Horizon Advisors

Avoid This Year‑End Financial Reporting Pitfall - Before It Becomes a Restatement Headache As we head into the final stretch of the calendar year, many finance teams are laser‑focused on closing the books on time. But one critical area often overlooked—and one that can come back to bite you—is error corrections vs. changes in accounting estimates/principles. Common mistake: Treating a prior period error as a “change in estimate” (or vice versa) to avoid restatement disclosures. Under U.S. GAAP or IFRS, if the misstatement arises from incorrect assumptions, omissions, or misapplication of GAAP in past periods, it should be corrected via a restatement (retrospective adjustment), not dressed up as an estimate tweak. — The way you measure and disclose it changes materially. — In fact, regulators have flagged accumulation of uncorrected errors on the balance sheet—with each year’s “small error” compounding unexpectedly large distortions. 3 actions to reduce risk now: Perform a “look‑back review” of prior years’ estimates and assumptions to check for signs of misapplication rather than legitimate change. Document the rationale rigorously — when a change is truly an estimate change, justify it with fresh information (e.g. new data, industry shifts), not hindsight. Engage auditors early when there’s risk of materiality or significant disclosure—even if you think the error is “small.” Their view on restatement vs. prospective treatment matters. For CFOs and reporting teams: this is not just a technical nuance. A misclassified “estimate change” can trigger restatement risk, erode investor confidence, and spark regulatory scrutiny. Visit us at https://lnkd.in/gP3tiQgs

Myth: “Technical accounting is just about digging through standards — it adds no strategic value.” Too many organizations still treat technical accounting as a purely compliance cost center — something relegated to journals, footnotes, and auditor back‑and‑forth. But that’s a flawed view. Reality check: -Technical accounting informs strategic decisions. Whether you’re evaluating an M&A, restructuring, lease vs buy, or software capitalization, judgmental accounting estimates influence transaction structure, timing, and disclosures. -It’s a radar for risk. Early technical accounting review can flag earnings volatility, restatement risk, or internal control gaps before they surprise stakeholders or trigger regulatory scrutiny. -It shapes narrative — not just numbers. In today’s environment, investors and regulators expect transparency on assumptions, sensitivities, and transitions. Technical accounting teams are uniquely positioned to bridge numbers and narrative. -Efficiency by design. If you embed technical accounting thinking early into your processes (not just at period close), you reduce “fire drills,” rework, and audit friction. Pro tip you can act on now: Choose one “strategic project” in your organization — say a new product launch, a major contract renegotiation, or integration planning — and mandate that a technical accounting reviewer is part of the planning team from day one (not afterward). Track how many accounting assumptions or structural changes shift because of early identification. When you do that, technical accounting stops being “compliance.” It becomes a strategic enabler and risk mitigator. Visit us at https://lnkd.in/gP3tiQgs

SOX Quick Tip for 2025 Simplify your SOX 404 compliance with smarter scoping. One of the biggest wins in SOX compliance is a sharper focus on top-down risk assessment. Internal audit and CFOs can align on a more strategic approach by: ✅ Reducing over-scoping—Reassess materiality thresholds and entity-level risk to eliminate low-risk controls from testing. ✅ Using automation wisely—Automated controls (especially IT-dependent ones) often require less testing and offer greater reliability. ✅ Rationalizing controls—Look for redundant or overlapping controls across entities or processes that can be streamlined. PCAOB and SEC enforcement is ramping up, but so are expectations for efficiency and strategic insight from Internal Audit. SOX programs that are lean, tech-enabled, and well-scoped deliver real value—without burning out your team. Your 2025 SOX goal: Fewer controls. Smarter testing. Stronger assurance. #SOXCompliance #InternalAudit #CFOInsights #RiskManagement #FinancialReporting #SOX2025 Visit us at https://lnkd.in/gP3tiQgs

Is Your Q3 2025 Filing Ready for a KPI Scrutiny Wave? As we get through Q3 2025, CFOs and reporting leaders should turn the spotlight on one critical area often overlooked amidst the rush to balance the books—KPI transparency. Why it matters now: In 2025, the FASB signaled a strategic shift—actively evaluating whether to bring commonly used non‑GAAP metrics like EBITDA and free cash flow into the formal reporting framework, potentially with standardized definitions and mandated disclosures. Quick‑win, step‑by‑step checklist for your Q3 10‑Q / MD&A: 1. List all non‑GAAP KPIs in your MD&A and risk discussions—especially EBITDA, adjusted earnings, free cash flow. 2. For each KPI, break down and disclose your exact calculation inputs (e.g., add‑backs, amortization, one‑time items). Transparency now can prevent future audit fatigue. 3. Link each KPI to strategic drivers or risks—investors and regulators increasingly expect clear rationale, not just numbers. 4. Tag variants of each KPI—e.g., “EBITDA (adjusted for X)”, and ensure consistency across filings. 5. Run a pre‑audit spotlight: flag where KPI formulas differ from peers—or even between your 10‑Q and an earnings press release. Consistency is your ally. Lead with confidence: Elevate your MD&A by going beyond performance reporting. This is not just about compliance—it’s about building credibility before FASB potentially tightens the rules. Visit us at https://lnkd.in/gP3tiQgs

Hot Topic for 2025: Non-GAAP Metrics & R&D Spending Under the Spotlight The FASB is turning its attention to two areas that spark plenty of hallway debates: Non-GAAP performance measures (like EBITDA and custom KPIs) How we account for R&D spending—especially software development Why it matters: ✅ Investors want more clarity and comparability ✅ New rules could reshape disclosures and how growth is shown on the balance sheet ✅ Early prep means fewer surprises (and smoother year-ends) Pro tip: Take stock of your current KPIs and R&D policies now. The more transparent and consistent they are today, the easier it’ll be to adapt tomorrow. 2025 is shaping up to be a big year for financial reporting. Are your metrics and disclosures ready for prime time? Come visit us at www.horizonadvisors.com

Common SOX Mistakes That Are Still Happening in 2025 – And What You Can Do About It Despite two decades of SOX being “business as usual,” many organizations are still making the same avoidable mistakes—often because today’s risks look different from those of even just a few years ago. One of the most common pitfalls in 2025? Underestimating the SOX impact of evolving IT environments. With the rapid adoption of AI, low-code/no-code tools, and cloud-based finance applications, many companies are seeing shadow systems pop up outside of IT’s control. These tools often support key financial processes—yet they're not evaluated for SOX impact, or they fall through the cracks in the risk assessment process. Here’s what we’re seeing: Finance and operational teams deploying bots or AI tools without change management protocols Cloud-based tools used in the close process without proper user access reviews Key reports and data transformations happening outside of the ERP, with no documented control around completeness or accuracy What to do about it: Reassess your SOX scoping and risk assessment in light of new tech adoption. Involve IT, internal audit, and business process owners early when new tools are introduced. Update your control set to include ITGCs and automated controls relevant to these platforms. This is a perfect time of year to address these risks before Q4 pressure hits. How is your organization managing the SOX risks that come with rapid tech adoption? Let’s discuss. #SOX #InternalControls #CFO #InternalAudit #Compliance #RiskManagement #FinancialReporting #AIinFinance #TechAdoption Visit us at https://lnkd.in/gP3tiQgs

Myth: “Materiality is just a numbers game.” Reality: Qualitative factors matter more than ever. As we move deeper into 2025, the SEC and PCAOB have made it clear: materiality isn't just about ticking quantitative thresholds—it's about what information a reasonable investor would consider important. This shift is especially relevant with increasing scrutiny on areas like: -Segment reporting -Non-GAAP measures -Climate and ESG disclosures We’re seeing more challenges to disclosures that, while numerically small, raise qualitative red flags—especially around consistency, transparency, and controls. If your financial reporting process still treats materiality as a static dollar threshold, now’s the time to reassess. A more nuanced, principles-based approach can: -Improve disclosure quality -Reduce SEC scrutiny -Build investor confidence Don't let outdated myths drive reporting decisions. #FinancialReporting #SECReporting #Materiality #ESGDisclosures #AccountingLeadership #FinanceStrategy #TechnicalAccounting Visit us at www.horizonadvisors.com

Q2 Close Tip: Reassess Segment Disclosures Consider the FASB’s new segment reporting standard (ASU 2023-07) during Q2 filing. Here’s what to prioritize now: -Review how your CODM (Chief Operating Decision Maker) currently uses financials—this drives disclosure. -Ensure disaggregated expense info is actually tracked—you can’t disclose what you don’t capture. -Evaluate whether internal changes (org structure, reporting lines) should trigger a reassessment of operating segments. Pro tip: Auditors and the SEC will be looking closely at consistency between MD&A, earnings calls, and your segment footnote. Make sure your story aligns across all fronts. #SegmentReporting #FASBUpdate #ASU202307 #SECReporting #Q2Close #FinancialReporting #TechnicalAccounting #CFOInsights Visit us at www.horizonadvisors.com.

SOX Compliance —It’s a Culture Shift. Too often, companies approach SOX implementation too late—or too lightly. Here’s a simple, step-by-step playbook for Internal Audit teams to get ahead of the curve and avoid the most common pitfalls: Start with Risk Don’t jump into controls. Begin with a top-down risk assessment tied to your financial reporting objectives. This sets the tone and scope. Define Roles Early Clarity beats cleanup. Who owns what? Internal audit, accounting, IT—ensure roles are defined before design begins. Design with Documentation in Mind Controls should be precise, testable, and clearly linked to risks. Avoid vague or manual-heavy processes that won’t scale. Involve IT from Day One Many deficiencies stem from access and change management gaps. If IT isn’t at the table early, you’re setting up for rework. Test Before Testing Perform a dry run. Too many teams skip walkthroughs or go straight to testing unproven controls. You want confidence, not guesswork. Keep the Board Informed SOX readiness is a governance issue. Regular updates—framed around risk, remediation, and cost—build trust and alignment. ✅ SOX doesn’t need to be painful. ✅ It does need to be intentional. If your team is heading toward SOX compliance—or feeling behind—it’s not too late to reset. Happy to share lessons learned from successful implementations that balanced rigor, efficiency, and cost. #SOXCompliance #InternalControls #FinancialReporting #TechnicalAccounting #SOX Visit us at www.horizonadvisors.com

Q2 2025 Financial Reporting: What’s Keeping Directors Up at Night? As Q2 filings approach, reporting leaders face a rapidly evolving landscape. Here are the top three common questions worth pondering: Are we fully ready for the FASB updates? This quarter brings ASU 2025‑03 (acquirer identification in VIE combinations) and ASU 2025‑04 (share‑based consideration to customers). These may seem narrow, but they can trigger shifts in transition planning, disclosure timing—and even audit scrutiny. How are we preparing for KPI & non‑GAAP standardization? In 2025, FASB is exploring formal definitions for metrics like EBITDA and R&D capitalization, and seeking comment on standard vs. industry‑specific models. If your team heavily leans on adjusted results, now is the time to evaluate consistency, reconciliation, and guardrails—and consider proactive disclosures before regulators do. What about geopolitical & trade volatility? From new US tariffs to unpredictability in tax policy, companies are grappling with uncertain exposures. Disclosure timing and segmentation may need fast thinking—especially in industries like manufacturing and tech. Have your segment teams already stress‑tested the impact of tariff swings? Key Takeaways for Q2 Success: Bring segment reporting and KPI standardization into your SOX and controls roadmap—don’t let them be afterthoughts. Build audit and SEC readiness for non‑GAAP standard updates by stressing reconciliations and definitions now. Get segment leaders aligned on geopolitical risk modeling; consider footnotes early. Curious where your peers stand—especially on embedding KPI definitions into internal reporting, or on stress‑testing tariff impacts across your P&L? Let’s connect and exchange approaches. Transparency in Q2 isn’t just compliance—it’s leadership. Visit us at www.horizonadvisors.com