CFGI attended the annual Conference on Current SEC and PCAOB Developments hosted by the AICPA in Washington, DC on December 9-11th. The conference is an opportunity to hear directly from the profession’s regulators on the most prominent topics impacting companies today. Here are our key takeaways as it relates to news from the Securities and Exchange Commission:
NON-GAAP MEASURES
The SEC Staff continued what seems to have become an annual tradition of reiterating the rules on companies’ use of Non-GAAP measures (Regulation S-K, Item 10(e)) as SEC Chair Mary Jo White reminded companies to reconsider why they are using Non-GAAP measures and how is the information used by investors. Additionally, companies should continue to monitor the equal prominence of Non-GAAP measures and controls around the calculation of Non-GAAP metrics.
The SEC comments on Non-GAAP Measures were made by several members including SEC Chair Mary Jo White.
DISCLOSURE EFFECTIVENESS
Both the SEC and FASB are currently engaged in studies of disclosure effectiveness/ framework with the stated goal to improve the effectiveness of disclosures in notes to the financial statements by clearly communicating the information that is most important to financial statement users. The SEC Staff is looking to both eliminate duplicative disclosure and expand disclosure in areas that may warrant additional information to meet investor needs. The SEC commented favorably on the expanded use of both tabular and visual disclosures that are a common effective way to communicate financial information to investors.
The SEC comments on Disclosure Effectiveness were made by several members including Chief Accountant James V. Schnurr, Division Chief Mark Kronforst and the Division of Corporation Finance, Associate Director, Karen Garnett.
AUDIT COMMITTEES
The SEC Staff provided an update on the SEC Concept release, Possible Revisions to Audit Committee Disclosures, which was issued in July 2015, and focused on the principal role of audit committees and seemed to indicate caution at the expanded role many Boards are asking from Audit Committees. This theme was discussed repeatedly over the course of the conference in order to focus companies’ attention to the core obligation of the Audit Committee to have the financial expertise and sufficient time to engage at the level companies require in advance of any rule changes that will likely include more transparency as to how Audit Committee’s operate.
In addition to SEC Chair Mary Jo White and Chief Accountant James V. Schnurr, Brian T. Croteau’s, SEC Deputy Chief Accountant, Office of the Chief Accountant, speech included a significant focus on the role of the Audit Committee.
REVENUE RECOGNITION
The SEC Staff emphasized the critical importance of the successful implementation of the new revenue standard and discussed survey results the Staff completed that indicates a majority of companies are playing catch-up in both their initial impact assessment and are well behind on transition planning to ensure they are making necessary people, process and technology changes required to implement the standard.
The SEC Staff remarks included speeches by Wesley Bricker and Ashley Wright for their complete remarks covering the anticipated impact of accounting for ASC 606.
FIXING AMERICA’S SURFACE TRANSPORTATION ACT (FAST ACT)
The SEC Staff discussed the recent legislation passed under the FAST Act that allowing for the following amendments to SEC registrants filing as an Emerging Growth Company under the JOBS act that includes:
- The reduction of time between when a company complete its initial public filing and the initiation of its investor roadshow from 21 days to 15 days
- The inclusion of audited financial statements for only the periods required at the time a company intends to go effective on its registration statement
The SEC has since issued a Q&A on these topics that can be located on the Corporation Finance website.
MD&A
Continuing on themes discussed in prior years, the SEC Staff discussed how companies can continue to expand disclosures to allow investors to better understand how current trends are impacting companies with particular attention paid to disclosures around the income tax rate reconciliation. The SEC Staff is studying the application of quantitative vs. qualitative disclosure as it considers the potential for updates to S-K regulations.
The SEC comments on MD&A were made by several members including Cicely LaMothe, Associate
Director in the SEC’s Division of Corporation Finance.
CFGI’s monitoring of SEC trends is a critical part of the firm’s commitment to ensure we are considering the industry’s thought-leadership when advising our clients in their SEC compliance and accounting interpretations. Please let us know how we can discuss the key takeaways observed by our team and how they may impact your business.