Business Context and Reporting Period
This Form 8-K Current Report was filed by Cheniere Energy, Inc. on March 18, 2014. The filing discloses a change in the Company's independent registered public accounting firm.
Key Financial Metrics
This filing does not contain financial performance data such as revenue, profit, cash flow, margins, debt, or liquidity metrics. The document focuses exclusively on the appointment of a new auditor and the dismissal of the previous one.
Material Changes
- Appointment of New Auditor: The Audit Committee approved the appointment of KPMG LLP as the independent registered public accounting firm for the fiscal year ending December 31, 2014.
- Dismissal of Previous Auditor: The Committee approved the dismissal of Ernst & Young LLP (EY) as the independent registered public accounting firm.
- Audit History: EY's reports for the years ended December 31, 2013 and 2012 were unqualified and did not contain adverse opinions, disclaimers, or modifications regarding uncertainty, audit scope, or accounting principles.
- Disagreements: There were no disagreements with EY on accounting principles, practices, financial statement disclosure, or auditing scope/procedure during the fiscal years ended December 31, 2013 and 2012, or through March 18, 2014.
Consultations and Accounting Matters
The Company consulted with KPMG regarding several complex accounting matters prior to the appointment, including:
- ASC 810 (Consolidation): Application to variable interest entities and the consolidation of Cheniere Energy Partners, L.P.
- ASC 480, 815, 470, and 260: Classification of Class B units (debt vs. equity), identification of embedded derivatives, beneficial conversion features, and earnings per share effects.
- Debt and Hedging: Accounting for debt issuance costs, embedded derivatives, and cash flow hedge accounting for interest rate swaps.
- Compensation and Equity: Application of ASC 718 and ASC 505 to stock compensation plans.
The Company confirmed that its accounting treatment for these matters was consistent with KPMG's views and had been discussed with EY and reflected in the 2012 and 2013 audited financial statements.
Investor Verification Checklist
- Verify the content of the letter from Ernst & Young LLP (Exhibit 16.1) to confirm their agreement with the Company's statements regarding the dismissal.
- Review the letter from KPMG LLP (Exhibit 16.2) for any clarifications or disagreements with the Company's description of consultations.
- Confirm that no "reportable events" or disagreements occurred during the tenure of the previous auditor.
- Monitor future filings for the first audited financial statements prepared under the new auditor for the fiscal year ending December 31, 2014.