Greetings from the AICPA Conference on Current SEC and PCAOB Developments in Washington, D.C.!
Day 2 started with the Securities Exchange Commission’s (SEC) Division of Corporation Finance discussing recent developments, including the potential need for scaled disclosures for smaller companies, flexibility with regard to registration statements, and the removal of outdated or duplicative disclosure requirements. The panel also examined the need to update the Division’s Financial Reporting Manual.
Up next was an address from Russell Golden, Chairman of the Financial Accounting Standards Board (FASB), who provided insights on the FASB’s current activities and future projects that will impact public company accounting and auditing. Mr. Golden began his address by joking that most people hope the FASB’s next project is to take a vacation! He noted that the FASB will be focused on implementation in the coming years, in addition to addressing potential projects surrounding the distinction between liabilities and equity, segment reporting and non-GAAP measures. He said the FASB continues to look for ways to simplify GAAP, since unnecessary cost and complexity in reporting simply dilute the impact of standards and disclosures. Susan Cosper, Technical Director and Chair of the Emerging Issue Task Force (EITF), continued the discussion, commenting on recently issued Accounting Standards Updates that relate to hedge accounting and credit losses. Ms. Cosper also discussed the FASB’s Disclosure Framework project and noted that the FASB is researching cryptocurrencies but has not yet started a project on the topic.
Things then shifted to the international side with an address from Sue Lloyd, Vice-Chair of the International Accounting Standards Board (IASB). Ms. Lloyd provided an update on the international standard setting process. Interestingly, Ms. Lloyd indicated that the future of the relationship between the FASB and the IASB will probably involve shared communication rather than joint undertaking like the Revenue Recognition and Leases projects.
The afternoon session kicked off with an enforcement update from the SEC that included a recap of recent actions from Co-Director Stephanie Avakian and Chief Accountant Michael Maloney of the agency’s Division of Enforcement. Importantly, Mr. Maloney noted that, as it related to Revenue Recognition, the SEC staff have been trained on the new standard, will focus on the reasonable judgment in its application, and consider the adequacy of internal controls to be very important.
The conference then shifted to a panel discussion on revenue recognition implementation issues. Key takeaways included the importance of controls, the impact on disclosures and, most importantly, the fact that most public companies should already understand how they are going to be impacted. The panel also discussed disclosures related to Staff Accounting Bulletin 74, Disclosure of the Impact that Recently Issued Accounting Standards Will Have on the Financial Statements of the Registrant when Adopted in a Future Period. Furthermore, the Panel discussed the use of the AICPA’s guides related to revenue recognition. While the guides do not represent authoritative guidance, they should not be ignored when implementing the new standard.
Following the panel was James Dolinar, Partner with Crowe Horwath LLP, who covered an update from the Financial Reporting Executive Committee (FinRec) on current projects related to accounting and financial reporting. Mr. Dolinar touched on a few guides that FinRec is working on, including a valuation guide geared toward private equity and venture capital groups and one for business combinations. He also discussed updates to the definition of a Public Business Entity.
Day 2 closed out with Martin Baumann, Chief Auditor and Director of Professional Standards for the Public Company Accounting Oversight Board (PCAOB) and Board Member Jeanette Franzel, providing an updated on the Board’s standard-setting activities, especially the importance and implementation of the new Auditor’s Reporting model.
Stay tuned for more as the conference wraps up on Day 3!
This article was co-written by Ryan Deatrick and Matt McNeal.
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