Reflections on the AICPA SEC and PCAOB Developments ConferencePosted: December 15, 2014
I attended the AICPA SEC and PCAOB Developments conference last week. For those CPAs in the public company or prospective public company accounting, reporting and auditing area, this is a must-follow conference. You can attend the conference in person or online, but even if you don’t do that, you can follow the conference via news releases, press stories, twitter feeds and lots of other ways on the internet. If you don’t follow the conference, you do so at the peril of your career because you need to understand what has happened in the past year and what will happen in the future in order to keep your knowledge current and relevant. With that in mind, I wanted to share my overall thoughts on the conference in this blog and then follow up with specific issues in subsequent blogs.
The theme of this year’s conference seemed to be Transparency. This term was used by the SEC Office of Chief Accountant (OCA) and Division of Corporate Finance (Corp Fin) extensively to explain why they publish speeches and why they are communicating the messages they communicate. This is to differentiate it from “rule-making” by speech. The point they tried to make is that speeches are not making the rules; they are explaining the process behind the SEC use of the rules. Another example is the 5 year shelf life on speeches expounded on by Dan Murdock, Deputy Chief Accountant, saying that as a speech gets old, you should put less and less credence behind what was said as the rules may have changed or the SEC staff’s thoughts may have evolved. It is clear the SEC is sensitive to the charge that they are making rules by speech which avoids rule setting requirements.
Segment reporting was again a focus of comments from the SEC. The OCA staff pointed out that reports provided to the Chief Operating Decision Maker (CODM), while an important factor in understanding segments, was not solely determinative of the segments of a business. They mentioned that just changing the report to not include a separate segment doesn’t mean that the segment doesn’t exist. The OCA also pointed out that the CEO is not automatically the CODM. In organizations where the CEO deals with strategy and a COO or an operating board makes decisions on current day-to-day operations, the CODM may be the COO or the operating board. Corp Fin brought up the point that preparers need to disclose their basis for determining their segments.
The final development I want to address in this blog is the potential for adoption of IFRS in the US for domestic filers. Keep in mind that the SEC already allows over 500 foreign issuers to file IFRS based financial statements without reconciliation to US GAAP. James Schnurr provided more insight on a potential new path forward on IFRS in the US. The idea is to allow US domestic filers to include as a non-GAAP disclosure IFRS based financial statements. This would be a voluntary disclosure and would have no impact on US GAAP, but it would allow the market to essentially decide if and when IFRS based financial statements are desired. It’s an interesting idea that will need to be fully fleshed out, but expect to see more from the SEC on IFRS in the coming year.
There was so much more talked about at the three day conference, but I can’t possibly include it all here. Check out future blogs and other resources you use for more discussion of the scores of issues discussed at the conference.