Insights

Don Applegarth and Steve Thompson are attending the National SEC and PCAOB Conference in Washington D.C. this week. Here’s a peek at a few of their observations from Wayne Carnall's presentation.

Wayne Carnall, SEC Division of Corporate Finance (Division), stressed the need for communication and transparency. He encouraged consultation with the Division of Corporate Finance and cited several accomplishments including the Divisions quick response times issuing waivers and interpretations generally within 10 days.

Other accomplishments and publications of the Division include:

1. Dear CFO letters directed to financial institutions letting companies know what the Division will be looking for such as MDA disclosures, higher risk loans, changes in practice, allowance for loan losses, etc.
2. Common Financial Reporting Issues Facing Smaller Issuers
3. Areas of Frequent Staff Comments.
4. Financial Reporting Manual - interpretive guidance updated quarterly.

One advisement of the Division for a Company’s responds to Comment Letters was to make the last response your first response because it creates inefficiencies otherwise. The Division cited several occasions where the first response was inadequate; resulting in inefficiencies and frustrations. Whereas it wasn’t expressly recommended, Companies should consider involving their auditors and legal counsel in crafting their initial response to comment letters.

Other recommendations were to simplify the responses to the Division and in financial reporting in general. The following were offered as guidelines to achieve the objective:

• Explain accounting concept not the code 
• Avoid redundancy
• Write for the investor not the SEC 
• The Disclosure checklist is starting point, not an end point 
• View the 10k or 10q as a communication document not a compliance document. 
• Be consistent with other communications.

Schneider Downs provides accounting, tax and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA, and Columbus, OH.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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