By Robert Miller, CPA, CFE
Samet & Company, PC

With the effective date for the new revenue standard fast approaching, many private companies have still not taken important steps towards implementation. Time is running out as the private company implementation date draws closer and some entities may be surprised to learn that the effort to implement the new model is more involved than they might have imagined.

In May 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, codified as Accounting Standards Codification (ASC) 606. This sweeping new revenue standard changes the entire model for recognizing revenues from arrangements with customers, introducing a new five-step model. The effective date for non-public entities is any fiscal year beginning after December 15, 2018.

Companies must consider and resolve important questions: What systems are in place to capture the new accounting, reporting and disclosure requirements? Are there customer arrangements that have a variable consideration component? Which of the two acceptable methods for calculating transaction price will be most appropriate? How will assessments be made to determine whether to recognize performance obligations at a point in time versus over time? What adoption method will be most appropriate? These are just some of the questions that must be considered by all entities as they implement the new revenue standard.

Auditors are also paying close attention to the implementation of ASC 606, and will themselves be focused on designing procedures to properly test the elements within the new revenue recognition model, in addition to implementation of the standard by their audit clients.

Companies will find that it is generally beneficial to have a preliminary discussion with their auditor regarding the approach in the first year of implementation and beyond. This will almost certainly eliminate certain potential surprises later on. Items that should be discussed include:

• The approach for documenting implementation of ASC 606, including the new five-step model
• The accuracy of any data used, and the approach for compiling that data to support first year reported amounts and disclosures
• The controls and process for ensuring that revenues are being properly captured and recognized under the new model
• Any assumptions by management and the supporting evidence or reasoning behind those assumptions
• Important management representations that are likely to be required

All entities within the scope of ASC 606 will need to develop a plan for implementation and document how they are applying the new standard, regardless of the level of impact. At a minimum, there are expanded disclosure requirements for all entities. Additionally, many entities that have already adopted ASC 606 found that changes to existing systems were necessary in many cases. An initial assessment of the impact of the new standard is critical to gain an understanding of what might be involved to implement.

So what should private companies who have not yet taken action do? Here are some important steps to follow:
• Designate a Champion – Identify and assign an individual to lead the implementation project
• Develop an Implementation Plan – A solid implementation plan should cover several areas, including technical accounting impact, processes and internal controls, IT and data needs, and training, among other areas
• Document – Document the application of the standard to specific types of customer contracts
• Make Changes to Systems – Implement any necessary system changes to ensure information necessary for proper reporting is captured and tracked
• Capture Information Necessary for Implementation – Complete any analyses and calculations needed to properly support amounts and disclosures on the date of adoption

An important first step is to contact your accounting firm. Your audit partner is often management’s best resource. An initial discussion about how the new ASC 606 model is likely to affect your business can be worth its weight in gold. While the clock continues to tick for many companies that have not yet begun the process of evaluating the impact of ASC 606, there is still time to avoid unwanted surprises. The key is to take that first step and reach out to your accounting firm or other advisor who has a solid understanding of the new standard and start the discussion about implementation.

Robert S. Miller, CPA, CFE, partner, Samet & Company, PC, Robertm@samet-cpa.com, 617-751-5395, www.sametcpa.com

A former federal prosecutor has been disbarred for posting anonymous online comments about cases being handled by himself or by his office, according to reports from the ABA Journal and the Legal Profession Blog.

The Louisiana Supreme Court ordered the disbarment of Sal Perricone, finding he had violated ethics rules because his “caustic, extrajudicial comments about pending cases strikes at the heart of the neutral “dispassionate control which is the foundation of our system.”

“Perricone had posted more than 2,600 comments on nola.com, the website of the New Orleans Times-Picayune, between November 2007 and March 2012. Between 100 and 200 comments related to matters being prosecuted by Perricone’s office,” according to Journal reporter Debra Cassens Weiss.

Read the ABA Journal article.

The U.S. Supreme Court may be on verge of upsetting the longstanding system of states requiring lawyers to pay dues to bar associations, reports the Los Angeles Times.

At least 30 states require the dues, in most cases with bar associations regulating the legal profession by licensing lawyers and disciplining those who violate the rules. Lawyers in turn are required to pay dues to cover the cost, explains the Times‘ David G. Savage.

Savage writes:

“In a brief order on Monday, the court overturned a ruling last year by the U.S. 8th Circuit Court of Appeals that had upheld mandatory bar dues in North Dakota and sent the case back “for further consideration in light of Janus.”

In Janus v. AFSCME, the court last June struck down state laws in California and elsewhere that required teachers and other public employees to pay fees to support a union.

Read the LA Times article.

The attorneys general of Maryland and the District of Columbia on Tuesday formally demanded financial records from U.S. President Donald Trump’s businesses as part of their lawsuit alleging his dealings with foreign governments violate anti-corruption clauses of the U.S. Constitution, reports Reuters.

The Trump Organization Inc., the president’s privately owned real estate company, and related corporate entities received the subpoenas, according to Reuters reporter Jan Wolfe.

The report quotes George Brown, a professor at Boston College Law School:

The development “brings us closer to judicially enforced discovery about the Trump empire,” said Brown. “It will probably tell us a lot we don’t know because nobody is going to hide that stuff in the face of a subpoena.”

Read the Reuters article.

Zapproved has published a new guide that outlines the five best practices for conducting fast, defensible internal investigations.

The guide can be downloaded from Zapproved website at no charge.

An internal investigation is exactly what it sounds like: an inquiry into an organization’s internal operations, Zapproved says on its website. Internal investigations frequently involve allegations of wrongdoing, such as embezzlement, sexual harassment, discrimination, or wrongful termination. However, an internal investigation may also be conducted in response to a regulatory compliance concern initiated by agencies like the U.S. Securities and Exchange Commission (SEC) or as part of a due diligence process before a merger or acquisition.

The goal of an internal investigation is to either detect and respond to wrongdoing or dispel suspicions. Organizations should respond to investigations in a way that curtails any specific incident of wrongdoing and discourages similar future violations. The overarching goal is to create an open, productive work environment that is neither distracting nor discriminatory.

Download the guide.

General Data Protection Regulation requirements might look like a new bureaucratic threshold for doing business in the European Union. But sooner or later, a strict regulation in this area is likely to occur in every country, points out Vladislav Nekrutenko in an article for IoT Evolution.

The acceptance of the California Consumer Privacy Act 2018 and the Brazil Personal Data Protection Law are good examples in this regard, he explains.

His article details some steps that can help a company fulfill its obligations in contracts with third parties and mitigate risks regarding third parties’ data misuse.

Read the article.

Labor Secretary Alexander Acosta is out of the running to be President Donald Trump’s attorney general following a Miami Herald report that he oversaw a sweetheart deal for a wealthy financier accused of sexually abusing dozens of underage girls, according to two people close to the president.

Acosta was a federal prosecutor in Florida before going to Washington, the two advisers said.

Herald report Anita Kumar explains:

The investigation, which reported that Acosta, then U.S. attorney, cut a secret deal to allow billionaire Jeffrey Epstein to serve only 13 months in a county jail, is “clearly something” that is being widely circulated among Trump aides, one of the people said. The agreement “essentially shut down an ongoing FBI probe” and granted immunity to “any potential co-conspirators,” according to the story.

Read the Miami Herald article.

TechCrunch reports that Facebook has recruited Kate Patchen, a veteran of the U.S. Department of Justice who led its antitrust office in Silicon Valley, to be a director and associate general counsel of litigation.

Patchen spent 16 years at the DoJ, where she began as a trial attorney before becoming an assistant chief in the antitrust division in 2014, and two years later she was made chief.

TechCrunch reporter Natasha Lomas writes that Patchen takes up her post amid ongoing scandals and reputation crises for her new employer, joining Facebook this month, according to her LinkedIn profile.

“Patchen, meanwhile, joins Facebook at the same time as some long-serving veterans are headed out the door — including public policy chief Elliot Schrage,” according to Lomas.

Read the TechCrunch article.

Lenovo Group Ltd. can move ahead with an $8.3 million settlement to end a class action that its ad software exposed customer laptops to performance, privacy, and security problems, reports Bloomberg Law.

The federal court’s initial approval of the settlement comes four months after Lenovo and the consumer class filed with the court to end the spyware action. The SuperFish software, which Lenovo began installing in 2014, could access customer Social Security numbers, financial data, and sensitive heath information, the court said.

“Lenovo is set to pay $7.3 million to the settlement fund, and SuperFish will kick in another $1 million from a prior deal with consumers over the spyware issue,” according to Bloomberg’s Daniel R. Stoller.

Read the Bloomberg Law article.

Corporate counsel report a decrease in the number of lawsuits against their companies over the last year, but they face more regulatory proceedings and arbitrations in navigating increased cyber risk, data protection and tax issues.

Norton Rose Fulbright’s 2018 Litigation Trends Annual Survey polled 365 senior corporate counsel representing US-based organizations on disputes-related issues and concerns.

Two thirds of respondents report feeling more exposed in 2018 to cybersecurity and data protection disputes. The survey also found that the growing international nature of many business operations has caused a spike in conflicts related to countries’ differing discovery and data protection laws and regulations.

See the survey results.

Facebook general counsel Colin Stretch, who announced in July that he was leaving the company at the end of the year, has changed his mind, reports Recode.

Facebook is still dealing with legal and political crises, including multiple federal investigations into Facebook’s data and privacy practices that started earlier this year, writes Recode reporter Kurt Wagner.

Stretch was named in a I story as one of the few Facebook executives who knew that Russian hackers were using the service ahead of the election well before it was announced publicly — or even presented to Facebook’s board of directors. It’s unclear whether or not Stretch’s decision to stay had anything to do with that report, according to Wagner.

Read the Recode article.

Bloomberg is reporting that an experienced securities lawyer has left Tesla Inc. just as the company needs one under its fraud settlement with U.S. regulators.

Phil Rothenberg, a vice president in Tesla’s legal department who joined the company in 2011, became general counsel at Sonder, a hospitality startup, on Nov. 5, writes Bloomberg reporter Dana Hull.

Before joining Tesla, Rothenberg was an attorney-adviser for the U.S. Securities and Exchange Commission and has extensive securities law experience.

Read the Bloomberg article.

A former precious-metals trader said to have worked at JPMorgan Chase & Co. admitted he engaged in a six-year spoofing scheme that defrauded investors in futures contracts with the help of his colleagues and bosses, Bloomberg Law reports.

Prosecutors said John Edmonds placed hundreds of orders he never intended to execute — orders designed to move the market, but were canceled before being matched. Edmonds and other traders sought to manipulate futures markets for gold, silver, platinum and palladium on the Nymex and Comex exchanges for their own benefit.

The Bloomberg article continues: “Edmonds, who lives in Brooklyn, New York, said he learned the spoofing strategy from more senior traders at the bank and said his immediate supervisors approved of it, according to the Justice Department.”

Read the Bloomberg Law article.

Image by Elvert Barnes

A federal judge temporarily blocked construction of the controversial Keystone XL pipeline, ruling late Thursday that the Trump administration had failed to justify its decision granting a permit for the 1,200-mile long project designed to connect Canada’s oil sands fields with Texas’s Gulf Coast refineries.

The Washington Post characterized the order as a  major defeat for President Trump, who attacked the Obama administration for stopping the project in the face of protests and an environmental impact study.

Post reporters explain that the order “requires the administration to conduct a more complete review of potential adverse impacts related to climate change, cultural resources and endangered species. The court basically ordered a do-over.”

Read the Washington Post article.

The Eastern District of Texas Bench Bar Conference set a new attendance record this year with more than 450 attendees gathering in Plano, Texas, for three days of programming and panel discussions focused on the diverse legal cases handled by the U.S. District Court for the Eastern District of Texas.

Andrei Iancu, U.S. Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office, delivered a major policy address during the event.

Iancu’s speech at the Inaugural Texas Dinner in Honor of the Judiciary and 7th Amendment was reported by many media outlets as a push back against the “patent troll” narrative that has encircled America’s intellectual property system for more than a decade.

Read details about the conference.

Former Pennsylvania Supreme Court justice and Penn State University general counsel Cynthia Baldwin was cleared Friday of any wrongdoing relative to her representation of university officials during the Jerry Sandusky investigation, reports the Pittsburgh Post-Gazette.

She had been accused by the Pennsylvania Office of Disciplinary Counsel of violating several of the Rules of Professional Conduct for attorneys as she represented Penn State, former PSU president Graham Spanier, and two other administrators while she served as university general counsel from 2010 to 2012, writes reporter Paula Reed Ward.

The case included an alleged conflict in representing the interests of the university as well as the three administrators before the investigating grand jury. All three administrators were convicted of child endangerment stemming from a case which resulted in a former university assistant football coach being convicted of sexually abusing children.

Read the Post-Gazette article.

The Justice Department’s Criminal Division has announced updated policies and procedures related to the selection of corporate monitors in federal criminal cases, according to an advisory written by Paul N. Monnin, a partner in Alston &. Bird.

He writes:

The memorandum makes clear that “the Criminal Division should favor the imposition of a monitor only where there is a demonstrated need for, and clear benefit to be derived from, a monitorship relative to the costs and burdens.” In short, a monitor is now disfavored “[w]here a corporation’s compliance program and controls are demonstrated to be effective and appropriately resourced at the time of resolution.”

The article also includes a link to a PDF of the DOJ advisory.

Read the article.

An Ohio company faces a record fine of more than $63 million after allegedly bilking a government aid program out of millions of dollars, some of which went toward funding the lavish lifestyle of the firm’s chief executive, federal regulators said Tuesday.

The Washington Post reports that the the Federal Communications Commission is taking action against American Broadband, a provider of low-income phone service whose agents allegedly created fake or duplicate customer accounts to claim extra federal funding under a program that offers disadvantaged Americans a small monthly discount on phone and Internet service.

Post reporter Brian Fung explains:

American Broadband’s chief executive, Jeffrey Ansted, was also held personally liable for the alleged misconduct Tuesday as the FCC accused him of embezzling aid money and using it to pay for luxury goods such as an $8 million private Cessna jet, a $1.3 million Florida condominium and a $250,000 Ferrari convertible. He also used the funds to buy memberships to yacht and country clubs, the FCC said.

Read the Washington Post article.

The Dallas Morning News reports that Texas businessman Christopher Faulkner, better known by his now infamous moniker “Frack Master,” has admitted to securities fraud, tax evasion and money laundering and faces up to 12 years in prison, federal officials said Tuesday.

Reporter Jess Mosier writes that Faulkner, the former CEO of Dallas-based Breitling Energy, became a star in business circles for his high-profile media appearances defending hydraulic fracturing or fracking. He used fake college degrees and skimpy business experience to convince Dallas business elite and Texas political elite that he was an oil and gas expert.

“The SEC effectively shut down Breitling Energy and related businesses after suing Faulkner and 11 others in 2016 for misusing $23.8 million of the $80 million they raised for oil and gas investments,” according to Mosier. “Besides the prison time, Faulkner must pay back the nearly $24 million made from his schemes, under the terms of his settlement.”

Read the Dallas News article.

Over the past 15 years, Key Risk Insurance Co. has made multiple trips to courts and before the North Carolina Industrial Commission to argue that Mario Seguro-Suarez has been faking his symptoms from an on-the-job injury and that his benefits should be cut off.

The Charlotte Observer reports documents show that the company disregarded years of medical opinions — including several from its own doctors — that Seguro-Suarez was indeed left disabled from his fall at a Southern Fiber factory. The 2003 head-first fall from 18 feet onto a concrete floor left him disabled.

After years of failing to cut off payments to Seguro-Suarez, the insurance company’s private detective “took what a detective would describe as misleading information to Lincolnton police to accuse Seguro-Suarez of insurance fraud. He was arrested, jailed and later indicted,” reporter Michael Gordon writes.

That attempt drew a withering rebuke from a judge, and now Seguro-Suarez is suing for malicious prosecution.

Read the Charlotte Observer article.