Current Financial Reporting Trends

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determines VSOE for program management support based on hourly rates when services are performed separately. Deferred revenue is recorded for products or services that have not been provided but have been invoiced under contractual agreements or paid for by a customer, or when products or services have been provided but the criteria for revenue recognition have not been met. If there is a customer acceptance provision or there is uncertainty about customer acceptance, revenue is deferred until the customer has accepted the product or service. Approximately 10% of segment revenues (4% of consolidated revenues) are recognized when products are delivered (when title and risk of ownership transfers) or when services are performed for unaffiliated customers. Products include the Eurovision digital video surveillance systems. Test Segment: Within the Test segment, approximately 65% of revenues (18% of consolidated revenues) are recognized when products are delivered (when title and risk of ownership transfers) or when services are performed for unaffiliated customers. Certain arrangements contain multiple elements which are accounted for under the provisions of EITF 00-21, "Revenue Arrangements with Multiple Deliverables." The multiple elements generally consist of materials and installation services used in the construction and installation of standard shielded enclosures to measure and contain magnetic and electromagnetic energy. The installation process does not involve changes to the features or capabilities of the equipment and does not require proprietary information about the equipment in order for the installed equipment to perform to specifications. There is objective and reliable evidence of fair value for each of the units of accounting, as a result, the arrangement revenue is allocated to the separate units of accounting based on their relative fair values. Typically, fair value is the price of the deliverable when it is regularly sold on a stand-alone basis. Approximately 35% of the segment’s revenues (10% of consolidated revenues) are recorded under the percentage-of-completion provisions of SOP 81-1, "Accounting for the Performance of Construction-Type and Certain Production-Type Contracts" due to the complex nature of the enclosures that are designed and produced under these contracts. Products accounted for under SOP 81-1 include the construction and installation of complex test chambers to a buyer's specifications that provide its customers with the ability to measure and contain magnetic, electromagnetic and acoustic energy. As discussed above, for arrangements that are accounted for under SOP 81-1, the Company estimates profit as the difference between total estimated revenue and total estimated cost of a contract and recognizes these revenues and costs based on either (a) units delivered or (b) contract milestones. If a reliable measure of output cannot be established, (which applies in less than 8% of Test segment revenues or 2% of consolidated revenues) input measures (e.g., costs incurred) are used to recognize revenue. Given the nature of the Company’s operations related to these contracts, costs incurred represent an appropriate measure of progress towards completion. The percentage-of-completion method of accounting involves the use of various estimating techniques of expected costs at completion. These estimates are based on Management’s judgment and the Company’s extensive experience in developing these types of estimates. Internal Control Effectiveness This comment was repeated for eight companies in the sample with specific reference to Exchange Act Rule 13a-15(e) http://www.sec.gov/about/laws/sea34.pdf. Examples follow: Comment #254 – Form 10-K; SIC: 4911 Electric Services We note your disclosure that your "principal executive officer and principal financial officer concluded that your disclosure controls and procedures are effective to provide assurance that the information required to be disclosed by the Company in reports Filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified 7
in the rules and forms of the SEC." Please confirm to us, if true, that your officers concluded that your disclosure controls and Procedures are also effective to ensure that information required to be disclosed in the reports that you file or submit under the Exchange Act is accumulated and communicated to your management, including your chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure. Otherwise, please explain to us in detail why your officers were unable to come to this conclusion. Refer to Exchange Act Rule 13a-15(e). In future filings please include this information in your discussion of disclosure controls and procedures. Comment #373 – Form 10-K; SIC: 5140 Wholesale-Groceries & Related Products You state that your management evaluated the effectiveness of your disclosure controls and procedures, as defined in Exchange Act Rule 13a-15 and 15d-15. However, your principal executive and financial officers only concluded that your disclosure controls and procedures were effective "in ensuring that information required to be disclosed in this annual report was recorded, processed, summarized and reported within the time periods required by rules and regulations of the SEC." Please confirm for us, if true, that the same officers concluded the controls and procedures were effective in "ensur[ing] that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure." See Exchange Act Rule 13a-15(e). Revise future filings accordingly. Comment #570 – Form 10-K; SIC: 5047 Wholesale-Medical, Dental & Hospital Equipment & Supplies We note your principal executive and financial officers concluded that your disclosure controls and procedures were effective, "to ensure that all material information required to be disclosed by [you] in reports that [you] file or submit under the Exchange Act is recorded, processed, summarized and reported as specified in the SEC`s rules and forms." Please revise future filings to also state, if true, whether the same officers concluded the controls and procedures were effective in "ensur[ing] that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer`s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure." See Exchange Act Rule 13a-15(e). Additionally, please confirm to us that your conclusion regarding effectiveness would not change had such statements been included in this filing. Comment #268 – Form 10-Q; SIC: 3490 Miscellaneous Fabricated Metal Products We note that your chief executive officer and chief financial officer concluded that your disclosure controls and procedures "are designed and were effective to give reasonable assurance that information we disclose in reports filed with the Securities and Exchange Commission is recorded, processed, summarized and reported..." This is an incomplete definition of disclosure controls and procedures per Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Please revise your disclosure to clarify, if true, that your officers concluded that your disclosure controls and procedures are effective to ensure that information required to be disclosed by you in the reports that you file or submit under the Exchange Act is accumulated and communicated to your management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Comment #688 – Form 10-Q; SIC: 3576 Computer Communications Equipment We note your disclosure that your disclosure controls and procedures are effective to ensure that the information required to be disclosed "is recorded, processed, summarized and reported within the time periods specified in the SEC`s rules and forms." Exchange Act Rule 13a-15(e) also requires that you conclude whether your disclosure controls and procedures are designed to ensure that the "information required to be disclosed in the reports that you file or submit under the Exchange Act is accumulated and communicated to your management, including your chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure." 8
Page 1 and 2: Current Financial Reporting Trends:
Page 3 and 4: Current Financial Reporting Trends:
Page 5 and 6: Introduction At the most recent Fin
Page 7 and 8: In connection with responding to ou
Page 9: As suggested by the Staff, Manageme
Page 13 and 14: Consolidated Interest Expense Ratio
Page 15 and 16: The underlying reasons for changes
Page 17 and 18: Please tell us how you have applied
Page 19 and 20: • Describe the accounting for int
Page 21 and 22: information disclosed in your fisca
Page 23 and 24: accounted for as discontinued opera
Page 25 and 26: tax payable. As such, no interest a
Page 27 and 28: anticipate that such a trend may si
Page 29 and 30: About the Authors Cheryl de Mesa Gr
Page 31: usiness / research

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