Greetings,

The Securities and Exchange Commission is mulling changes to audit inspections and other rules. Some of these changes are likely welcomed, but come after a few busy years of changes and stringent enforcement activity. The real question is: will these changes stick? Or will we just be whipsawed back in the other direction in a few years? What do you think? 

Also in this edition:

• Companies warn of post-holiday price increases due to tariffs 🏷️
• Households more pessimistic, but inflation outlook steady 😑
• Large-scale M&A momentum expected to carry into 2026 ⛷️
• AI chip depreciation accounting debate widens 🤼
• SEC to push for global cooperation on accounting standards 🤝

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The Securities and Exchange Commission is considering a series of potential changes to audit inspections and conflict-of-interest rules. Chief SEC Accountant Kurt Hohl said accounting watchdogs must carefully consider the compliance burden when implementing new disclosure rules. "What we don't want to happen is essentially a high compliance cost to dissuade companies from accessing the public market," Hohl said at a Monday conference.

Economists and retail executives caution that the full impact of President Donald Trump's tariffs will intensify in early 2026. Companies have largely managed to shield consumers from the full brunt of tariffs throughout 2025 by employing tactics such as stockpiling pre-tariff inventory, cutting expenses and distributing price increases selectively across products. However, executives from companies such as Williams-Sonoma and Kohl's now acknowledge that these strategies are reaching their limits, with plans to implement broader price increases to protect margins after holiday discounts end.

US households became more pessimistic about their current financial situations in November, according to the New York Federal Reserve's Survey of Consumer Expectations. Thirty-nine percent of respondents report that their financial situation has worsened over the past year, the highest percentage in two years. One-year inflation expectations remained steady at 3.2%, with the three- and five-year outlooks at 3%.

A majority of the US Supreme Court on Monday appeared inclined to rule in favor of President Donald Trump's firing of Federal Trade Commission member Rebecca Slaughter without cause. Such a decision would reverse a precedent that the court set 90 years ago, with US Chief Justice John Roberts calling the Humphrey's Executor decision "a dried husk of whatever people used to think it was." Justice Ketanji Brown Jackson said overturning the ruling would enable the president to "fire all the scientists and the doctors and the economists and the Ph.D.s and replace them with loyalists and people who don't know anything."

The Bank for International Settlements has raised concerns about a potential "double bubble" in gold and stocks, noting that the simultaneous surge in both assets is a phenomenon not seen in at least 50 years. Gold has surged 60% this year, driven by central bank purchases and increased interest from retail investors, while gains in AI and technology have buoyed equity markets.

Large-scale M&A deals surged in the second half of the year and are expected to continue in 2026 despite ongoing geopolitical uncertainties, according to Willis Towers Watson. Analysts attribute the momentum to pent-up demand, stable interest rates and stock market strength. Buyers are shifting their strategies toward portfolio optimization via de-conglomeration and "buy and build" approaches, and the market is set to benefit from increased private equity activity resulting from undeployed capital and more accessible debt markets.

Neo-cloud companies like IREN and CoreWeave are increasingly utilizing convertible bonds as a strategic tool to finance the acquisition of AI chips, which are essential to their business models. IREN recently completed a $2 billion convertible bond offering, while CoreWeave announced a similar plan. The funding approach enables these firms to access capital at lower interest rates and with less leverage compared to traditional debt, although it does come with risks, such as future debt maturities and potential stock dilution.

Tariffs are having a pronounced negative impact on middle-market goods firms, with 47% of product leaders in the segment describing the financial consequences as mostly or completely negative. Goods firms are also more likely than their services counterparts to expect operational disruptions, such as shortages and delays, as well as increased costs from supply chain reconfiguration. Their ability to respond is limited by high sunk costs in inventory and production, making it harder to discontinue affected products or raise prices compared to services firms.

A debate has emerged over the accounting treatment of the depreciation of AI chips and other equipment. Big tech firms have recently extended the estimated useful life of their AI chips and supporting equipment, from as little as three years in 2020 to as long as six years, reducing depreciation expenses by billions. These changes have a substantial impact on reported expenses and profits, drawing investor scrutiny and fueling discussions about accounting practices across the industry.

The Securities and Exchange Commission is intensifying its efforts to promote global coordination in accounting and auditing standards. Chairman Paul Atkins and Chief Accountant Kurt Hohl highlighted the importance of closer collaboration with international bodies such as the International Auditing and Assurance Standards Board and the International Accounting Standards Board. Aligning US and global standards could reduce costs and complexity for multinational companies, enhance investor confidence and mitigate risks associated with fragmented regulations.

Private credit is increasingly mirroring the public bond market as rapid growth pushes the asset class into areas once dominated by high-yield bonds and leveraged loans. Assets under management are projected to reach $5 trillion by 2029, and lenders now offer private versions of nearly every major fixed-income segment. Experts say the convergence is driven by banks pulling back, borrowers seeking bespoke financing, and investors chasing yield. They warn that rising competition could pressure underwriting standards, increasing risks around leverage, liquidity, and potential market stress.

Robert Fantazia, former CFO of Cebro Frozen Foods, is accused in a civil lawsuit of diverting over $4.3 million from the company to his personal accounts, benefiting both himself and his family. The suit alleges that Fantazia used the funds to finance a lavish lifestyle, including luxury vehicles, jewelry and real estate, all while maintaining exclusive access to company financial systems and discouraging oversight measures.