Technology Industry Competition Drives Expansion and M&A Risks, According to BDO Study

Press Releases

Keri Toomey
Bliss Integrated Communication
212.584.5471
Keri@BlissIntegrated.com

Tuesday, May 27, 2014

TECHNOLOGY INDUSTRY COMPETITION DRIVES EXPANSION AND M&A RISKS, ACCORDING TO BDO STUDY

- INCREASED LABOR RISKS ALSO PLACE COMPANIES ON EDGE -

Chicago – May 27, 2014 – Faced with fierce competition and the unrelenting demand to innovate and meet consumer needs, technology companies are increasingly turning to strategies such as mergers and acquisitions (M&A) and global expansion to defend their market positions. As technology companies increase their size, change structure and confront new geographic frontiers, they raise their exposure to related risks. Furthermore, the evolving regulatory landscape and looming changes to U.S. GAAP add to a climate of uncertainty. According to a new report from BDO USA, LLP, while competition and regulation are the most frequently named risks (mentioned by 99 and 98 percent of technology companies, respectively), more and more technology companies are citing risks related to M&A, supplier and vendor concerns, and threats to international operations.

The 2014 BDO Technology RiskFactor Report, which analyzes the most recent SEC 10-K filings of the 100 largest publicly traded technology companies in the U.S., also found that companies are increasingly addressing labor-related risks in their filings (cited by 83 percent of companies, up from 55 percent last year). Labor concerns are on the rise amid the shortage of highly skilled labor, the growing cost for healthcare benefits and an improving labor market. Additionally, global competition for talent is vigorous, with 81 percent of companies citing concerns over their ability to attract and retain key personnel. Tech companies also note risks related to managing a geographically dispersed workforce. Increased focus on these challenges is also in line with trends identified in the BDO Technology Outlook Survey, which found that 95 percent of tech CFOs do not plan to offshore their activities in the coming year. As companies repatriate previously off-shored positions, they increase their need for highly-skilled U.S. professionals.

“Competition is the consistent theme in many of the top risks in the technology industry this year,” said Aftab Jamil, partner and leader of the Technology & Life Sciences practice at BDO USA, LLP. “Companies are battling to manage, attract and retain the best talent, efficiently oversee supply chains and protect their valuable intellectual property, all while developing the most innovative products at fiercely competitive prices. In this fast-paced market, any delay or unanticipated cost can be the difference between success and failure.” Continue reading

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Posted in Barfield, Barfield Murphy Shank & Smith, BDO, Technology, Uncategorized | Tagged , , , , , | Leave a comment

New Revenue Recognition Standard: Frequently Asked Questions

An alert from the BDO National Assurance Practice as published on www.bdo.com, June 2014.

BDO FLASH REPORT

FASB

SUMMARY

On May 28, 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. It takes effect in 2017 and establishes a comprehensive revenue recognition standard for virtually all industries in U.S. GAAP, including those that previously followed industry-specific guidance such as the real estate, construction and software industries. The new ASU is available here.

BDO developed these Frequently Asked Questions and Answers to facilitate discussions between management teams, audit committees, boards of directors, and auditors. A more detailed BDO Financial Reporting Letter will be issued this summer.

INDEX OF QUESTIONS

  • When does the standard become effective?
  • What are the transition methods?
  • In a nutshell, what does the new standard require?
  • What are some of the more significant changes?
  • How is this going to affect us?
  • What should we be doing now?
  • What resources are available to help us with implementation?

Continue reading

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Posted in Assurance, Barfield Murphy Shank & Smith, BDO, Uncategorized | Tagged , , , , , , , | Leave a comment

IRS Virtual Currency Guidance: Virtual Currency Is Treated as Property for U.S. Federal Tax Purposes; General Rules for Property Transactions Apply

The following post was released by the IRS in their IRS Newswire, Issue Number: IR-2014-36.

WASHINGTON – The Internal Revenue Service today issued a notice providing answers to frequently asked questions (FAQs) on virtual currency, such as Bitcoin. These FAQs provide basic information on the U.S. federal tax implications of transactions in, or transactions that use, virtual currency.

In some environments, virtual currency operates like “real” currency — i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance — but it does not have legal tender status in any jurisdiction.

The notice provides that virtual currency is treated as property for U.S. federal tax purposes.  General tax principles that apply to property transactions apply to transactions using virtual currency.  Among other things, this means that:

  • Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
  • Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply.  Normally, payers must issue Form 1099.
  • The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
  • A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.

Further details, including a set of 16 questions and answers, are in Notice 2014-21, posted March 25, 2014 on IRS.gov.

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U.S. TECH CFOS TO INCREASE HIRING FOR FOURTH CONSECUTIVE YEAR, ACCORDING TO BDO USA SURVEY

Thursday, March 6, 2014

U.S. TECH CFOS TO INCREASE HIRING FOR FOURTH CONSECUTIVE YEAR, ACCORDING TO BDO USA SURVEY

COMPANIES LOOK TO REPATRIATE SOME OPERATIONS

CHICAGO - With job opportunities in the technology industry remaining abundant, most technology CFOs are optimistic about their hiring plans in 2014, according to data released today by BDO USA, LLP. Ninety-one percent of CFOs expect the number of employees at their companies to increase or remain the same in the coming year, consistent with the survey’s findings over the past four consecutive years (88 percent last year, 91 percent in 2012 and 93 percent in 2011). According to recent reports, employers remain focused on hiring in several areas, including big data, cloud computing and data security. Moreover, employment in all information technology fields is expected to increase by 22 percent by 2020, according to the U.S. Bureau of Labor Statistics. Continue reading

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17 Reasons Why Your Business May Never Sell…And What You Can Do About It

On Friday, February 28th from 8.30 to 9.30 Founders Investment Banking will be giving a talk at Innovation Depot about the reasons your business may never sell. This is an important topic for anyone that thinks they have an exit strategy for their business. Many people get to that point of sale and hit obstacles they never imagined. Zane does a great job covering the mistakes he has seen over the years of being in the Investment Banking business. You will not want to miss this, it could save you money.BMSS Founders Investment Banking Seminar at Innovation Depot 2 28 14

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The History of BMSS

I am thrilled with the new “The History of BMSS”  video produced by our own staff members, AJ Vanderwoude and Tyler Crawford.  Additional thanks go out to all the staff who assisted as well as Connor King at Birds Eye Video for his video contributions. While I am thanking people, let me also mention our network of friends and family that have forwarded the link to get the word out.  I got an email from our associates at BDO who are including it in their “best practices” recommendations to our sister firms all across the country. Continue reading

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BMSS Seminar – 17 Reasons Why Your Business May Never Sell… And What You Can Do About It

Do you own a business or are a member of a family-owned business?

Are you prepared to possibly sell your business or transfer to another family member?

Do you know why one business has multiple cash offers from strategic buyers while other similar businesses have no exit options at all?

How do you make sure you are building a business that is truly sellable?

Barfield, Murphy, Shank & Smith and Founders Investment Banking will present the vital and pertinent information you need to effectively position your business for a future sale to maximize your investment.

We will break down the 17 most common reasons why business owners are never able to sell their business.  You will learn what to do to avoid or correct these mistakes in your business.

Friday, February 28 at 8:30– 10:00 am (breakfast will be provided) at the Innovation Depot.

Cost: FREE

Space is limited. Registration is required to marketing@bmss.com.

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Tech CFOs Anticipate Boost in Revenue This Year

– M&A Activity Expected to Remain Robust –

CHICAGO – February 4, 2014 – U.S. technology industry CFOs, buoyed by strong returns over the past year, are feeling confident heading into 2014. According to BDO USA, LLP‘s 2014 Technology Outlook Survey, more than two-thirds (67 percent) of technology CFOs anticipate increased sales revenue in 2014, a 15.5 percent increase from the number of respondents expressing similar sentiment last year. Survey respondents who forecast revenue growth expect an average increase of 11 percent. This comes on top of other recent robust industry projections. According to financial research firm FactSet, technology companies in the S&P 500 are expected to see a 9.3 percent increase in net income this year, placing the technology sector among the most profitable U.S. industries. Continue reading

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Now you can Click and Sign our Engagement Letters!

SignatureLast year, one of our clients was out of the country and needed to sign a document and return it to us. Of course, he had no access to a printer, scanner, or even a fax machine. He challenged us to help him e-sign his document.  Of course our tech staff, headed by Kenneth Moore, immediately found an online solution to meet our customer’s expectations.  Since then, we have been actively evaluating all of the various e-sign options. Continue reading

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Posted in Barfield, Barfield Murphy Shank & Smith, Going Green, Software, Tax issues | Tagged , , , , , , | Leave a comment

Service Organization Control (SOC) Reports

The AICPA developed Service Organization Control (SOC) reports in response to marketplace demand to help companies that outsource tasks or functions to third-party providers. SOC reports (formerly SAS 70 reports) provide a framework for CPAs to examine controls and help senior management understand the related risks of outsourcing to a service provider. Historically, companies misused SAS 70 to issue reports on controls related to outsourced non-financial data rather than the correct attest standard which was in place. SOC reports clarify which standard needs to be used and how it should be implemented to meet specific user needs.

A brief description of the three SOC reports is outlined below:

SOC 1 These reports examine controls at a service organization that are relevant to an entity’s internal control over financial reporting and are primarily an auditor-to-auditor communication. This engagement is performed under the Statement on Standards for Attestation Engagements, SSAE 16 – Reporting on Controls at a Service Organization. The SOC 1 report is equivalent to the former SAS 70 and requires the same level of evidence and assurance. There are two types of SOC 1 reports; a Type 1 covers one point in time while a Type 2 covers a period of time and includes an assessment of the operating effectiveness of controls. Use of this report is restricted to management of the service organization, user entities, and user auditors.

SOC 2 These reports are intended to meet the needs of a broad range of users that need to understand internal controls at a service organization as it relates to security, availability, processing integrity, confidentiality, and privacy (based on the trust services principles and criteria). These are areas not covered by a SOC 1 report. A service organization can include one or multiple trust services principles in a SOC 2 report. SOC 2 reports are generally restricted and intended for use by stakeholders such as user entities, regulators, business partners, suppliers, and others who have an understanding of the service organization and its controls. SOC 2 reports are also prepared as a Type 1 or Type 2 report.

SOC 3 These reports cover the same subject matter as a SOC 2 report, but in a general use short form format which can be freely distributed and publicly promoted with the AICPA SOC 3 seal on a service organization’s website. These reports are often issued in conjunction with a SOC 2 report. The primary difference from a SOC 2 report is that a SOC 3 report does not include a description of the service organization’s system nor does it contain any information on testing. It simply provides the auditor’s opinion on whether the service organization maintains effective controls over its systems. SOC 3 reports are designed for entities that maintain or process electronic consumer data through e-commerce, software as a service (SaaS) solutions, and other electronic systems.

Requests for these types of reports have grown significantly in the last few years as entities are increasingly requiring these reports from their outsourced service providers as part of their vendor management due diligence and to satisfy requests from their auditors and regulators.

BMSS can issue each of these types of reports and can help your company determine which type of report is right for you.   Please contact your BMSS CPA or Michael Eanes or John Shank for more information on SOC reporting.

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