Didn’t have time to visit the AICPA National Conference on Current SEC and PCAOB Developments held in Washington D.C. this week? Did you attend but your memory’s too hazy from the fervor and raucous excitement of thousands of fellow CPA’s descending on the nation’s capital? Either way, we’ve got you covered with a few quick summaries of the speeches handed down by the heaviest of hitters from the financial reporting agencies! Click on the links below if you’re hungry for the full, unabridged texts of these presentations from the SEC, PCAOB, FASB and IASB.

Before I begin, I would like to remind you that the words on this page express my own views and do not represent the views or opinions of GAAP Dynamics as a company or any of my colleagues. Coincidentally, the summaries of the speeches below also do not reflect the views of the agencies represented by the individuals delivering these carefully crafted messages!

Working Together to Advance High Quality Information in the Capital Markets – Wesley R. Bricker, Chief Accountant of the SEC (December 5, 2016)

If the country is to flourish, capital must be invested in enterprise But those who seek to draw upon other people’s money must be wholly candid regarding the facts on which investors’ judgment is asked. -- Joseph Kennedy

Mr. Bricker began his speech with this quote from the inaugural chairman of the Securities and Exchange Commission. Even though decades have passed since the creation of the SEC, the importance of this mission continues to resonate in a period of global economic, demographic, technological, and institutional change. Fair, orderly, and efficient capital markets remain a pillar of the U.S. economy, Mr. Bricker asserted.

Confidence in high quality financial reporting builds the strength of these markets, according to Mr. Bricker, which essentially underscores the theme of this speech and of the conference.

For the remainder of the presentation, Mr. Bricker directly addressed many of the groups in attendance.

First, he spoke to preparers of financial reports. High quality financial reporting starts here, and it relies on the ability to evaluate, challenge and address transactions with accurate, informative disclosures. In this regard, internal control over financial reporting (ICFR) is a highly useful tool which will help give the best quality information possible.

Mr. Bricker also called attention to a recent survey about the implementation of the new revenue recognition standard. It shows 8% of public companies still have not started an initial assessment of this standard and 75% of these companies were still in the assessment phase. It is important for companies to understand the impact this new standard will have and to adequately disclose this information in the footnotes now. He also urged the audience to call the Office of the Chief Accountant if you have any questions or if you need help finalizing your company’s position.

Additionally, Mr. Bricker addressed non-GAAP measures, which attract a lot of attention at the SEC. He believes there is still work to do when evaluating the appropriateness and prominence of such measures. To help companies with this process, the SEC recently issued new Compliance and Disclosure Interpretations (C&DI’s) to guide your approach to presenting non-GAAP information.

Mr. Bricker also called on the audit committees and auditors to maintain open lines of communication and insight, as these two groups act as the “gatekeepers” of high quality financial information. He praised the PCAOB and its important role to enhance audit quality, specifically congratulating its efforts behind a new research agenda to better inform its standard setting process.

Mr. Bricker went further, speaking to the standard setters in the audience that write the rule book for high quality financial reporting. He urged them to continue identifying and responding quickly to the changing needs of users, now that several significant projects spanning the last decade have been completed. He also encouraged the FASB and IASB to continue collaborating and resolving differences where it makes both sets of standards stronger.

In closing, Mr. Bricker challenged all the CPA’s in the room to uphold the values of objectivity and integrity every day. All in attendance share the responsibility of high quality, reliable financial information with open, transparent, and proactive engagement!

PCAOB’s Role in Enhancing Public Trust and Integrity in Audits – James R. Doty, Chairman of the PCAOB (December 5, 2016)

Right before lunch, Mr. Doty hit four key points to justify the importance of the PCAOB and the accomplishments made over the last several years.

1. An independent review process promotes audit integrity and enhances investor protection. Mr. Doty builds on Mr. Bricker’s idea that confidence is key to the strength of the capital markets, and certified information gives investors that confidence, which is why the audit process is so important.
2. The PCAOB manages this independent process and makes a real difference. Enforcement actions root out bad auditor apples and foster trust with the markets.
3. A constructive relationship between the PCAOB and audit firms benefits the whole economic process. Mr. Doty praised the many unsung heroes who perform high quality work, but it’s important to deter others who don’t.
4. The PCAOB can propel the audit profession to realize the full potential of its role in the capital markets. Here, Mr. Doty outlined the current initiatives of the PCAOB:
   • Finish quality control standards
   • Consider technology’s role in higher audit quality
   • Offer guidance when dealing with non-GAAP information
   • Define the auditor’s role when finding potential illegal acts

He also touched on progress to a new auditor’s report that would keep the current pass/fail opinion but add discussion of judgments that support the opinion, or “critical audit matters”. The IAASB (International Auditing and Assurance Standards Board) also recently adopted the inclusion of “key audit matters” in audit reports under international standards.

Before finishing his remarks, Mr. Doty confirmed the PCAOB’s commitment to help the profession meet increasing demands in a responsible way that preserves integrity, inspires investor trust, and promotes economic vitality.

Remarks of Russell G. Golden, Chairman of the FASB (December 6, 2016)

On the second day of the Conference, Mr. Golden reflected on his first term as Chairman of the FASB, outlining the work made and the work yet to be done for the “Five I’s”, the list of highest priorities he set when he was elected to the Board.

1. Improvement. The FASB completed major projects related to revenue recognition, leases, and credit losses. The Board also introduced narrowly focused improvements through various short-term projects to reduce financial reporting costs without sacrificing quality.

   Looking forward, the FASB intends to issue hedging and insurance standards in 2017. It also will continue its simplification initiatives, such as reducing complexity related to balance sheet classification of debt and nonemployee share-based payments.

2. Implementation. To better aid companies adopting the new converged revenue recognition standard, the FASB and IASB created a Revenue Recognition Transition Resource Group (TRG). The group identified several issues many stakeholders expressed when adopting the new standards prior to initial implementation. Mr. Golden believes this assistance is critical to best capture the improvement in financial reporting quality. Also, the Board convened a Credit Losses TRG before issuing the new standard, which should prevent the need for technical corrections to the standard’s language later.

   The FASB will continue to monitor and assist with the transition to new standards as needed in the coming months.

3. Inclusion. The FASB introduced new plain language publications to give clarity to financial statement users who may not be technical accountants! Mr. Golden pointed out the use of online videos to communicate what the Board is doing, why it is doing it, and how it will affect users. In his view, the Board recently evolved to consider public, small public, nonpublic, and not-for-profit perspectives and when differences justify accounting alternatives.

   In the future, the FASB will manage the pace of changes to U.S. GAAP based on recent feedback from stakeholders in its open Invitation to Comment.

4. Ideals. Mr. Golden mentioned the additional progress made for the Board’s conceptual and disclosure framework projects. The conceptual framework focuses on presentation of recognized elements of financial statements. The disclosure framework hits the need for more relevant information in certain areas, including income taxes, pension plans, and fair value.

   Looking forward, the FASB will develop a revised project plan to complete the two framework projects. Mr. Golden also believes it is prudent to explore the impact of technology on delivery and consumption of financial reports and the FASB’s role here as more and more users get information from mobile devices.

5. International. The Boards issued a (mostly) converged revenue recognition standard, a major accomplishment for both the FASB and the IASB. Also, both standard-setters reached similar conclusions with different implementations regarding leases (all leases should show up on the balance sheet) and credit losses (recognition of losses should be forward-looking).

   Mr. Golden hopes to collaborate more in the future to reduce cost and complexity of global accounting standards. The FASB will continue to deepen relationships with the IASB and other standard-setters to find common solutions and to promote comparability.

In his final words, Mr. Golden asked the audience to consider two more “I’s” before leaving: Involvement and Input. Support and participation both help in the standard-setting process. And for that, Mr. Golden is sincerely thankful!

Safety in numbers – Hans Hoogervorst, Chairman of the IASB (December 6, 2016)

The closing act was Mr. Hoogervorst’s informative speech laced with touches of dry wit. I’d like to highlight a few main points from his speech by introducing each subject with a few gems from the IASB boss himself.

“For these reasons, the IASB is keen to keep IFRS Standards as closely converged as possible to US GAAP. And I promise you, if the FASB comes up with good ideas before we do, then we will steal them as quickly as possible. We have no shame, and good accounting ideas cannot be patented!”

In the wake of seeming pushback to the globalizing economy, Mr. Hoogervorst believes it is more important than ever to search for ways to keep FASB and IASB standards as comparable as possible. Developing common accounting standards across the globe is still possible, even in face of tumultuous political events like Brexit and the U.S. election.

“We began this [new insurance accounting] project back in 1997, so the new Standard will not come one day too soon.”

Expect a newly issued Insurance standard in the first half of 2017, according to the IASB chairman. Mr. Hoogervorst equates the world of insurance to accounting anarchy, and it sounds like he is ready to be done with it! Almost every country does its own thing, and it ain’t pretty.

The new standard will fix that and will align the accounting practices in insurance to generally accepted practices in other industries. Take premium revenue recognition, recognized on a cash-basis, and deposit components of insurance products, recognized as revenue, for example! The new standard will increase comparability with this sector and other parts of the financial services industry and require current valuation of all insurance contracts.

“We might decide to create more discipline around the presentation of non-recurring items (which have such a nasty habit of recurring time and again!).”

When discussing “Better Communication”, the theme of the IASB’s new standard-setting agenda, Mr. Hoogervorst notes one of the main issues to address in this arena is non-GAAP financial measures. In his view, preparers view financial reporting as too much of a compliance exercise and use too many non-GAAP measures.

He points outs that the use of high quality standards is part of management’s toolkit. The standards were originally designed for this purpose! He believes it is foolish to rely on non-GAAP measures because these numbers are not the best basis for sound business decisions. GAAP numbers should anchor management presentation as these are supported by sound economic principles.

With time winding down and a pack of hungry attendees ready to bolt, Mr. Hoogervorst wisely bids the audience adieu after making his final points.