I had the pleasure of attending the 2021 AICPA Conference on Current SEC and PCAOB Developments from December 6th – 8th. And I must say, the biggest highlight of the conference was that I was able to attend in person! It was so great to be back in Washington, D.C. and be amongst all of our accounting friends from the AICPA, the SEC, the FASB, the IASB, etc. And my second biggest highlight came from the SEC Enforcement update, when Gurbir Grewal, Director, and Matt Jacques, Chief Accountant, referred to this year’s conference as “the Catalina Wine Mixer” of accounting conferences, which inspired this blog theme, and produced the most laughter I’ve ever seen at any conference I’ve ever attended!
Based on the various sessions throughout the conference, I gave the 2021 conference a theme of “Investor’s new needs.” We are living in an environment where there is constant and accelerated change and people are adapting to (and wanting to see) new information. High-quality financial reporting is still top of mind (don’t touch my drum set!), but investors are shifting their focus to disclosures that better describe the various impacts to a business. I had expected a lot more discussion on COVID-19, but this conference really focused on new changes and how to best move forward in this post-pandemic world. A few highlights and most discussed areas included:
- ESG reporting: This was by far the most discussed area of the conference! The SEC is looking to revise its climate disclosure guidance (and received over 6,500 comment letters!) and adhere to more consistent reporting in the ESG space (this is also top of mind to investors).
- SPACs: The accounting implications of a SPAC (and deSPAC) transaction were reiterated throughout the conference, including discussions and reminders on accounting for warrants, EPS, temporary equity, and ICFR implications a newly public company must consider (independence, governance, processes, certifications, etc.). As a reminder, SAB 120 was issued in November to discuss certain requirements of share-based payment transactions.
- Materiality: As a reminder, SAB 99 has not been changed! However, there were many discussions on materiality and how entities are leveraging (or not leveraging) the qualitative factors that should also be considered when evaluating an error. I found these discussions to be interesting: distinguishing between the “Big R” and “little r” restatement, the consideration of all factors, and the needs of investors (just because financials have already been published, doesn’t mean the investors don’t consider historical reporting or errors on current analysis).
- Non-GAAP financial measures and metrics: As usual, there were various reminders on the requirements of reporting non-GAAP financial measures (prominence, mislabeling, etc.). But there was also some interesting discussion between distinguishing a measure from a metric (the SEC has released interpretive guidance on non-GAAP financial metrics that I find to be useful).
- Other tidbits: The SEC is continuing to have consultations on revenue recognition (principal vs. agent, identifying performance obligations, and variable consideration), leases and CECL (lucky for you – we have courses on all three of these areas!). And the FASB reminded all of us that a proposed ASU was issued in November to eliminate the accounting guidance for TDRs in ASC 310-40. There was also significant discussion around digital assets (who owns these assets and how to value them), cybersecurity, and segment reporting!
Just like Dr. Doback, who feels the responsibility to guide his son Dale and stepson Brennan into adulthood, Rich Jones (FASB Chair) and Gary Gensler (SEC Chair) also bear important responsibility onto us accounting professionals (and don’t all three look like brothers?!). Even though Gary Gensler did not make an appearance at this year’s conference, Paul Munter, SEC Acting Chief Accountant, did a fantastic job summarizing important messages from the SEC on Day 1. Mr. Munter reminded us that even though investors are shifting their focus onto more impactful business disclosures, high-quality financial reporting is still top of mind and reminded us of three important elements that rule when it comes to financial reporting:
- High quality accounting standards and rules
- High quality application against those standards and rules
- High quality audits of financial statements
Here is a statement from Mr. Munter on the SEC’s continued focus on high quality financial reporting in a complex environment.
Another personal highlight for me from the conference was during a Q&A session at the end of Day 1 with Mr. Munter. Somebody had asked about non-GAAP disclosures and wondered if all the non-GAAP rules and attention were too much considering all the other new disclosures (ESG, human capital, reference rate reform, etc.) and Mr. Munter politely reminded everybody that non-GAAP disclosures are completely optional!
Mr. Jones and two of his technical directors gave a great update on Day 2 and discussed its outreach to stakeholders to comment on the FASB’s agenda and received over 500 comments! The overall feedback received mostly related to the following areas:
- Wanting to see more in terms of financial statement disaggregation
- Wanting to see more guidance on emerging topics
- Wanting the FASB to re-evaluate areas of U.S. GAAP that are redundant
- Wanting the FASB to improve its internal procedures (e.g., standard-setting procedures)
Here is the full speech that Mr. Jones gave at the conference, for reference. For even more reference, here are additional recaps of the conference from Deloitte and EY (note that PwC and KPMG summaries were not available as of this blog publishing date).
As I mentioned above, it was great to be back in D.C. in person, which gave us the opportunity to network and talk with people face-to-face (Did we just become best friends? Yep!). It was fascinating to hear from various individuals and how different industries and services were impacted by the events that have transpired in the last two years. Based on our numerous conversations and meetings, it seems that we’re all excited for new possibilities and the changes that 2022 will bring. Please don’t hesitate to contact us if you have any questions or additional requests for your training needs!
I’d like to take this opportunity to thank all of our wonderful clients and supporters during this challenging year, but we are looking forward to what 2022 has to offer! From all of us at GAAP Dynamics, we wish you a happy holiday season!
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