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Dec. 5 — Public companies don’t start fully applying far-reaching accounting rules on revenue until 2018, but accountants at the Securities and Exchange Commission will start scrutinizing preliminary reporting on their potential impacts next year, the SEC’s chief accountant said.
The Securities and Exchange Commission’s Wesley Bricker highlighted Dec. 5 what advance preparation companies should consider soon to shift as smoothly as possible to the 2014 standard that governs reporting on what is considered the most important single line in financial statements.
“The changes in standards will affect all companies, and even if the extent of change for a particular industry or company is slight, the disclosures necessary to explain the changes” and their effects on revenue streams might not be, Bricker said Dec. 5 at a conference of the American Institute of CPAs.
Investors and staff of the SEC accountants will be looking for increased disclosures in 2016 filings on the potential effects of the new accounting rule, he said. Also in 2017, they will be checking for footnote reporting about the significance of the new rules’ potential impact.
An example of potential significance that should be disclosed could emerge from the shift to a point-in-time recognition prescription from the current practice of recognizing revenue over time.
Bricker said that companies in 2016 had improved their collective outlook in preparing for the advent of the major new rules. However, he said more work on that front—including “assessment,” or basic work on what reporting changes are in store for companies—needs to be done.
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