July 26, 2022 | In the News

The Morning Ledger: SEC Seeks More Details From Companies on Russia-Linked Losses, Risks

Good morning. The Securities and Exchange Commission continues to grill companies on how they disclose the financial impact of Russia’s war on Ukraine and has asked many of them to make changes for future filings.

In May, the U.S. securities regulator published a list detailing the information it seeks from companies to ensure that investors can adequately assess risks. In recent weeks, it has sent out additional queries and, in some cases, follow-ups. Among the recipients were Citigroup Inc., United Parcel Service Inc., satellite-communications company Viasat Inc., petroleum-services provider Core Laboratories NV and United Maritime Corp., a shipping business that recently went public.

In letters released this month, the SEC asked Core Laboratories for more details on its unrepatriated earnings in Russia. Like many international companies, the Amsterdam-based provider of technology to oil producers, hasn’t been able to move its cash—$12 million—out of Russia because of a Russian ban on the repatriation of earnings from Russian businesses. Core Laboratories in April said its tax rate was affected by the release of withholding tax related to the earnings of the subsidiary, JSC Petroleum Analysts.

Under U.S. accounting rules, companies must accrue a withholding tax liability on unrepatriated earnings that they plan to transfer from a foreign subsidiary to the parent company. The release of $600,000 in withholding tax tied to unrepatriated earnings of its Russian subsidiary increased its tax rate, Kevin Daniels, the company’s chief accounting officer, said in a June 2 letter.

The Day Ahead

Alphabet Inc., McDonald’s Corp., Microsoft Corp. and Visa Inc. are among the companies scheduled to release earnings today.

The Conference Board’s index of consumer confidence, which measures American attitudes toward jobs and the economy, is expected to have declined in July.

Latest From CFO Journal

KPMG Is Fined $17.3 Million in U.K. for Audit Shortfalls

The U.K.’s audit and accounting regulator fined KPMG LLP and sanctioned five former employees for providing false and misleading information in relation to two audits, one of them of the now-defunct Carillion PLC.

Corporate News

Walmart Inc. warned that higher prices for food and fuel were causing consumers to pull back, an ominous sign for the U.S. economy that has relied on resilient household spending to power through rising inflation.

The country’s largest retailer, which said in May that it was stuck with too many unsold goods, said on Monday it was having to cut prices to reduce merchandise levels at its flagship and Sam’s Club chains.

The U.S. Energy Department said it would lend a General Motors Co. joint venture $2.5 billion to fund the construction of three battery-cell factories, part of the Biden administration’s plans to jump-start the market for electric cars.

Whirlpool Corp. said it lost $371 million in the second quarter stemming from the appliance maker’s exit from its business in Russia, and cut its profit outlook for the year.

Alibaba to Pursue Primary Listing in Hong Kong

Weber CEO Out as Grill Maker Withdraws Guidance, Suspends Dividend

Redwood Materials Plans $3.5 Billion Battery-Materials Plant in Nevada

Shell to Proceed With Jackdaw Natural-Gas Project as U.K., Europe Seek New Supply

Significant Digits

71%

The amount of private U.S. companies that don’t know how much their leases cost their business, in part due to a lack of centralized data, according to a survey of 200 finance and accounting professionals by software provider Visual Lease LLC.

Regulation

Tesla Inc. said it recorded a $170 million impairment charge against the carrying value of its bitcoin holdings for the first six months of the year.

Because accounting rules define digital assets as indefinite-lived intangible assets, Tesla said it must recognize impairment charges to reflect any decrease in the fair value of cryptocurrencies held by the company below their carrying values.

“We are certainly open to increasing our bitcoin holdings in future, so this should not be taken as some verdict on bitcoin.” — Tesla Chief Executive Elon Musk said on a quarterly earnings call, referring to the electric-car maker’s recent sale of $936 million worth of bitcoin.

Cargill Inc. and the newly formed Wayne-Sanderson Farms have agreed to pay $85 million to settle claims they violated antitrust laws by sharing information about poultry workers’ wages.

New federal investigations into the deepening hush-money scandal enveloping World Wrestling Entertainment Inc. hastened the retirement of its chief executive, Vince McMahon, according to people familiar with the matter.

U.S. House lawmakers are delaying consideration of a bipartisan bill to curb potential risks posed by so-called stablecoins, according to people familiar with the matter, pushing back a vote on the measure for at least several weeks.

China tried to build a network of informants inside the Federal Reserve system, at one point threatening to imprison a Fed economist during a trip to Shanghai unless he agreed to provide nonpublic economic data, a congressional investigation found.

Former Goldman Sachs Banker Charged in Insider-Trading Scheme

Markets

Barclays debt-market blunder was bigger than previously thought. PHOTO: PETER NICHOLLS/REUTERS

Barclays PLC said on Monday that it had uncovered $2.4 billion more in notes sold than it had registered with the U.S. Securities and Exchange Committee to sell, increasing its previous overshot estimate.

In March, the British bank said it had sold more securities–$15.2 billion more–than allowed under a plan it registered with the U.S. Securities and Exchange Commission. The flub involved the sale of structured notes, or debt instruments linked to an underlying reference such as the S&P 500 index, and exchange-traded notes. On Monday, it revised the oversold amount a bit higher.

The world’s pool of negative-yielding debt has shrunk to a roughly seven-year low, as an era of exceptionally loose monetary policy draws to a close in most major economies.

CFO Moves

Wrap Technologies Inc., a Tempe, Ariz.-based maker of law-enforcement equipment, appointed Chris DeAlmeida as chief financial officer. Mr. DeAlmeida most recently served as CFO at Encore Dredging Partners LLC, a dredging-services firm.

Mr. DeAlmeida is set to succeed Jim Barnes, who will continue at the company as a consultant, Wrap said.

Hometap Equity Partners LLC, a Boston-based alternative-loan provider, appointed Eugene Wong as its chief financial officer. Mr. Wong most recently served as vice president of strategy and finance at Forward Financing, a financial-technology firm.

Parsons Corp., a Centreville, Va.-based security-technology provider, named Matt Ofilos as chief financial officer. Mr. Ofilos, who joined last year as executive vice president of finance, succeeds George Ball, who had been chief financial officer since 2008 and will remain in an advisory capacity through September, Parsons said.

Naked Wines PLC, a London-listed online wine retailer, appointed James Crawford interim chief financial officer. Mr. Crawford, who previously served as CFO from 2015 to 2020, is set to serve on an interim basis until June 2023. The company said CFO Shawn Tabak stepped down from his role on July 22.

Source: The Wall Street Journal