Companies should be prepared to address accounting issues, tax increases, executive compensation, access to capital and the economic recovery at annual shareholder meetings this year, advises accounting firm BDO.
The firm has provided a list of topics that corporate management and boards of directors should be ready to discuss. Among them are changing accounting practices, including requirements to move off-balance-sheet items onto bank balance sheets. A number of financial institutions have incurred losses rescuing off-balance-sheet entities, BDO noted. New accounting rules will require most of these entities to be consolidated. Executives should be prepared to discuss how these on-the-balance-sheet entities will impact financial statements moving forward.
The SEC recently reiterated its support for a single set of high quality global accounting standards, the firm noted. While a decision as to a definite conversion date is still a year away, shareholders will want to know if management is prepared to meet the potential timeline of 2015, what the conversion may cost and how it might affect earnings per share. Fair value accounting may also be discussed. Shareholders may want to know if the company expects to experience wide fluctuations in the value of assets and liabilities due to fair value accounting.
Taxes are also a likely topic of discussion. Executives and board members should be able to talk about whether new federal and state government tax initiatives such as the Obama administrations proposal that would significantly change current tax provisions affecting foreign operations would affect the companys ability to grow and invest in the business.
Executive compensation has also become a hot topic of discussion at shareholder meetings. Reports of excessive compensation during times of poor economic performance have riled shareholders in recent years. The SEC has introduced new requirements in 2010 for corporate compensation risk assessments at all levels. Shareholders will want to know what the company has done to identify and address compensation risk in order to fulfill the new SEC requirements and avoid penalties.
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