AICPA National Conference Provides Insight for 2014, Part 2
Simplification of Accounting Standards
Paul Beswick, SEC Chief Accountant, set the stage in his remarks on the first day of the conference, “I think the concept of simplification applies to both revisiting current standards and future standard setting projects. There are certainly areas of current GAAP that could be simplified without a loss of the quality of information provided to investors.”
Later in the day, Mark Kronforst, Chief Accountant in the SEC’s Division of Corporation Finance (CorpFin) stated that CorpFin’s forthcoming study on its disclosure requirements, which is required by the JOBS Act, is just the first step in simplifying and modernizing disclosures.
On the second day, Russ Golden, FASB chairman, shared that the FASB is developing an internal board policy to guide it explicitly in considering complexity in the development of financial reporting standards. In addition, he was clear that any changes would be weighted toward the needs of investors.
We are encouraged by the emphasis on reducing complexity in financial reporting. However, it will be interesting to see what impact the emphasis on simplification has on the board’s deliberations on the remaining issues related to revenue recognition, leases, and financial instruments. While there have been significant strides to reduce the complexity in these three areas, there still appears to be some room for improvement.
Use of Data Analytics
Mark Kronforst, Associate Director in the Division of Corporation Finance, commented that the staff needs to increase its use of data analytics. However, his comments were hardly surprising. Throughout the year, SEC Chair Mary Jo White has referred to the importance of data analytics in several public statements.
Craig Lewis, SEC Chief Economist and Director of the Division Economic and Risk Analysis, provided an overview of the Accounting Quality Model (AQM) on the second day of the conference. The purpose of this model is to identify accounting anomalies for CorpFin and the Division of Enforcement based on an analysis of XBRL data. Like Mark Kronforst who said that he is "excited to use" the AQM, we are interested in how the staff will deploy it.
The increased use of data analytics will improve the effectiveness and efficiency of the SEC’s oversight. However, we continue to be perplexed by the SEC staff’s reluctance to enforce compliance with its rule for XBRL filings and by its continued use of data from external data providers instead of the XBRL-formatted data from those filings.
Stay tuned during 2014 as we continue to update you on these and other developments affecting financial reporting. Click here to read part one of this blog series about the AICPA National Conference on Current SEC and PCAOB Developments.
About the Author
Mike Starr is Vice President of Governmental and Regulatory Affairs. He previously served as the SEC Chief Accountant’s advisor with a focus on investors’ financial information needs and the role of structured data in meeting those needs. Prior to his work with the SEC, Mike served as Chief Operating Officer for Grant Thornton International Ltd., where he oversaw global strategy and public policy. He earned a Bachelor of Science in accounting from Oklahoma State University (OSU), and in 2010 was recognized as an OSU distinguished accounting alumnus and inducted into the School of Accounting Hall of Fame.