Accounting firm BDO Seidman said corporate executives and board members should be prepared to address various questions about the effect of the credit market crisis on their companies at their upcoming annual shareholder meetings.
Numerous companies have reported losses on a variety of investments - such as subprime mortgages, collateralized debt obligations, asset-backed securities and auction rate securities - BDO noted. Shareholders may question why the losses were incurred and how much exposure to loss still exists, as well as any changes in risk management to avoid similar losses in the future. Investors may also ask about the value of investments held in the company's pension plans, BDO predicted.
Companies that have funded long-term assets with short-term liabilities may face liquidity problems, such as distressed sales of assets, when creditors won't roll over the short-term loans, BDO noted. Shareholders may ask what the company is doing to mitigate any liquidity problems.
BDO said company executives should be prepared to address shareholder questions about any off-balance-sheet entities, staggered board structures, and executive compensation disclosures. Questions may also arise about any financial restatements, recent guidance about Sarbanes-Oxley audits of internal controls, and changing accounting practices such as the convergence with International Financial Reporting Standards.
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