Business Context and Reporting Period
This Form 8-K is filed by Chimera Investment Corporation on March 11, 2012. The report addresses a change in the Company's independent registered public accounting firm and the resulting impact on the filing timeline for its 2011 Annual Report (Form 10-K) and subsequent quarterly reports.
Key Financial Metrics
This filing does not contain specific financial performance data such as revenue, profit, cash flow, margins, debt, or liquidity figures. The document focuses exclusively on corporate governance and accounting matters.
Material Changes and Events
- Dismissal of Auditor: The Audit Committee approved the dismissal of Deloitte & Touche LLP as the independent registered public accounting firm, effective upon the completion of the audit for the fiscal year ended December 31, 2011.
- Appointment of New Auditor: The Audit Committee appointed Ernst & Young LLP as the new independent registered public accounting firm, effective immediately, to perform audit services for the fiscal year ended December 31, 2012.
- Accounting Error and Material Weakness: The change in auditors follows a determination in Q3 2011 that the Company incorrectly applied accounting standards (ASC 320-10 instead of ASC 325-40) regarding non-Agency RMBS. This error resulted in a material weakness in internal control over financial reporting.
- Disagreements: The Company reported no disagreements with Deloitte regarding accounting principles, practices, or auditing scope during the two fiscal years ended December 31, 2011, and 2010, other than the subject matter of the accounting error discussed above.
Outlook, Risks, and Contingencies
- Filing Delays: Due to the ongoing review of GAAP guidance for non-Agency RMBS and the transition to a new auditor, the Company announced it will be unable to file its 2011 Annual Report within the timeframe permitted by Rule 12b-25.
- Future Filings: The Company expects to file its Form 10-Q for the quarter ended March 31, 2012, within 60 days after filing the 2011 Annual Report. There is no assurance the Q1 10-Q will be filed by the statutory deadline of May 10, 2012.
- Risks: Forward-looking statements are subject to risks related to the transition to the new accounting firm and the ability to timely complete the necessary processes to file the 2011 Annual Report and Q1 2012 Form 10-Q.
Investor Verification Checklist
- Verify the status of the 2011 Annual Report (Form 10-K) filing and the specific reasons for the delay beyond the initial announcement.
- Monitor the upcoming Form 10-Q for the quarter ended March 31, 2012, for updated financial statements reflecting the corrected application of ASC 325-40.
- Review the amended Form 8-K (to be filed) for the required disclosures regarding the report on internal control over financial reporting for 2011.
- Confirm the timeline for the transition of audit responsibilities from Deloitte to Ernst & Young.