The Financial Accounting Standards Board issued an invitation to comment Thursday requesting input on financial key performance indicators such as EBITDA and free cash flow and how they should be treated.

FASB is defining a financial KPI as a financial measure that is calculated or derived from the financial statements and/or underlying accounting records that is not presented in the GAAP financial statements. That includes measures that come from amounts presented in the financial statements, measures derived from adjusting amounts presented in the financial statements, and measures derived from or calculations based on other information included in the financial statements or other financial records. 

Some examples of financial KPIs include earnings before interest, taxes, depreciation and amortization (EBITDA); free cash flow (FCF); organic sales growth; and adjusted net income.

Patrick Dorsman/Financial Accounting Foundation

Accounting Today asked FASB chair Richard Jones during a press conference Tuesday at Financial Executives International’s Current Financial Reporting Insights conference about whether the KPI project would address the concerns that the Securities and Exchange Commission has raised about the use of non-GAAP measures in financial reporting.

“Whether they’re concerned about them and which ones they are and aren’t, I’ll leave to them,” said Jones. “We have heard from some stakeholders that we should be considering whether there are certain financial KPIs that should be brought into the financial statements. Now, what does that mean? For some that might mean, are there some financial KPIs that could benefit with a standardized definition, say a single definition of EBITDA, and what goes into that? For others, it may simply mean, what industries does it make sense to provide a KPI in the financial statements? Alternatively, some look at it and say, ‘Well, maybe there are KPIs that the company’s already using. Is there a way under a management type approach to bring them into the financial statements, or should potentially, they not be included in the financials?’ So it’s really us getting input on all those issues. Depending on what we hear from that ITC, we’ll bring that back to our board, and our board will be able to make decisions on [whether] there’s a need for standard-setting in this area.”.

FASB is issuing the invitation to comment as part of a research project on financial key performance indicators for business entities. An ITC is a staff document prepared at the direction of the FASB chair in which the board does not express any preliminary views. Responses to the questions in the ITC will help inform FASB as it considers whether to add a project on financial KPIs to its technical agenda and, if it’s added, to determine the objective and scope of the project.

During previous outreach, including a 2021 agenda consultation, FASB heard feedback from constituents that a project on financial KPIs should be considered. But they expressed different views about the nature and extent of the perceived issues, whether the board should add a project to its technical agenda, and, if a project is actually added, what the objective of the project should be.

FASB staff issued the ITC to hear more feedback on potential standard setting for financial KPIs, including whether financial KPIs should be standardized and, if so, which ones? Another question is :Should financial KPIs be required or permitted to be disclosed in an entity’s GAAP financial statements and, if so, when and for what types of entities?

FASB is asking for comments on the ITC by April 30, 2025.

The Public Company Accounting Oversight Board adopted a rule amendment Thursday that enables the PCAOB to address situations in which a registered firm has ceased to exist, is nonoperational or no longer wishes to remain registered.

It would apply when firms fail to file annual reports on PCAOB Form 2 and pay annual fees for at least two consecutive reporting years. Via Form 2, registered auditing firms give the PCAOB important information such as each audit client for which that firm issued any audit reports during a reporting period. 

“Firm registration is a cornerstone of the PCAOB’s operations,” said PCAOB chair Erica Williams in a statement at the PCAOB’s meeting Thursday. “Firms are required by the Sarbanes-Oxley Act to register with the PCAOB in order to perform audits of publicly traded companies and SEC-registered broker-dealers or to play a substantial role in those audits.  In addition to registering, filing an annual report through what’s called Form 2, allows the PCAOB to keep track of the firms who are eligible to perform those audits and to understand which audits, if any, they are performing. In turn, the PCAOB then uses that information for many purposes, including planning its inspections program, which inspects over 800 issuer audits in more than 30 jurisdictions around the world each year.”

The PCAOB noted that as of Aug. 31, 2024, 80 registered firms have not filed annual reports and have not paid annual fees for both the 2022 and 2023 reporting years.

“These firms include, for example, sole proprietorships that remain registered even though the sole proprietor has died; firms that registered with the board years ago but now appear to be defunct; and small firms, often in foreign countries, that cannot be reached through the primary contact person designated by the firm,” said Williams.

Those delinquencies obstruct the PCAOB’s ability to maintain an accurate list of registered firms that wish to maintain their registrations; ensure that Form 2 information is being reported to the public; collect mandatory annual fees; and use PCAOB staff time and resources efficiently.

“The amendment adopted today will not only make registration information more useful for investors, audit committees and other stakeholders, it will also improve the efficiency and effectiveness of our organization,” Williams stated. 

The rule amendment would treat a PCAOB-registered firm’s failures both to file annual reports with the PCAOB and to pay annual fees to the PCAOB for at least two consecutive reporting years as a constructive request for leave to withdraw from PCAOB registration; and deem the firm’s registration withdrawn.

After the PCAOB issued the proposal in February of this year that included the amendment, the board received feedback from various commenters. While those commenters were generally supportive of the proposed amendment, the PCAOB also made changes to address stakeholder feedback. For example, the February proposal originally included a 30-day period for firms to send an email to the PCAOB’s Registration staff to stop the withdrawal process. In response to stakeholder input, the 30-day period was extended to 60 days. The February proposal also included a proposed new Rule 2400 regarding false or misleading statements concerning PCAOB registration and oversight. The PCAOB said it’s continuing to consider next steps regarding proposed Rule 2400.

PCAOB board member Christina Ho said during the meeting she had originally supported the proposal, but now has reservations about the timing. 

‘Notwithstanding my support today for this ‘good housekeeping’ rule, I am deeply concerned about the possibility of the PCAOB adopting in the weeks ahead a series of ‘midnight regulations’ that could overwhelm the institutional review process, both here and at the Securities and Exchange Commission, that helps ensure that regulations have been carefully considered, are based on sound evidence, and can justify their costs,” she stated. “Moreover, correspondence from at least one member of a relevant committee of Congress has called on the federal financial regulatory agencies to suspend the proposal or promulgation of any regulations before the end of the current Administration. Modernizing our standards and rules is important, but if we rush to get things done before any changes in the composition of the Commission, we could end up wasting taxpayer dollars by adopting ill-considered rules and running our professional staff ragged while at the same time undermining the democratic process.”

Another PCAOB board member, George Botic, expressed his support for the rule amendment. “One area of focus for me over the past year has been the need for increased transparency,” he stated. “I believe that improved transparency and accessibility of PCAOB oversight activities on our website, in particular registration and inspection information, will help to better inform and equip investors, audit committee members, academics, and other stakeholders to not only understand our work but also to make better informed decisions. While I am hopeful for more efforts in this regard, I have been pleased with our work to date. Hand in hand with promoting transparency comes the responsibility to do our best to ensure that the information on the PCAOB’s website is not only accurate, but also useful and informative to a wide variety of stakeholders.”

The amendment is subject to approval by the Securities and Exchange Commission. If it’s approved by the SEC, the amended rule will take effect initially for annual reports and annual fees that are due in 2025, so a registered firm that doesn’t file an annual report and doesn’t pay an annual fee for both the 2025 and 2026 reporting years could be deemed withdrawn from registration under Rule 2107(h) starting in the fall of 2026.

Citrin Cooperman, a Top 25 Firm based in New York, is acquiring most of the assets of the Clearview Group, a management consulting and CPA firm based in Owings Mills, Maryland, in the Baltimore area, its second acquisition in two days.

Citrin has been doing a string of acquisitions since receiving private equity funding in 2021 from New Mountain Capital. It sees the latest deal as a transformative one, strengthening its presence in the Mid-Atlantic region and enhancing its capabilities in risk advisory, state and local tax, and technology solutions and implementation. The deal will add 10 partners and over 150 professionals to Citrin.

Financial terms of the deal were not disclosed. Citrin Cooperman ranked No. 18 on Accounting Today’s 2024 list of the Top 100 Firms, with $700 million in annual revenue, more than 450 partners and over 2,800 employees.  

“We could not be happier to add a firm like Clearview Group to the Citrin Cooperman family,” said Citrin Cooperman Advisors LLC CEO Alan Badey in a statement Thursday. “Clearview Group’s ability to expand our service offering and offer up-market solutions to our client base will allow us to continue to help our clients Focus on What Counts. Clearview Group’s focus on a strong culture and technical excellence will fit perfectly with Citrin Cooperman.”

Since receiving private equity funding, Citrin has adopted an alternative practice structure with a split between the attest and non-attest sides. As with several of its deals involving other CPA firms, the transaction will consist of two acquisitions: Citrin Cooperman Advisors LLC will acquire the non-attest assets of Clearview Group, Inc. while Citrin Cooperman & Company, LLP will acquire the attest assets of BD & Co., Inc., Clearview’s licensed CPA firm. The deal is expected to close later this month.

“We are thrilled to be joining Citrin Cooperman,” said Clearview Group CEO Brian Davis in a statement. “With Citrin Cooperman’s expansive geographical presence and impressive suite of world-class professional services and industry insights, this transaction enables us to expand the reach of our industry-leading risk and enterprise solutions to continue to provide clear solutions to the complex problems large corporations are facing in today’s ever-evolving market conditions.”

On Wednesday, Citrin announced the acquisition of Signature Analytics, a San Diego-based outsourced accounting and advisory firm. Earlier this year, the firm acquired Teplitzky & Co.,  an accounting, consulting and tax firm that specializes in the health care industry based in Woodbridge, Connecticut; S&G, an assurance, tax and advisory firm based in Worcester, Massachusetts; Maier Markey & Justic, a provider of outsourced accounting, controllership, CFO, human resources and taxation services  in White Plains, New York; Keefe McCullough & Co., a tax, attest and business advisory firm based in Fort Lauderdale, Florida; Mibar, a business software consulting firm in New York; and Coleman Huntoon & Brown, in Chapel Hill, North Carolina. Last year, it added Gettry Marcus, a Regional Leader based in Woodbury, New York; FMT Consultants, a California-based consulting firm; and Berdon, a Top 50 Firm based in New York. In 2022, Citrin acquired Murray Devine Valuation Advisors, an independent advisory firm headquartered in Philadelphia; Untracht Early, in Florham Park, New Jersey; Shepard Schwartz & Harris in Chicago; Kingston Smith Barlevi in Los Angeles; McNulty & Associates in Westford, Massachusetts; Appelrouth, Farah & Co. in Coral Gables, Florida; Bloom, Gettis & Habib in Miami; as well as music industry consultancy Massarsky Consulting in New York. In 2021, it added OLC Management, a California-based business management firm.