August 19, 2010
New York, N.Y. — New regulations, changing funding environment create audit and tax needs.
Regulatory initiatives enacted in response to the economic downturn, along with changes in the capital markets, pose a number of accounting, audit and tax issues for public companies. EisnerAmper LLP recently expanded its public company practice through a business combination and is uniquely positioned as the nation’s 10th largest auditor of SEC registrants to offer issuers the expertise of a super-regional firm, along with a strong client-centric focus.
“Many recent developments, ranging from the Dodd-Frank Act to the constraints on traditional lending post-recession, have wide-ranging implications for public companies or companies looking to raise capital,” said Michael Breit, co-practice leader of EisnerAmper’s Services to Public Companies. “To assist issuers in responding to these developments, EisnerAmper offers a talented team of partners with national firm experience; broad expertise in U.S. GAAP, IFRS, audit, tax and valuation matters; as well as a sharp focus on serving the needs of middle market clients.”
EisnerAmper offered a number of examples of accounting, audit and tax consequences to public companies or companies looking to raise new capital arising from the current regulatory initiatives and economic landscape:
- The Dodd-Frank Act requires listed companies to have “clawback” policies that provide for recovery of incentive-based executive officer compensation in the event of an accounting restatement due to material noncompliance with financial reporting requirements. The added pressure to ensure the accuracy of reported financial statements is likely to be a further stress on public companies.
- Due to the economic meltdown, many traditional avenues of non-equity financing are no longer available to middle market companies. Bank credit is reportedly tight, while the market for asset securitization is non-existent for many asset classes such as residential and commercial mortgages. Thus, companies requiring capital may need to turn to the equity markets in the form of IPOs, creating new demand for public company independent audit services.
- The move toward increased IPOs by smaller companies may be accelerated by an easing of some regulatory burdens. For example, companies with less than $75 million in market capitalization will no longer need to obtain an opinion on both their financial statements and their internal controls (relaxing the Sarbanes-Oxley Section 404 requirement). This relief from one of the major compliance and cost provisions of SOX may encourage some smaller companies to go public. Uncertainty exists with respect to additional costs, if any, the Dodd-Frank Act will create for traditional lenders and the extent to which those costs will be transferred to debtors, which may narrow the cost of capital between debt and equity.
- Companies are hoarding a record level of cash on their balance sheets, due to the tight credit environment, fears of a double-dip recession, and the recent lack of growth (and thus reduced cash needs) in their businesses. According to some estimates, nonfinancial companies are sitting on $1.8 trillion in cash – the highest level in decades as a percentage of assets. At some point, managements are likely to deploy this cash in the form of M&A transactions to re-start growth and take advantage of the low valuations of attractive acquisition targets. This will result in the need for additional accounting services on the part of both acquirers and acquirees.
EisnerAmper is prepared to help its clients address these and other demands arising from today’s regulatory and market dynamics. The firm was recently formed through a combination of two leading regional accounting firms, Eisner LLP and Amper, Politziner & Mattia LLP, both of which had extensive public company practices. The combination created the leading regional firm in the greater New York metropolitan region. EisnerAmper offers comprehensive accounting and business advisory services for a diverse range of public company clients in such industries as technology, media and entertainment, life sciences and financial services.
“The combination of Eisner’s and Amper’s practices has given our firm an expanded range of professional competencies and a significant talent pool comparable to national firms. Yet, at the same time, we have maintained our traditional focus on serving middle market clients whose needs can be overlooked by larger accounting firms. The public company audit and tax practice is very important to our firm going forward, and we intend to devote substantial resources to meeting the needs of issuers as they cope with a changing regulatory and market environment,” Peter Bible, co-practice leader of EisnerAmper’s Services to Public Companies noted.
About EisnerAmper LLP
EisnerAmper is one of the premier accounting, tax and business advisory firms in the United States and the leading regional firm in the Northeast. EisnerAmper provides a wide array of services to a diverse client base including publicly traded and privately held companies and high net worth individuals and family groups. For more information, please visit EisnerAmper at www.eisneramper.com.