Explorer

The issuer used (1) store-level operating results to evaluate whether any impairment indicators existed for its long-lived assets including lease right-of-use assets and (2) store-level cash-flow forecasts to evaluate the recoverability of certain of these assets. The issuer excluded certain costs from these analyses. The following deficiencies were identified: · The firm selected for testing a control that included the issuer's reviews of these operating results and cash-flow forecasts. The firm did not evaluate the specific review procedures that the control owner performed to assess the appropriateness of excluding these costs. (AS 2201.42 and .44)

In the current year the issuer identified events indicating that its operating lease right-of-use assets may not be recoverable and performed an impairment analysis. The issuer determined that for certain of these assets (the 'valued assets') the fair value of the individual assets would not be impaired by more than a pre-determined percentage of the asset's recorded value (a 'maximum impairment percentage'). The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of its assessment of these assets for possible impairment. The firm did not evaluate the specific review procedures that the control owner performed to assess the reasonableness of the maximum impairment percentage. (AS 2201.42 and .44)

The firm selected for testing a control that included the issuer's review of forecasts used in the issuer's analysis of possible impairment of operating lease right-of-use assets. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of the revenue growth rates that the issuer used in these forecasts. (AS 2201.42 and .44)

The firm tested controls that included the issuer's review of forecasts used in its analysis of possible impairment of its operating lease right-of-use assets and determined that they were ineffective because an aspect of these controls was not operating effectively. The firm concluded that this deficiency represented a significant deficiency primarily based on its conclusion that the remaining aspect of these controls was operating effectively. The firm did not sufficiently evaluate whether this deficiency represented a material weakness because in its testing of this remaining aspect the firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of certain revenue forecasts that the issuer used in its analysis. (AS 2201.62)

The firm selected for testing two controls that consisted of the issuer's (1) evaluation of its leases for potential implications with respect to the accounting for its leases upon adoption of FASB ASC Topic 842 Leases and (2) review of the disclosures related to that adoption. The firm did not evaluate the specific review procedures that the control owner performed to evaluate the completeness of the population of leases that should have been subject to these controls. (AS 2201.42 and .44)

The firm selected for testing a control that included the review of the issuer's accounting for leases for conformity with FASB ASC Topic 842 Leases. The firm did not evaluate the review procedures that the control owner performed including the procedures to identify items for follow up and the procedures to determine whether those items were appropriately resolved. (AS 2201.42 and .44)