Heads Up — Highlights of the 2016 AICPA Conference on Current SEC and PCAOB Developments
by Deloitte & Touche LLP’s National Office
On the heels of the U.S. presidential election, participants at the 2016 AICPA Conference on Current SEC and PCAOB Developments in Washington, D.C., were eager to talk about the changing financial reporting and audit landscape. While there was much speculation about the impact of the new administration on financial reporting regulations, there was little uncertainty regarding the effect that new accounting standards will have when they are adopted in the coming years. Specifically, the new standards on revenue recognition, leases, financial instruments, and credit losses — or the “new GAAP standards” as SEC Chief Accountant Wesley Bricker1 referred to them — were a central theme throughout the conference.
Despite all the talk of change, the conference proceeded in its usual fashion, with speakers and panelists offering their insights into current accounting, reporting, and auditing practice issues. Picking up where they left off at the 2015 AICPA conference, SEC staff members discussed their efforts over the past year to rein in certain practices related to the presentation of non-GAAP measures. Also revisited at this year’s conference was internal control over financial reporting (ICFR) — from the significance of the control environment in a time of immense accounting change to the importance of ongoing dialogue between management, audit committees, and auditors.
One thing that clearly has not changed is the mission of the SEC and the PCAOB. Mr. Bricker discussed the important role that preparers, auditors, audit committee members, regulators, and others play in meeting investors’ needs for high-quality financial information. PCAOB Chairman James Doty reiterated that the PCAOB’s critical mission, investor protection, is as relevant today as it was at the PCAOB’s inception. And Cynthia Fornelli, executive director of the CAQ, reminded attendees that there were many reasons to be "#AuditorProud."
Internal Control Over Financial Reporting
Mr. Bricker emphasized the importance of ICFR and stated that the staff of the Office of the Chief Accountant (OCA) continues to encourage management, audit committees, and auditors to “engage in dialogue” on ICFR assessments. Whether related to new GAAP standards, non-GAAP measures, disclosure effectiveness, or any of the other issues addressed at the conference, it is clear that ICFR and disclosure controls and procedures are, and will continue to be, a key focus for regulators, preparers, auditors, and audit committees.
New GAAP Standards
While the effective dates of the new GAAP standards vary, the message from the SEC, FASB, preparers, and auditors was clear: if you haven’t started preparing for the adoption of these standards, it’s time to do so. The SEC staff also reiterated its focus on disclosures that registrants provide about implementation of accounting standards in the years leading up to adoption, or what the veteran attendees fondly referred to as “SAB 74 disclosures.” On this note, the staff particularly emphasized revenue recognition, noting that it expects to see more robust qualitative and quantitative disclosures about the anticipated impact of the new revenue standard, as well as about management’s status in achieving implementation, in registrants’ upcoming Form 10-K filings.
Also top of mind was the ongoing dialogue related to disclosures about non-GAAP measures. Staff members from the SEC’s Division of Corporation Finance (the “Division”) indicated that they had seen notable improvement in the disclosures since the release of the SEC’s updated compliance and disclosure interpretations (C&DIs) in May. However, Mr. Bricker noted there is still “more progress for companies to make, for example, in the evaluation of the appropriateness of the measure and its prominence, as well as the effectiveness of disclosure controls and procedures.”
Many of these topics, as well as others from this year’s conference, are discussed in the attached Heads Up.
1 For a list of speeches that were publicly available as of the date of this publication, see Appendix B.