The Accounting Policy & Practice Report ® provides financial accounting policy makers, advisors, and practitioners with the latest news, expert insights, and guidance on emerging, evolving,...
By Todd Cheney
Company disclosures should become increasingly specific about probable effects from the transition to new accounting standards and avoid reverting to “cut and paste” information from previous reports, a SEC official told an American Institute of CPAs oil and gas conference.
“As you get closer and closer to implementation, the expectation would be that your transition disclosures be much more consistent and much more aligned with what the company will ultimately do,” Rahim Ismail, professional accounting fellow at the Office of the Chief Accountant for the SEC, told the AICPA conference
“One of the things we do look for is how are the transition disclosures changed over time and are they becoming more specific? Are they becoming more responsive?” Ismail said, who clarified his views were solely his own.
“One way you could tell if a company really is behind on transition disclosures is if they basically say the same thing in Q1 or 10-K of last year,” he said. “So for example, revenue recognition. If your transition disclosures say that you are still evaluating the impact, probably not the right answer. A lot of people in the company should start raising questions if that is the case.”
“But again, the way you think about leases, some of the guidance being provided on the transition disclosures have been showing that you are talking about both the impact and the process and we expect these disclosures will evolve as you get closer,"he said. “I think that is okay, but it would be helpful to see that evolution play out in the filings.”
The coming accounting standards for public companies are revenue recognition in 2018, leasing in 2019, and financial instruments—which includes a new recognition of credit losses—in 2020.
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