide 3, by its terms, applied to bank holding companies but was widely adopted by savings and loan holding companies and other registrants with material lending and deposit gathering activities.

The rules apply to domestic registrants, including Regulation A issuers, and to foreign registrants. The disclosure requirements are linked to categories or classes of financial instruments disclosed in the registrant’s U.S. GAAP or IFRS financial statements, aligning the reporting period statistical disclosure requirements with those required to be presented in the financial statements, and explicitly exempting IFRS registrants from certain of the disclosure requirements that are not applicable under IFRS.

Impact of Changes

Significant new disclosures include weighted average yield of debt investment securities by maturity, maturity analysis of loan portfolios, expanded credit ratios and factors explaining changes in those ratios and uninsured time deposits including a breakdown by maturity. Certain ratios required in Guide 3 (return on assets, return on equity, dividend payout, and equity to assets) are eliminated from Subpart 1400 but are likely to continue. These ratios are not unique to bank and savings and loan registrants, and the Commission’s guidance on MD&A already requires registrants to identify and discuss key performance measures when they are used to manage the business and would be material to investors.

Location of Disclosure Requirements and XBRL

Consistent with existing Guide 3, the disclosures of new Subpart 1400 are not required to be presented in the notes to the financial statements. Therefore, if disclosures are provided outside the financial statements, for instance in the MD&A sections, the disclosures would not be required to be audited, nor would they be subject to the Commission’s requirement to file financial statements in a machine-readable format using XBRL.

What’s Next?

The rules will be effective 30 days after publication in the Federal Register and will apply to fiscal years ending on or after December 15, 2021. Voluntary compliance with the new rules will be accepted in advance of the mandatory compliance date however the new rules must be adopted in their entirety. Guide 3 will be rescinded effective January 1, 2023.

Notice to Readers

This publication has been carefully prepared, but it necessarily contains information in summary form and is therefore intended for general guidance only; it is not intended to be a substitute for detailed research or the exercise of professional judgment. The information presented in this publication should not be construed as legal, tax, accounting, or any other professional advice or service. CFO Consulting Partners LLC can accept no responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. You should consult with professional advisors familiar with your factual situation for advice concerning specific audit, tax or other matters before making any decisions.

 

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Appendix A: SEC Modernizes Disclosure for Banking Registrants 

– Outline of Requirements of Subpart 1400 of Regulation S-K

 

Distribution of Assets, Liabilities and Stockholders’ Equity; Interest Rate and Interest Differential (Average Balance, Interest and Yield/Rate Analysis and Rate/Volume Analysis)

Item 1402 of Regulation S-K:

  • Codifies all of the average balance sheet, interest and yield/rate analysis and rate/volume analysis disclosure items currently in Item I of Guide 3
  • Requires segregation of domestic and foreign activities, if applicable
  • The categories enumerated in Item 1402(a) must be included, if material
  • Additionally, registrants are required to separate (1) federal funds sold from securities purchased with agreements to resell and (2) federal funds purchased from securities sold under agreements to repurchase and to disaggregate commercial paper, if material.

Investment Portfolio

Item 1403 of Regulation S-K:

  • Codifies the requirement to disclose weighted average yield for each range of maturities by category of debt securities required to be disclosed in the registrant’s U.S. GAAP or IFRS financial statements
  • Applies to debt securities that are not carried at fair value through earnings.
  • Eliminates requirement for certain disclosure items in Item II of Guide 3 as these items substantially overlap with U.S. GAAP and IFRS disclosure requirements:
    • book value information
    • the maturity analysis of book value information
    • the disclosures  related to investments exceeding 10% of stockholders’ equity

Loan Portfolio

Item 1404 of Regulation S-K:

  • Item 1404(a):
    • Codifies the requirement to disclose the maturity by loan category disclosure currently called for by Item III.B of Guide 3, with the loan categories based on the categories required by U.S. GAAP or IFRS in the financial statements
    • Requires additional maturity categories to provide investors with sufficient information on the potential interest rate risk associated with the loans in the portfolio
    • Codifies the existing Guide 3 instruction stating the determination of maturities should be based on contractual terms
    • Also codifies the language, as proposed, regarding the “rollover policy” for these disclosures
    • To the extent non-contractual rollovers or extensions are included for purposes of measuring the allowance for credit losses under U.S. GAAP or IFRS, such non-contractual rollovers or extensions should be included for purposes of the maturities classification and the policy should be briefly disclosed
  • Item 1404(b):
    • Codifies the disclosure items in Item III.B of Guide 3 regarding the total amount of loans due after one year that have (a) predetermined interest rates or (b) floating or adjustable interest rates
    • Specifies that this disclosure should also be disaggregated by the loan categories disclosed in the registrant’s U.S. GAAP or IFRS financial statements to promote consistency of loan portfolio disclosures throughout a registrant’s filing, and elicit trend information about interest income and potential interest rate risk
    • The final rules require additional maturity categories (1) after five years through 15 years, and (2) after 15 years
    • The additional maturity categories
      • o    will elicit more decision-relevant information for investors by capturing the maturity periods of commonly offered residential mortgage loan products, such as 15-year and 30-year residential mortgages
      • o   residential mortgage loans would no longer be classified in a single maturity category
      • o   the loans would move through the maturity categories until they are paid off or sold, such that over time, even 30-year residential mortgage loans would migrate into different maturity categories
      • Eliminates the loan category disclosure items in Item III.A of Guide 3, the loan portfolio risk element disclosure items in Item III.C, or the other interest bearing asset disclosure items in Item III.D

Allowance for Credit Losses

Item 1405 of Regulation S-X:

  • Disclosure of the ratio of net charge-offs during the period to average loans outstanding based on the loan categories required to be disclosed in the registrant’s U.S. GAAP or IFRS financial statements, instead of on a consolidated basis as called for by Guide 3
  • Requires disclosure of the following new credit ratios on a consolidated basis, along with each of the components used in their calculation:
    • (1) Allowance for Credit Losses to Total Loans
    • (2) Nonaccrual Loans to Total Loans
    • (3) Allowance for Credit Losses to Nonaccrual Loans.
    • (4) Discussion of the factors that drove material changes in the ratios, or related components, during the periods presented
  • IFRS registrants are not required to disclose the ratio of nonaccrual loans to total loans or the allowance for credit losses to nonaccrual loans, as there is no concept of nonaccrual loans in IFRS
  • Requires registrants to provide the tabular allocation of the allowance disclosure called for by Item IV.B of Guide 3, except that the allocation would be based on the loan categories presented in the U.S. GAAP financial statements, instead of the loan categories specified in Item IV.B of Guide 3

Deposits

Item 1406 of Regulation S-X:

  • Codifies the majority of the disclosure items in Item V of Guide 3, with some revisions
  • Defines uninsured deposits for bank and savings and loan registrants that are U.S. federally insured depository institutions as the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit or similar state deposit insurance regimes and amounts in any other uninsured investment or deposit accounts that are classified as deposits and not subject to any federal or state deposit insurance regimes
  • Requires foreign bank and savings and loan registrants to disclose the definition of uninsured deposits appropriate for their country of domicile
  • The rules require disclosure of:
    • (1) U.S. time deposits in excess of the FDIC insurance limit
    • (2) time deposits that are otherwise uninsured by time remaining until maturity of: (A) three months or less; (B) over three through six 57 months; (C) over six through 12 months; and (D) over 12 months

Certain Existing Guide 3 Disclosures That Are Not Codified in Subpart 1400 of Regulation S-K

  1. A. Return on Equity and Assets – Item VI of Guide 3 calls for disclosure of four specific ratios for each reported period, including return on assets, return on equity, a dividend payout ratio, and an equity to assets ratio. The requirement to disclose these ratios is not included in Subpart 1400 as these ratios are not unique to bank and savings and loan registrants, and the Commission’s guidance on MD&A already requires registrants to identify and discuss key performance measures when they are used to manage the business and would be material to investors.
  2. B. Short Term Borrowings The new rules do not codify the short-term borrowing disclosure items in Item VII of Guide 3 in their current form. Instead, Item 1402 of Regulation S-K codifies the average balance and related average rate paid for each major category of interest-bearing liability disclosures currently called for by Item I.B.1 and I.B.3 of Guide 3, and requires disaggregation of the major categories of interest-bearing liabilities to include those referenced in Item VII of Guide 3 and Article 9 of Regulation S-X. Other existing disclosure items in Item VII are not included as they are substantially covered by existing Commission rules and the financial statement requirements.

Written by CFOCP Director, Larry Davis (ldavis@cfoconsultingpartners.com)

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