SEC Developments Conference Day 3

Day 3 included sessions on specific topics like MD&A, revenue recognition and leases.

One interesting point on MD&A were the enforcement cases around MD&A where the SEC found that the company complied with GAAP in their segment disclosures in their financial statements, but they did not provide enough disaggregation and other information in the MD&A. Make sure you read Financial Reporting Releases 36 and 72 as you prepare your MD&A to make sure you are following the principals outlined for MD&A.

Another area of interest was around how to discuss foreign operations that are impacted by current fluctuations. The use of constant currency can help you better describe what is really going on in the business in each country and not just focusing on currency fluctuations as the reason for revenue and expense changes.

In discussing revenue, it was noted that the three open amendments are not expected to be released until first quarter 2016; probably later in the quarter rather than earlier in the quarter. It was also noted that the AICPA Revenue Recognition Task Force documents will contain guidance including “FinREC believes” statements. These documents are not intended to write industry rules, but they will help members of an industry determine what the standard is telling them in the language of the industry. A lot more papers are expected in 2016. The task forces are working on close to 150 issues/papers. The first edition of the guide is targeted to be issued by the end of 2016.

Finally, the revenue recognition panel agreed there is “no way” there will be a further delay in the standard.
The final sessions I attended were on the upcoming new lease standard. We were told to expect the standard to be issued in January 2016 near the end of the month. This means most public companies with a December 31 year end need to anticipate including a disclosure on the impact of the new leasing standard in their footnotes to comply with SAB 74. While it might be easy and true to say you are evaluating the new standard and don’t know the impact, that might be considered a little disingenuous. Companies already have to disclose their future minimum lease payments. Simply looking at that number can give you a clue as to the potential impact on the balance sheet, so preparers really need to be thinking about something more than a boilerplate disclosure on this new standard as they prepare their 2015 financial statements.

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