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2019 Year-end Corporate Reporting Update Todays agenda Regulatory update SEC update Major accounting updates Restatement themes Page 2 2019 Year-end Corporate Reporting Update Regulatory update Page 3 2019 Year-end Corporate Reporting Update PCAOB inspections: anticipated 2019 focus

Increasing engagement with audit committee chairs Recurring areas of deficiencies, such as assessing and responding to risks of material misstatement and auditing internal controls over financial reporting Implementation of the new auditors reporting model Audit procedures on new accounting standards Use and development of digital audit tools Understanding how firms consider risks related to cybersecurity incidents and digital assets (e.g., cryptocurrencies) Audit firms system of quality control and control environment Auditor independence Page 4 2019 Year-end Corporate Reporting Update PCAOB standard setting: auditors reporting model Critical audit matters (CAMs) Critical audit matters Effective for fiscal years ending on or after 30 June 2019 for large accelerated filers, and for fiscal years ending on or after 15 December 2020 for all other filers Communicated or required to be communicated to the audit committee Related to accounts or disclosures that are material to financial statements

Involved especially challenging, subjective or complex auditor judgment, considering: Risks of material misstatement, including significant risks Degree of auditor subjectivity and judgment Nature and timing of significant unusual transactions Nature and extent of audit effort and nature of evidence Auditors report will identify the CAMs and include: Page 5 Principal considerations in making determinations Description of how matters were addressed in the audit Relevant financial statement accounts or disclosures 2019 Year-end Corporate Reporting Update PCAOB standard setting: auditors reporting model CAMs planning considerations Early discussion of CAMs will help avoid surprises and allow time for resolving concerns Management and the audit committee should: Understand the types of matters that may be CAMs Review the draft description of the CAMs Evaluate the effect on the financial reporting process Understand the requirements of the standard and evaluate the

effect on the audit process and the companys financial reporting, including: Determining whether additional internal parties should be involved in discussions to understand the CAMs identified in the auditors report Understanding the auditors timeline for implementation Anticipating questions from investors, regulators and others Assessing whether to change disclosures in areas related to CAMs PCAOB expects auditors to identify at least one CAM in most audits Page 6 2019 Year-end Corporate Reporting Update PCAOB standard setting: final guidance Auditing accounting estimates

More robust risk assessment procedures Increased focus on evaluating the potential for management bias Greater prescription in the nature of procedures to evaluate the method, model, significant assumptions and data used to make the estimate Specific requirements for evaluating external information, including information from third-party pricing services Using the work of specialists Strengthens the procedures to use the work of a companys specialist as audit evidence, including evaluating: Specialists knowledge, skill and ability in the relevant field and their relationship with the company Methods, models, significant assumptions and data used by the specialist Enhances the supervision of an auditors specialist Doesnt apply to individuals who specialize in income taxes and information technology Effective for audits of periods ending on or after 15 December 2020 Page 7

2019 Year-end Corporate Reporting Update PCAOB standard setting: proposals and projects Standard-setting projects Supervision of audits involving other auditors Going concern Quality control standards, including assignment and documentation of firm supervisory responsibilities Research projects Page 8 Changes in use of data and technology in the conduct of audits Auditors role regarding other information and company performance measures, including non-GAAP measures Auditors consideration of noncompliance with laws and regulations 2019 Year-end Corporate Reporting Update SEC update

Page 9 2019 Year-end Corporate Reporting Update Overview of the Commission and its priorities Outlook and strategic priorities Capital formation Disclosure effectiveness Emerging technologies Initial public offering (IPO) accommodations DUSTR and Regulation S-K modernization Digital asset framework Accelerated filer definition Section 404(b) Disclosure reform: Rules 3-05 and 3-14 Rules 3-10 and 3-16 Quarterly reporting Sustainability reporting

Page 10 2019 Year-end Corporate Reporting Update Cybersecurity Rulemaking activities Request for comment on earnings releases and quarterly reports SEC asked for input on the nature, timing and frequency of earnings releases and interim reporting SEC also asked whether voluntarily providing forward-looking guidance creates an undue focus on short-term decision making and what actions it should take to discourage this practice We support quarterly reporting because it gives investors access to timely and decision-useful information We believe there are opportunities for the SEC and the FASB to reduce the cost and burden of providing that information SEC Chairman Jay Clayton has stated that he doesnt expect the frequency of interim reporting to change for large public Our markets thirst for high-quality, companies

anytime soon timely information regarding company performance and material corporate events. We recognize the importance of this information to well-functioning and fair capital markets. We also recognize the need for companies and investors to plan for the long term. Our rules should reflect these realities. SEC Chairman Clayton Page 11 2019 Year-end Corporate Reporting Update Rulemaking activities Proposed amendments to S-X Rules 3-05 and 3-14 Proposal would revise the significance tests that are used to determine whether a registrant needs to provide financial statements of an acquired business and, if so, how many periods Investment test: A registrant would compare its investment to the aggregate worldwide market value of the registrants common

equity Income test: A registrant would compare both its revenue and after-tax income (rather than only its pretax income) to those of the acquired entity Thresholds for significant disposals and significant real estate operations would be raised to 20% from 10% Proposal would eliminate any requirement to provide three years of financial statements for an acquired business, or to provide more than the interim financial statements for the year of acquisition when only one year of audited financial statements is required Todays restrictive criteria for pro forma adjustments would be Page 12 2019 Year-end Corporate Reporting Update Rulemaking activities Proposed amendments to S-X Rules 3-10 and 3-16 Proposal would streamline disclosures for registered debt offerings involving subsidiary issuers or guarantors (S-X Rule 310) and affiliates whose securities are pledged as collateral (SX Rule 3-16) by: Narrowing the circumstances that would require separate financial statements by allowing alternative disclosures when a subsidiary guarantor is less than 100% owned or not fully obligated for the debt Streamlining Rule 3-10 disclosure requirements, including:

Page 13 Replacing condensed consolidating financial information with summarized financial information and expanded narrative disclosures Reducing the number of periods that must be covered by the summarized financial information Eliminating the requirement to provide pre-acquisition guarantor financial statements Replacing requirement to provide separate financial statements under Rule 3-16 with requirement to provide summarized financial information and narrative disclosures 2019 Year-end Corporate Reporting Update Rulemaking activities Proposed changes to the definitions of accelerated and large accelerated filer Proposal would change the definitions of accelerated filer and large accelerated filer to exclude a smaller reporting company (SRC) with less than $100 million in annual revenues

Non-accelerated filers do not require an internal control attestation report from an external auditor and have extended Annual filing deadlines Public float Revenue ICFR report Definition (last day of Q2) (annual) audit deadline < $75 million Any amount No 90 days $75700 million < $100 million No 90 days SRC and

accelerated filer $75250 million $100 million Yes 75 days Not SRC but accelerated filer $250700 million $100 million Yes 75 days SRC and nonaccelerated filer Page 14 2019 Year-end Corporate Reporting Update Rulemaking activities Modernization of Regulation S-K

Rule is intended to simplify certain disclosure requirements in Regulation S-K It allows a registrant to omit discussion of the earliest of the three years in managements discussion and analysis if it is included in a previous filing and the location of that discussion is disclosed Registrants are permitted to redact confidential information from material contracts filed as exhibits without submitting a confidential treatment request in certain circumstances Rule clarifies that description of property disclosures are only required for properties that are material to the registrant Rule prohibits cross-references in the financial statements to information disclosed in the filing outside of the financial statements, unless permitted or required by US GAAP or IFRS All information on the cover pages of Form 10-K, Form 10-Q, Form 8-K, Form 20-F and Form 40-F must be tagged using inline XBRL Page 15 2019 Year-end Corporate Reporting Update Rulemaking activities Proposal to further modernize Regulation S-K disclosures

Proposed changes are intended to improve disclosure effectiveness and reduce costs Description of business disclosures would be: Tailored based on facts and circumstances (i.e., amendments would eliminate the requirement to disclose 10 prescribed items) Limited to material changes, with a hyperlink to disclosure that, together with the update, provides a complete discussion Expanded to include compliance with material government regulations related to environmental laws Enhanced to include human capital disclosures, if material, and related measures (e.g., retention) used by management Proposal would permit information on legal proceedings to be referenced from other disclosures and increase certain thresholds Companies would have to provide a summary if risk factor disclosures exceed 15 pages Page 16 2019 Year-end Corporate Reporting Update

Enforcement activities SEC filed a total of 821 cases in 2018 (9% increase from 2017) 79 1000 reporting and disclosure actions in 2018 (17% decrease from 868 821 2017) 807 800 656 671 664 684 735 734 755 754 676 574 600 Issuer reporting and disclosure actions

400 219 200138 157 143 126 89 79 68 96 135 103 95 Source: Annual Reports issued by the 79 SECs Division of Enforcement 0 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Enforcement actions include those in following areas: Page 17 2019 Year-end Corporate Reporting Update SEC staff focus areas: trends in SEC comments Areas of frequent SEC staff comment Comment letter topic Revenue recognition

Non-GAAP financial measures Managements discussion and analysis (MD&A) Fair value measurements Intangible assets and goodwill Income tax State sponsors of terrorism Segment reporting Acquisitions and business combinations Exhibits, signatures and agreements Page 18 2019 Year-end Corporate Reporting Update Ranking 2019 2018 1 5 2 2 3 1 4 3 5 6 6 8 7 7 8 4 9 9

10 17 SEC staff focus areas: trends in SEC comments ASC 606, Revenue from Contracts with Customers SEC staff comments have focused on areas that require significant judgment or involve estimates Comments have often been resolved by providing the staff with a better understanding of the judgments made by management or by agreeing to provide additional disclosure in future filings The SEC staff encourages registrants to refine and supplement future disclosures, especially those that relate to significant judgments and estimates Page 19 ASC 606 requires disclosure of judgments made (and changes in those judgments) that significantly affect the determination of the amount and timing of revenue from contracts with customers 2019 Year-end Corporate Reporting Update SEC staff focus areas: trends in SEC comments ASC 606, Revenue from Contracts with Customers Nature of comment: Comment request:

Identification of performance obligations How a registrant determined whether each promise was a separate performance obligation Principal versus agent considerations How a registrant determined whether they are a principal or an agent in contracts with customers Variable consideration How registrants estimated different forms of variable consideration and how they applied the constraint Residual allocation approach How registrants met the criteria to apply the residual approach to estimate the standalone selling price of a promised good or service Satisfaction of performance obligations How a registrant determined whether revenue is recognized over time or at a point in time, and for overtime recognition, why the selected measure of progress is appropriate Disaggregated revenue disclosures How the selected categories met the disaggregated revenue disclosure objectives Amortization of capitalized costs of obtaining What was the registrants basis for the amortization a contract

period, including how contract renewals were considered Page 20 2019 Year-end Corporate Reporting Update SEC staff focus areas: trends in SEC comments Non-GAAP measures SEC staff continues to focus on the use of non-GAAP financial measures Areas of comment include: Page 21 Prominence of non-GAAP financial measures Inconsistent presentation in different fiscal periods or if similar gains and losses are treated differently (i.e., cherry picking) Excluding normal recurring cash operating expenses from performance measures Tailoring GAAP recognition and measurement principles 2019 Year-end Corporate Reporting Update SEC staff focus areas: trends in SEC comments Non-GAAP measures

Staff Compliance and Disclosure Interpretation 100.04 states that individually tailored accounting principles may be misleading SEC staff has communicated that these may include measures that: Shift from an accrual basis to a cash basis of accounting Are adjusted to include the effect of transactions that are also recordable in another companys financial statements (e.g., proportionate consolidation) Reflect part but not all of an accounting concept (e.g., cash taxes excluding deferred taxes) Render a measure inconsistent with the economics or terms of an agreement (e.g., acceleration of revenue) For example, SEC staff has objected to non-GAAP measures that: Page 22 Change the recognition or measurement principles of ASC 606

Include adjustments related to anticipated future cost savings or synergies in a merger2019 Year-end Corporate Reporting Update SEC staff focus areas: trends in SEC comments Non-GAAP measures Best practices for non-GAAP measures include: Clearly state the objective of the non-GAAP measure and how it is intended to be used by investors Establish a non-GAAP framework or policy on what types of adjustments are appropriate and consistent with the objective of the measure Include consideration of how management uses the measure This framework can be evaluated on an ongoing basis for any changes, but it is a useful tool to help management present non-GAAP measures consistently Make sure disclosures are robust and transparent If management or SEC staff deems a non-GAAP measure to be inappropriate, an alternative is to present the relative

components (adjustments) of the measure but not a total Page 23 2019 Year-end Corporate Reporting Update SEC staff focus areas: trends in SEC comments Managements discussion and analysis Results of operations SEC staff often requests that registrants explain the results of their operations with greater specificity SEC staff typically requests that registrants quantify the effects of factors that contributed to material period-to-period changes SEC staff continues to believe that key financial and operating metrics can be useful for investors, and may ask a registrant to disclose key performance indicators in its SEC filings Clarification requested when staff believes that a registrants use of such metrics without the appropriate context is potentially misleading Liquidity and capital resources Page 24

SEC staff may request enhanced disclosures focusing on sources and uses of cash and the availability of cash to fund liquidity needs, as well as transparency in the contractual obligations table and its footnotes 2019 Year-end Corporate Reporting Update SEC staff focus areas: trends in SEC comments Goodwill issues SEC staff has often asked registrants to provide more specifics in their qualitative descriptions of the factors that make up the amount of goodwill recognized in a business combination Especially when goodwill represents a significant portion of the consideration transferred SEC staff has also requested additional information about goodwill impairment, including: Page 25 Disclosures about reporting units that may be at risk of goodwill

impairment The timing of impairment losses, particularly when the conditions that resulted in the charge also existed in prior periods Information about the registrants impairment testing policies Discussion of goodwill impairment testing policies as part of registrants critical accounting estimate disclosures 2019 Year-end Corporate Reporting Update Major accounting standards update Page 26 2019 Year-end Corporate Reporting Update Leases (ASC 842) Contract modifications for a lessee Implementation challenges may arise after adoption of ASC 842 Is the modified contract a lease, or does it contain a lease? No Account for it as a lease termination if original contract contained lease Yes Does the modification result in a separate contract? (two conditions)

Yes Account for two separate contracts: Unmodified original contract Separate contract accounted for in same manner as any new lease No Remeasure and reallocate remaining consideration in the contract Reassess lease classification at effective date of modification Account for any initial direct costs, lease incentives and other payments made to or by the lessee Page 27 2019 Year-end Corporate Reporting Update Leases (ASC 842) Contract modification example #1 Facts Lessee enters into a 10-year lease for 10,000 square feet of office space

At beginning of Year 6, Lessee and Lessor agree to modify lease for remaining five years to include 10,000 additional square feet of office space in same building The increase in lease payments is commensurate with the market rate at date of modification related to the additional office space Modification is a new contract, separate from the original contract Page 28 Lessee has an additional right of use (10,000 square feet) The increase in lease payments is commensurate with the standalone price of the additional right of use 2019 Year-end Corporate Reporting Update Leases (ASC 842) Contract modification example #2 Facts Lessee enters into a 10-year lease for 10,000 square feet of office space At beginning of Year 6, Lessee and Lessor agree to modify the lease to increase the total lease term to 15 years from 10 years Modification is not a separate contract

Page 29 Modification changes an attribute of the right to use the 10,000 square feet of office space Lessee already controls Modification does not grant Lessee an additional right of use 2019 Year-end Corporate Reporting Update Leases (ASC 842) Reassessment and remeasurement for a lessee Reassess measurement/ allocation of consideration, lease payments* Reassess lease term and classification Reassess discount rate Modification not accounted for as a separate contract, when contract is or contains a lease

Change in lease term * Change in whether the lessee is reasonably certain to exercise option to purchase the underlying asset * Variable lease payments meet the definition of lease payments after resolution of contingency Change in assessment of amount owed under a residual value guarantee Remeasurement of the lease liability and the right-of-use (ROU) asset occurs when: * Additional considerations apply.

Page 30 2019 Year-end Corporate Reporting Update Leases (ASC 842) Other implementation challenges for lessees and lessors Identifying the lease and non-lease components of a contract is critical Lease incentives may affect both lease accounting and lease classification Nonconsecutive periods of time must be considered when determining the lease term Page 31 2019 Year-end Corporate Reporting Update Leases (ASC 842) Recent standard setting Proposal would defer the effective date for the new leases standard by one year for the following entities: Entities other than public business entities (PBEs), not-for-profit entities that are conduit bond obligors and employee benefit plans that file or furnish

financial statements with or to the SEC ASC 842 would be effective for these entities for fiscal years beginning after 15 December 2020, and interim periods within fiscal years beginning after 15 December 2021 FASB staff clarified that under ASC 842, lessors can continue to recognize a reserve (i.e., allowance for uncollectible operating lease receivables) under the loss contingency guidance in ASC 450-20 after applying the collectibility guidance in ASC 842 Page 32 2019 Year-end Corporate Reporting Update Revenue from contracts with customers SEC staff comments on ASC 606 disclosures SEC staff comment letters focused on disclosures for several topics, including: Identifying performance obligations Principal vs. agent analysis Estimating variable consideration Residual method Recognition over time or at a point in time

Disaggregation of revenue Amortization of certain capitalized contract costs The staff often encouraged entities to refine and supplement their disclosures included in future filings, especially those related to significant judgments and estimates Page 33 2019 Year-end Corporate Reporting Update Revenue from contracts with customers Challenging practice areas Identifying performance obligations (step 2) Determine whether identified promises of goods and services should be combined into a single performance obligation A high degree of interrelationship or interdependency required for promises to be combined Variable consideration (in step 3) Constrain estimate of variable consideration Include if probable that a significant reversal of cumulative revenue recognized will not occur once associated uncertainty is resolved

Dont default to zero Estimating standalone selling price (in step 4) Determine estimate based on all reasonably available information if observable price is not available Approaches include an adjusted market assessment approach or an expected cost plus margin approach Use of residual approach expected to be limited Page 34 2019 Year-end Corporate Reporting Update Restatement themes Page 35 2019 Year-end Corporate Reporting Update Restatement themes Overview SEC SAB Topic 1.N provides guidance on whether and how to restate prior years when an error has been identified

The need to restate depends on the materiality of the errors to the prior year(s) and current year There are three possible outcomes: Page 36 Big R restatement corrects an error that is material to the prior period(s) financial statements Little r restatement corrects an error that is immaterial to prior-period(s) financial statements but would materially misstate the current periods income statement or statement of comprehensive income if corrected in the current period No restatement corrects an error in the current period with no restatement of prior-period financial statements when the error is immaterial to the prior-period(s) financial statements and correcting the error in the current period is not material to the current-period financial statements 2019 Year-end Corporate Reporting Update Restatement themes General observations Top three topics 20181, 2 % Top three topics 20171, 2 %

Income taxes 15 Income taxes 13 Revenue recognition 10 Revenue recognition 12 Reclassifications (balance sheet), 5 each accrued liabilities and goodwill/intangible assets Stock compensation, expense recognition 6 each 1 Includes both Big R and Little r restatements. 2 Some companies restatements involved multiple errors and cited more than one reason for restating their financial statements.

Practices that may lessen the likelihood of errors/restatements include: Page 37 Identifying and understanding contractual terms (e.g., shipping terms that affect timing) Focusing timely on the effects that changes in business and other factors have on estimates Correcting identified errors as soon as practicable to avoid a Little r restatement due to an accumulation of individually immaterial errors 2019 Year-end Corporate Reporting Update Restatement themes Internal control considerations A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the companys annual or interim financial statements will not be prevented or detected on a timely basis As defined, a material weakness does not require that an

error exist in a companys financial statements, but rather that there be a reasonable possibility that a material misstatement could occur Page 38 2019 Year-end Corporate Reporting Update

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