We heard from a number of speakers representing a wide range of perspectives. The following messages were delivered with regards to actions that need to be taken to protect existing shareholders and prospective investors;
- The need for more effective disclosures – there is a Disclosure Effectiveness Project that has been launched by the Division of Corporation Finance to review required disclosures. It was mentioned that there has not been a comprehensive review of these items in more than 20 years. Issuers were also encouraged to do their part to improve disclosures by avoiding boilerplate disclosures that offer little value to users, avoiding repetition throughout the MD&A and the footnote disclosures and instead consider cross-referencing, and by providing relevant information that offers insight to the investor about risks and operating trends affecting the industry or organization or that are expected to impact the industry or organization in the future.
- The need to simplify accounting standards – In response to feedback from preparers, practitioners and investors, there are a number of accounting standards, (measurement of inventory, extraordinary items, balance sheet classification of debt, income taxes and share based payments), being revisited by the FASB in an attempt to reduce the complexity of applying these standards with the goal of providing more timely information and reducing costs of compliance, particularly when there is a not a lot of value derived from the effort put forth to comply with the existing standards.
- Enforcement and monitoring activities – there is a focus on identification of insider trading, foreign corrupt practices, microcap fraud and pyramid schemes. A task force has been created to focus on identification of cases involving improper accounting and financial reporting through the use of analytical tools and other means. There will continue to be scrutiny of auditor work and auditor independence matters.
Overall the atmosphere seems to be one of collaboration aimed at instilling confidence in the investors. The idea of convergence is still alive although the remarks from FASB chairman, Russell Golden, indicate that the primary focus of the FASB’s efforts is to address the needs of investors, issuers, and practitioners in our domestic capital markets, while attempting to minimize the differences among global standards.
© 2014 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.