Accounting Year In Review: 2005

BDO USA, LLP prepared this Financial Reporting letter to help our clients anticipate and respond to questions that may arise in connection with financial statements for 2005.

Executive Summary

2005 was a year of continued pressure for companies and for financial reporting. The top challenges included:

• Risks and uncertainties associated with natural disasters, airline bankruptcies, rising interest rates, and spiraling energy costs.

• Fresh insights provided by the intense regulatory scrutiny of the past few years, especially initial experiences with internal control reporting.

• A record-breaking number of restatements by public companies.

• Mounting controversy over the benefits of expanded consolidation criteria to users of private company financial statements.

• Staggered effective dates and numerous implementation issues for complex standards, such as accounting for stock options.

More than ever before, the key to successful reporting is to sort through the lessons learned, go beyond the minimum requirements, and select the prac-tices best suited to your business and the users of your financial statements. Throughout this Financial Reporting letter, you will find comments on basics and best practices. We hope you find these summaries useful in preparing your 2005 financial statements and in the months to come.

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