Business Context and Reporting Period
This Form 8-K is a current report filed by Kohlberg Capital Corporation (noted as BCP Investment Corp in metadata) on January 27, 2010. The filing addresses Item 4.01, reporting a change in the registrant's certifying accountant.
Key Financial Metrics
The filing text does not provide specific values for revenue, profit, cash flow, margins, debt, or liquidity. The document focuses exclusively on the engagement of a new accounting firm and the nature of prior accounting disagreements.
Material Changes
- Accountant Change: On January 27, 2010, the Company engaged Grant Thornton LLP as its new independent registered public accounting firm.
- Prior Disagreement: The Company previously disclosed a disagreement with its former accountant, Deloitte & Touche LLP, regarding the methodology and procedures used to value investments under SFAS 157 (Fair Value Measurements) for the fiscal year ended December 31, 2008, and interim periods ended March 31, 2009, and June 30, 2009.
Guidance, Outlook, and Management Commentary
Management and the audit committee discussed fair value accounting with Grant Thornton prior to engagement. Grant Thornton expressed general views on SFAS 157, including:
- Market quotations or trades for Level 3 (illiquid) assets may not be heavily weighted due to the lack of an active market or potential distress.
- Credit quality should be considered in fair value determinations.
- Loan amendments or repricings may not reflect market transactions if completed on disadvantageous terms to the borrower.
- At December 31, 2008, it was unlikely that a LIBOR floor provision would result in a fair value determination in excess of par.
- It was unlikely that an asset would be valued in excess of par as of December 31, 2008, given prevailing market conditions.
The Company believes Deloitte might disagree with at least some of the views expressed by Grant Thornton. Grant Thornton was requested to review the disclosure and provide a letter to the SEC regarding any new information or disagreements.
Investor Verification Checklist
- Verify the specific terms of the engagement letter with Grant Thornton LLP.
- Review the prior Form 8-K filed on January 19, 2010, for details on the disagreement with Deloitte regarding SFAS 157.
- Monitor for the receipt of the letter from Grant Thornton to the SEC regarding their agreement or disagreement with the Company's disclosure.
- Assess the potential impact of the accounting methodology change on the valuation of the Company's investment portfolio.