Business Context and Reporting Period
This Form 8-K was filed by BRT Apartments Corp. on June 18, 2020. The filing addresses a significant change in the company's independent registered public accounting firm and the underlying reasons for this decision, specifically related to the accounting treatment of real estate ventures.
Key Financial Metrics
This filing does not report specific revenue, profit, cash flow, margin, debt, or liquidity figures. The document focuses exclusively on the dismissal of the prior auditor and the appointment of a new one.
Material Changes and Accounting Disagreements
- Dismissal of BDO: On June 18, 2020, BRT Apartments Corp. dismissed BDO USA, LLP as its independent auditor. This decision was approved by the audit committee.
- Adverse Opinion: BDO issued an adverse opinion on the effectiveness of internal controls over financial reporting in its May 15, 2020 report. This was due to the company's failure to maintain effective controls regarding the accounting for real estate ventures under ASC Topic 810 (Consolidation).
- Accounting Disagreement: A disagreement existed regarding whether multi-family real estate ventures should be consolidated or accounted for using the equity method. The company previously consolidated these ventures, but after receiving guidance from the SEC's Office of the Chief Accountant, the company determined that non-wholly owned ventures should be presented as unconsolidated equity method investments.
- Restatements: The company amended a prior 8-K and its Annual Report to restate financial statements, presenting non-wholly owned ventures on an unconsolidated basis.
Guidance, Outlook, and New Appointment
- Appointment of E&Y: On June 18, 2020, the audit committee appointed Ernst & Young LLP (E&Y) as the new independent registered public accounting firm.
- Scope of Appointment: E&Y's appointment covers the fiscal year ending December 31, 2020, and interim periods beginning with the three months ending June 30, 2020.
- No Prior Consultation: The company confirmed that neither it nor anyone on its behalf consulted E&Y regarding accounting principles or audit opinions during the two most recent fiscal years or subsequent interim periods prior to this appointment.
Investor Verification Checklist
- Verify the details of the restated financial statements filed in the amended 8-K (April 21, 2020) and the Annual Report (Form 10-K) to understand the impact of switching from consolidation to the equity method for real estate ventures.
- Review the letter from BDO (Exhibit 16.1) to confirm their stance on the disagreement and the dismissal.
- Monitor future filings for the new auditor's (E&Y) initial assessment of internal controls and the effectiveness of remediation efforts regarding ASC Topic 810.
- Confirm the specific financial impact of the restatement on net assets and earnings per share, as these figures are not detailed in this specific 8-K.