3 things you need to know from the 2015 AICPA national conference
In early December, Workiva representatives attended the 2015 AICPA Conference on Current SEC and PCAOB Developments in Washington, D.C.
The big theme this year: improving the reliability and quality of reporting.
We came home from this event with dozens of pages of notes. We've broken them down in this blog post to highlight the biggest takeaways from this year's conference around some of our favorite topics: internal controls over financial reporting, segment reporting and non-GAAP financial measures, and revenue recognition.
Here's what you need to know:
- Internal controls over financial reporting (ICFR)
...it is hard to think of an area more important than ICFR to our shared mission of providing high-quality financial information that investors can rely on.—SEC Chair Mary Jo White
ICFR continues to be a key focus area for both companies and their external auditors as deficiencies remain high. The better control that a company has over ICFR, the more that the company, external audit, and regulators can ensure that companies are providing high-quality financial information that investors will rely on.
Panelists at the conference discussed common questions and challenges companies are facing. Among the many conversations, some important topics came up, including communication challenges, why it is important for management to understand controls, auditor failure to understand control implications, and issues seen around precision and the level a control operates.
- Segment reporting and non-GAAP financial measures
As an area of focus for the Division of Corporate Finance, it's important to remember that as the business evolves, companies need to continue to reassess which segments should be operating segments and what can be aggregated. Management review controls or controls over ICFR are important when considering internal control over segment reporting.
Another large topic of conversation is the use of non-GAAP and GAAP financial measures. Companies need to make sure they are in compliance with securities rules. Take the time to stop and ask why the measure is being used? What useful information is it providing to investors? How is it described, and are there appropriate controls over the calculation?
Companies also need to remember that labeling and consistency is crucial to the use of non-GAAP financial measures and other adjustments. Without proper labeling or consistency between measures, the language and terms used can be misleading.
- Revenue recognition
Taking effect in 2018, there were a lot of discussions on the new revenue recognition standard and the need to apply this on a global standard. Many companies have not begun this process, while others are much farther along.
In order to prepare for the standard, companies need to start socializing with internal stakeholders today. The standard will likely require changes in processes and controls, and evaluation of operational impacts. At the conference, speakers suggested that companies begin connecting with the Transition Resource Group (TRG), and other industry resources to understand the new standards and get their questions answered early. Now is a great time to start
These three takeaways make the bigger picture for 2016 clear. There will be a focus on reliable, quality financial reporting and auditing practices. We are excited to see what the next year will bring and support our may customers through another year of lively business activity.