Perspectives
On the latest topics, articles and standards

Overview
A Special Purpose Acquisition Company (SPAC) exists solely for taking another company public. In a SPAC transaction, the private company becomes publicly traded by merging with a listed shell company—the SPAC. These entities are commonly referred to as “blank check” companies as they have no commercial operations. A SPAC is typically sponsored by a team with industry expertise and connections with fundamental investors focusing on the industry segment targeted by the SPAC. The sponsor forms the SPAC and provides seed capital that will be used by the SPAC to pay expenses until it engages in a merger with an operating company (referred to as a de-SPACing event). The sponsor receives equity that is referred to as founder shares. The SPAC also raises capital through an initial public offering (IPO) and the proceeds of the IPO are also placed in a trust and are only released upon consummation of a de-SPACing transaction.
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Overview
What is a SPAC?
A special purpose acquisition company (SPAC), also referred to as a blank-check company, is a publicly traded firm with no operations and a large sum of capital with the sole purpose of purchasing a privately held company. As a way to incentivize capital infusion, SPAC’s will typically offer investors shares of common stock and warrants to purchase additional stock at a later date with the hope that the stock price will rise once the company goes public. Once the company or target is purchased, it becomes a public company and must take over the related accounting and reporting responsibilities, including accounting for the warrants. SPACs have grown in popularity as of late; we have seen more than 500 SPACs filed in 2021, already exceeding the total for all of 2020.
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FASB Release No. 2016-13; (Issue Date: June 16, 2016)
Link to Release: FASB Release No. 2016-13
Overview
On June 16, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Measurement of Credit Losses on Financial Instruments, which introduces Current Expected Credit Losses (CECL). The update is effective beginning January 2023 for non-SEC filers, smaller reporting companies and privately held companies.
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Overview
On February 25, 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2016-02 – Leases (“ASU 2016-02”) that was codified in Accounting Standards Codification 842 – Leases (“ASC 842”). From a lessee perspective, ASC 842 lets companies recognize expenses on their income statement in a manner consistent with previous guidance. However, operating leases must now be recorded on the balance sheet as a right-of-use (“ROU”) asset with an associated lease liability, which are measured at the present value of remaining lease payments.
As a result of the challenges associated with COVID-19, the FASB issued Accounting Standards Update 2020-05 – Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842) (“ASU 2020-05”) which allowed private companies to defer once again implementing ASC 842 until fiscal years beginning after December 15, 2021. While this creates a delay in having to adopt the standard, the importance of developing an implementation strategy sooner rather than later cannot be understated. As public companies and early adopters have emerged from the many challenges associated with adopting the new lease standard, along with the introduction of leasing software to improve contract management in addition to driving compliance efficiently, they have provided a roadmap to help private companies ease their transition.
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Overview
Over the last year of the COVID-19 pandemic, business resilience has been tested unlike ever before. As we inevitably move into the second year of this crisis, C-Suite level executives need to assume responsibility for ensuring that their organizations can mitigate risk factors and continue to operate through this unprecedented time. Reviewing the stability of a company’s critical business processes and underlying systems can help companies determine whether proper safeguards are in place to mitigate common operational risks.
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Overview
The accounting treatment for internal-use software costs can be confusing. Amidst the growing number of software applications moving to subscription-based cloud solutions, it is important to understand the accounting treatment of the arrangement. Also, certain costs related to software that is 1) obtained or developed for internal-use, 2) sold, leased, or marketed, and 3) used in connection with Cloud Computing Arrangement (“CCA”), can be capitalized. Specific accounting guidance and criteria exist to address which of these costs can be capitalized. In this whitepaper, we will be focusing in how to appropriately account for a CCA and the capitalization criteria for costs incurred in connection with the CCA.
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Overview
It has been over 18 years since the Sarbanes-Oxley Act of 2002 (“SOX”) created the Public Company Accounting Oversight Board (“PCAOB”) to oversee the Accounting industry. During that time, the PCAOB has issued multiple Accounting Standards to guide the work performed by external audit firms. From 2004 – 2006, Auditing Standard No. 2 (AS 2) “established the requirements and provided directions that apply when an auditor is engaged to audit both a company’s financial statements and management’s assessment of the effectiveness of internal control over financial reporting.” In 2007, Auditing Standard No. 5 (AS 5) superseded AS 2, providing a more “top-down” risk-based approach to the audit of internal control. Throughout the years, one definition in the SOX landscape has remained consistent. Specifically, an external audit’s opinion related to the effectiveness of internal control over financial reporting includes the words “reasonable assurance.”
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SEC Release Nos. 33-10751; 34-88094; FR-87 (Issue Date: January 30, 2020)
Link to Guidance: Release Nos. 33-10751; 34-88094; FR-87
Link to Proposed Rule: Release Nos. 33-10750; 34-88093; IC-33795; File No. S7-01-20
Overview
In recent years, the Securities and Exchange Commission (SEC) has sought to update disclosure requirements for registrants. Here, we provide a summary and insights related to these updates, with a focus on the recently issued Release Nos. 33-10751; 34-88094; FR-87 in January 2020, in addition to the Proposed rule Release No. 33-10750; 34-88093; IC-33795; File No. S7-01-20.
The SEC issued this update (Release Nos. 33-10751; 34-88094; FR-87) to bring further clarity to the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) by providing guidance on key performance indicators and metrics.
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SEC Release No. 34-88318; (Issue Date: March 4, 2020)
Link to Rule: SEC Release No. 34-88318
Overview
COVID-19 is a global issue that is not only significantly impacting business and consumer activity but will also impact upcoming financial reporting and disclosure requirements. Given the current market conditions and concerns about the growing pandemic, the coming months are likely to be particularly challenging from an accounting and reporting perspective for many companies and may present challenges in meeting certain of their obligations under the federal securities laws in a timely manner. In response to this, the Securities and Exchange Commission (SEC) released Order 34-88318 on March 4, 2020. This order grants registrants impacted by COVID-19 the period from and including March 1, 2020 to April 30, 2020 an extra 45 days to file their financial statements.
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Building a Hierarchy of Detail
In the last article (click here to view), we discussed how to begin the process of escaping the Data Bottleneck. Again, what we mean by the Data Bottleneck is the twofold challenge of:
- Timeliness – Not having access to data fast enough – the data request process is slow and drawn out
- Completeness – Not having enough of the data you need – or, incomplete datasets
Part 1 explained how to build the foundation. Clear communication and collaboration are integral to developing a common understanding of the data needs of your business. Taking the time to define your data environment is crucial to creating a proactive data analysis environment, rather than one that is reactive. Finally, we discussed how being strategic in how the data is modeled will increase efficiency and allow for cross referencing.
Now that the foundation has been set, what can you do with your data?
You can start by building a: Hierarchy of Detail
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Communication and Foundation Building
We are collecting and analyzing more data than ever. Companies count on it to derive real insight and create strategic plans for their business. There are dozens of tools and platforms available that will meet any company’s needs, however, many will struggle with the process of rationalizing and operationalizing their data environment.
- “How is it that we collected all this data, invested in a Business Intelligence (BI) tool, and yet I do not feel I truly know how the sales team is performing?”
- “I am spending so much time scanning through data before I can get anything valuable out of it. Then, I am constantly using VLOOKUP’s to combine other datasets. This takes up way too much of my day.”
- “I need to have the TPS report on my desk by this afternoon, but the report request has been taking forever! So, if you could find solution… that would be great.”
Do you feel the same way, or ask some of the same questions yourself?
This is the result of the dreaded…Data Bottleneck
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Overview
The biopharmaceutical industry and interrelated biotechnology organizations focus on medicines and drugs formulated by biological processes of living organisms. These organizations operate within a heavily regulated environment and face many operational challenges during periods of research and development through commercialization of products. The pharmaceutical development process is highly complex, requiring superior operational focus to address risks and navigate regulatory processes.
In addition to the robust focus on operations, these businesses must also focus on raising capital, collaborating with other organizations and, as the business matures, merger and acquisition related activities and perhaps going public through an initial public offering. The necessary management focus extends well beyond science and operational project matters. Specifically, finance and accounting matters also bring a unique set of challenges. In order to be successful in both the near-term and long-term, businesses must be supported by a strong accounting and finance structure to allow the business to continue to focus on operational aspects without undue distraction.
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Overview
In accordance with the Sarbanes-Oxley Act of 2002, the Division of Corporate Finance (DCF) of the Securities and Exchange Commission (SEC) is required to review each SEC registrant at least once every three years. The DCF uses judgment in determining the frequency and rigor of this review, the latter of which may include a complete cover-to-cover review, a financial statement review, or a targeted review based on a particular industry issue or a new accounting standard. When issuing comments to a company, the DCF may request that a company provide additional information so the staff can better understand the company’s disclosures, revise disclosures in a document that has been filed with the SEC, or provide additional or comparatively different disclosure(s) in a future filing with the SEC. This may result in an iterative review process with multiple rounds of comments from the SEC staff and responses from the filer until the issues, identified in the review, have been fully resolved.
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FASB Accounting Standards Codification 842 (Issue Date: February 2016)
Link to Standard: Update No. 2016-02
Overview
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842), which replaced Accounting Standards Codification (ASC) 840. The two most impactful parts of this new standard is the classification criteria for operating and financing leases for lessees, and the treatment of operating leases on the balance sheet. Public entities must start reporting leases under ASC 842 in fiscal years beginning after December 15, 2018; all other entities have an additional year to conform. For more information on the financial statement impact of the new standard, please see Fidato Partners’ whitepaper entitled Leases (Topic 842) Targeted Improvements –Modified Retrospective Transition Method.

SEC Final Rules: (Issue Date: June 2018)
Link to Rule: Release Nos. 33-10513; 34-83550
Overview
The Securities and Exchange Commission (“SEC”) released its final ruling Release Nos. 33-10513; 34-83550, Smaller Reporting Company Definition, in June 2018.
The ruling amended the definition of a Smaller Reporting Company (“SRC”). The intended effect is to expand the number of companies that can benefit from reduced disclosures that are available to SRCs, thus promoting capital formation and the reduction of compliance costs. The SEC estimates that 966 additional registrants will be eligible for SRC status in the first year under the new definition. The previous and new definitions are summarized below.
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FASB Accounting Standards Update No. 2018-15 (Issue Date: August 2018)
Link to Standard: Update No. 2018-15
Overview
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, in August 2018.
This update addresses the diversity in practice and aligns the requirements for capitalizing implementation costs incurred in a service contract hosting arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.
Accordingly, the amendments in this Update require an entity that is a customer in a service contract hosting arrangement to follow the guidance in Subtopic 350-40, Internal Use Software, to determine which implementation costs to capitalize and which costs to expense.

Overview
The Project Management Body of Knowledge (“PMBOK”) defines project risk management as the process of conducting risk management planning, identification analysis, response planning, and controlling risk on a project (PMI, 2016). The objectives of project risk management are to increase the likelihood and impact of positive events and decrease the likelihood and impact of negative events in a project. Effective risk management strategies allow companies to identify the project’s strengths, weaknesses, opportunities, and threats. By planning for expected or unexpected events, companies can be ready to react appropriately (e.g. mitigate negative risk or capitalize on positive risk) when such events occur during the project lifecycle.
To ensure the success of a project, it is important to define how organizations manage potential risks which may arise during the course of the project and whether companies decide to transfer, accept, or work around the risk. Achieving a project’s goals depends heavily upon risk management being implemented, incorporated, and analyzed throughout the lifecycle of the project.

Overview
Big data and data analytics are becoming ever more prevalent in today’s business environment. Firmsare beginning to realize the value in their data and the benefits derived from its analysis. Nearly half of all executives surveyed in the 2017 Newvantage Partners Big Data Executive Survey indicated that they decreased expenses as a direct result of their investments in big data (Bean, 2017). Many firms currently use big data/analytics for informed decision making and improved operations efficiency. However, with these innovations, the question of who should own and govern data-driven analytics has arisen. In a recent survey, Grant Thornton found that 89% of those surveyed believed that the CFO of the future will require much stronger data analytics skills (Sachdev, 2018). Likewise, according to the EY and Forbes Insights’ Survey, in the past five years, 50% of CFOs have increased time and monetary resources devoted to analytics in hopes of providing more valuable information for the CEO and senior management (EY-Global, 2018). Given that finance is usually the driver of analytics-based innovations, this presents a strong case for conceding ownership of analytics to the CFO.

FASB Accounting Standards Update No. 2018-11 (Issue Date: July 2018)
Link to Standard: Update No. 2018-11
Overview
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-11, Leases (Topic 842) Targeted Improvements, in July 2018.
This update permits entities to use an optional transition method to Accounting Standards Codification (ASC) 842. The optional transition method allows an entity to continue to use guidance from ASC 840 in the comparative periods presented in adoption year of ASC 842. The optional election allows entities to implement the new lease standards of ASC 842 using an easier modified method to comparative financial statements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the adoption year. This approach is thought to provide relief to adopters by simplifying the comparative reporting requirements presented in ASC 842, which would require entities to adjust all lease standard changes in the earliest period presented on their respective financial statements instead of a cumulative adjustment in the period of adoption.
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FASB Accounting Standards Update No. 2018-13 (Issue Date: August 2018)
Link to Standard: Update No. 2018-13
Overview
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, in August 2018.
This update is part of the FASB’s overall disclosure framework project, which is primarily focused on improving the effectiveness of required Generally Accepted Accounting Principles (GAAP) disclosures for users of the financial statements. The update modifies required fair value disclosures related primarily to level 3 investments. In their endeavor to improve disclosure quality, Topic 820 has been revised by removing, modifying and adding certain requirements. This ASU applies to all entities that are required to provide disclosures about recurring or nonrecurring fair value measurements. Non-public companies are exempt from certain existing and revised requirements of the standard.
ASU 2018-13 eliminates disclosures that the FASB believed were too heavily reliant on subjective information that may have been misinterpreted, and strengthens existing disclosures to provide financial statement users with a firmer understanding surrounding the estimates and assumptions used in valuations.
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FASB Accounting Standards Update No. 2018-01 (Issue Date: January 2018)
Link to Standard: Update No. 2018-01
Overview
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-01, Land Easement Practical Expedient for Transition to Topic 842, in January 2018.
To assist entities with the transition to the new standard, the FASB issued a practical expedient for existing or expired easements not previously accounted for as leases under ASC 840. This update provides entities with the option to not evaluate existing or expired land easements under ASC 842 that were not previously accounted for as leases under current lease guidance in ASC 840. If an entity chooses to elect the optional practical expedient for transition, it will begin evaluating new or modified land easements under ASC 842 at the time of adoption. Conversely, if an entity does not elect this practical expedient, it will need to evaluate all existing or expiring land easements to determine whether they meet the definition of a lease.
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FASB Accounting Standards Update No. 2017-08 (Issue Date: March 2017)
Link to Standard: Update No. 2017-08
Overview
The amendments in this Accounting Standards Update (ASU) shorten the amortization period for certain callable debt securities held at a premium. The guidance now requires the premium to be amortized to the earliest call date. Under prior guidance, entities generally amortized the premium as an adjustment of yield over the contractual life of the instrument. The new guidance does not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity.
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FASB Accounting Standards Update No. 2018-02 (Issue Date: February 2018)
Link to Standard: Update No. 2018-02
Overview
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, in February 2018.
This update permits entities to reclassify the stranded tax effects caused by the Tax Cuts and Jobs Act from accumulated other comprehensive income (AOCI) to retained earnings. The FASB describes these stranded tax effects as items within AOCI that do not properly reflect the appropriate tax rate, which are caused by the adjustment of deferred taxes due to the reduction of the corporate income tax rate being included in income from continuing operations.
Under the new guidance, if a company elects to reclassify the tax effects from AOCI to retained earnings, the reclassification amount will include the following:
- The effect of the change in the U.S federal corporate income tax rate on the gross deferred tax
amounts and related valuation allowances at the date of enactment of the Tax Cuts and Jobs Act
related to items remaining in AOCI. - Other income tax effects of the Tax Cuts and Jobs Act on items remaining in AOCI that an entity elects
to reclassify.
Excluded from this reclassification amount is the effect of the change in the U.S. federal corporate income tax rate on gross valuation allowances that were originally recorded in income from continuing operations.
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FASB Accounting Standards Update No. 2017-07 (Issue Date: March 2017)
Link to Standard: Update No. 2017-07
Overview
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-07, Improving the Presentation of Net Period Pension Cost and Net Periodic Postretirement Benefit Cost, in March 2017.
This update changes the guidance for employers that sponsor employee defined benefit pensions as well as other postretirement benefit plans. Under the new guidance, employers will be required to present the service cost component of net periodic benefit costs separate from the other components. Service cost is the only component of net benefit cost that originates exclusively from an employee’s service to the company during the current period. Therefore, this component will be presented in the same line as other employee compensation costs that arise from services rendered. Other components will be presented separately and outside of any operating income subtotal. Additionally, while the service cost component is still eligible for capitalization, these other components will no longer be eligible for that treatment.
The change is mainly driven by the FASB’s belief that presenting pension costs in this manner will provide stakeholders with a better quality of information. This will make it easier for financial statement users to determine the costs arising from services rendered in the period from costs relating to the other components of net benefit costs. Additionally, it will make it easier for users to compare the service costs across companies that have pension plans as well as compare the other components that are driven more by interest, return on assets and amortizations.
It is worth noting that if presented, gross profit, gross margin, and operating income may change significantly for some companies as a result of adoption.
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