AICPA to Set Best Practice for Cheap Stocks

Three years after the project was initiated, the American Institute of Certified Public Accountants is now preparing to develop a report on best practices for addressing the practice of a company issuing cheap stock to its employees in the period just preceding an IPO.

The SEC had requested the Institute address this issue, but the guidelines had been delayed due to disagreements among task force members. "The staff had high hopes this could lead to useful guidance addressing issues that preparers, auditors, and regulators face on a daily basis with respect to accounting for cheap stock. Unfortunately, that project has lacked leadership and has not shown any progress in the last year," wrote Lynn Turner, former chief accountant at the SEC in a letter to Arleen Thomas, V.P. of Professional Services and Standards at the AICPA.

Larry Dodyk, a partner at PricewaterhouseCoopers, is optimistic about the development of a best practices guide. "Right now there's not a lot of places to go in the literature to deal with this," he said. Companies typically have to rely on valuations done at the time of financing rounds while a company is private. This information, which is very subjective, then becomes the basis for the SEC's examination of whether stock issued to employees was overly discounted.

Reviewing filings will be a much easier job for the SEC if a best practices guide becomes available. The task force is due to begin meeting next month.

You may like these other stories...

An examination initiative launched by the US Securities and Exchange Commission (SEC) earlier this week will enable the agency to evaluate whether municipal advisors are complying with new SEC rules that went into effect...
Bipartisan Cooperation on Tax Refund FraudAs noted in Politico, Senators Wyden and Hatch have introduced a tax refund fraud bill. According to a summary from Senator Hatch's office, the bill would enhance "the...
There’s a way for investors to brave the world beyond stocks and bonds of a traditional Individual retirement arrangement (IRA) and venture into real estate, tax liens, unregistered securities and so on. Their avenue...

Already a member? log in here.

Upcoming CPE Webinars

Aug 26
This webcast will include discussions of recently issued, commonly-applicable Accounting Standards Updates for non-public, non-governmental entities.
Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.