Governance IssuesTM
Volume 2020, No. 3
September 23, 2020
In This Issue
This issue tackles two challenging accounting matters. The first deals with loss contingencies leveraging a recent SEC enforcement action, while the second presents practical questions in determining VIE consolidation. Respond directly to the authors with comments.
Having the right people involved, along with robust controls, is critical in mitigating the risks of material weaknesses, restatements and adverse litigation exposure.
By Ron Kral, CPA, CMA, CGMA
“Hindsight is 20/20” can be a profound statement when it comes to loss contingencies as it is easy to precisely define them once they are settled over time. The statement can also be interpreted that the company should have known something would happen, or that the company made a bad decision in hindsight. In applying this concept to contingencies, the truth almost always surfaces.
By Michael Ussery, CPA
One of the most complicated topics in US accounting is variable interest entities, or VIEs. Even the name conjures up images of flow charts explaining complicated ownership chains of mysterious paper companies. This article provides questions to identify a variable interest and possibly eliminate the applicability of the VIE consolidation model.
Anytime a company has a variable interest in another legal entity, especially a subsidiary, the VIE model should be considered, even before the Voting Interest model. 
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) released a new paper, Blockchain and Internal Control: The COSO Perspective, for using the COSO Internal Control – Integrated Framework (2013) to evaluate risks related to using blockchain for financial reporting and the need for new applicable internal controls over financial reporting (ICFR).
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About Governance IssuesTM
Governance IssuesTM is an electronic newsletter published by Kral Ussery LLC, a public accounting firm delivering advisory services, litigation support and internal audits. The newsletter focuses on our practice areas of SEC compliance, internal controls, IT general controls, risk assessments, IPO readiness, M&A transactions, US GAAP compliance and internal auditing.
Content in this newsletter is for general information purposes only and should not be used as a substitute for professional consultation.
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