Skip to Main Content



Remarks before the 2015 AICPA Conference on Current SEC and PCAOB Developments

Wesley R. Bricker, Deputy Chief Accountant

Washington, D.C.

Dec. 9, 2015

The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. The views expressed herein are those of the author and do not necessarily reflect the views of the Commission or of the author’s colleagues upon the staff of the Commission.


Good morning. Thank you for the kind introduction.

I would like to start by repeating that for me and my fellow SEC staff members speaking on this panel, the views expressed are each speaker's own and not necessarily those of the Commission, the individual Commissioners, or other colleagues on the Commission staff.

I will continue to build upon the theme of credible financial reporting in both Chair White and Jim Schnurr’s remarks. The strength of our financial markets depends on the availability of credible financial reporting.

Revenue Recognition Implementation Activities

I would like to first touch on implementation of the new revenue recognition standard.

One of the single most important measures used by investors, regardless of a company’s industry, the nature of its securities, or the capital markets it accesses is revenue. Successful implementation of the new standard is important for investors, so I would like to give my thoughts on where the focus should be in the coming year.

We have seen tremendous progress over the last 12 months by the standards setters. The FASB[1] and IASB’s[2] joint Transition Resource Group (TRG) [3] has addressed over 50 implementation questions in a collaborative, public forum.[4] A few of those questions resulted in standard setting, with the vast majority resulting in educational discussions by the global TRG members.

Still, there is more to do. A recent survey indicated that 75% of responding companies had not completed their initial impact assessment and, of those, a third had not begun.[5] The study concludes “the overall state of readiness may be lagging.”[6]

It is important that the TRG not only continue, but also to reflect a global perspective to foster comparability between domestic registrants that file under U.S. GAAP and foreign private issuers that file under IFRS. A global TRG process can provide valuable insight and education to all preparers.

Also important to the implementation efforts is collaboration among industry groups, including those formed by the AICPA and the many other informal groups. I encourage inclusive, robust discussion within those groups but also timely escalation of unresolved questions to the TRG, the audit firms, or the OCA[7] staff[8]. Educational efforts at the TRG and industry groups are underway, and now is the time for your company’s perspective on implementation questions to be considered.

Companies play a critical role in moving this process forward. I believe good practice is to ensure that the agenda for the audit committee, executive management, and auditor incorporates timely, candid discussions about not only the appropriateness of the design and status of management’s detailed implementation plans and impact assessments, but also the sufficiency of resources needed to complete the work timely.

As companies prepare their annual financial statements over the next couple of months, we are looking forward to reviewing more detailed disclosures about the expected effect the new standard will have on those financial statements.[9] If that effect is still unknown, then in addition to making a statement to that effect, a registrant may consider advising investors when that assessment is expected to be completed. Again, this is about providing useful information to investors who need time to analyze the impact on companies.

Other Accounting Standards Activities

Shifting to other accounting standard setting activities, I would like to comment on a few other priority projects.

I am pleased that the FASB is nearing the end of its leases accounting standard setting project where leases with more than a 12 month term have been proposed to be reported on the balance sheet. The project incorporated recommendations from a 2005 SEC staff report.[10] We have monitored the FASB’s development of the proposed leases standard, including responses to the valuable feedback the FASB received in its prior 2009 discussion paper[11] and exposure drafts in 2010[12] and 2013 on the topic.[13] As proposed, the FASB’s lease standard is similar to the IASB’s leases standard in many respects, with the most significant difference being a matter of income statement presentation. The SEC staff will continue to actively monitor the FASB’s activities on this and other standards, including the FASB’s continued adherence to its operating procedures that are designed to, and do, encourage the issuance of high quality standards that reflect broad public input and, most importantly, are beneficial to investors.

Financial instruments’ classification, measurement, and impairment are other topics on which we have actively monitored the FASB’s and IASB’s activities. These projects draw on the recommendations of a joint FASB/IASB advisory group and others on ways to enhance the reporting of financial instruments.[14] I am pleased that the FASB has solicited and received broad input from investors in making decisions about the standards. As a result, for example, the FASB is sharpening the clarity of the core principles in the impairment proposal.

While the FASB and IASB’s financial instruments impairment standards and proposals are not fully converged, both require consideration of future economic conditions in estimating expected losses. For those concepts that are converged, consistent implementation will be critical for investors.

I understand that some preparers and auditors are already evaluating the application of the proposed impairment standard. The proposed standard reflects a number of foundational concepts present in the other important accounting estimates, such as servicing rights and other-than-temporary impairments of debt securities, so many companies will have relevant starting points for the design of scalable processes and effective internal controls.

For example, together with existing Commission and SEC Staff guidance[15], the proposed standard would:

  • Reflect an objective of reporting management’s best estimate of losses at the reporting date, reasonably developed and adequately supported.
  • Require the company to incorporate all of its available information when developing and supporting the estimate, without misusing or overlooking available information.
  • Require the estimate to be determined with a procedural discipline, including the identification of relevant data, assumptions, and methodologies, and adequate documentation to support review, validation, and audit of the estimate.

When a standard is finalized, I encourage the financial reporting community to work collaboratively to identify relevant implementation questions and learn the core principles together through illustrations and examples.

Accounting Consultation Activities

Now, I would like to provide a few observations regarding our accounting consultation activities.

As a first observation, we track and use data on the volume and trends of consultations in our program and oversight activities. During 2015, the three most frequently consulted topics were revenue recognition; business combinations; and identification and reporting of segments. It is worth noting that these are not among the top three restatement areas, suggesting that companies and audit firms are making progress in identifying and seeking input on application questions, timely.

The second observation is troubling. Some registrants have contended in their consultations, including on segment reporting, that they should not be required to apply a GAAP standard because the result would be “competitively harmful” or “misleading.” These arguments are troubling, since they disregard the thoughtful balance taken by the accounting standard setters in crafting reporting standards that provide transparent, useful information to investors. A better approach starts with identifying what information is useful to investors, why, and how that information can be appropriately reported.

As a third observation, some registrants discuss and collaborate with peers and others regarding accounting policies. While this interaction can be valuable[16], I caution against placing overreliance on simply benchmarking to other registrant disclosures and Division correspondence. Benchmarking may be an element of, but is not a substitute for, management doing the work needed to select, support, and document a company’s accounting policies.[17]

Accounting Restatements

Now, I would like to touch on accounting restatements, which are down since their peak during years immediately following implementation of Sarbanes-Oxley, but have held in more recent years at a total of 874 in 2014 and 541 through the beginning of September 2015.[18]

Three of the accounting topic areas most commonly identified in a restatement are debt/equity accounting, statement of cash flows classification, and income tax accounting. Accounting restatements for complex debt and equity transactions tend to occur with transactions undertaken by smaller to mid-size issuers—the auditor during the period restated is equally likely to be from a large audit firm as a smaller one. Many of our interactions on these topics would suggest a need for increased focus on financial reporting competencies and other internal controls over the preparation and review processes in these and other restatement areas before financial statements are provided to investors.

Our interactions would also suggest the value of the accounting profession continuing to examine the circumstances associated with financial restatements (as well as with those of high quality financial reporting) to inform where any additional steps can be taken to foster continued progress in credible financial reporting.

Companies, including management and the Audit Committee, need to continually assess whether they have resources with sufficient training and competence available to support high quality financial reporting, since they are fundamental to the effectiveness of a company’s overall control environment. Resource needs might be satisfied, for example, through a designated accounting policy function or augmented with a qualified service provider.


In closing, I look forward to the continued relevance of the accounting profession to the investing public as the profession continues to embrace in the coming year the successful implementation of the new revenue recognition standard with appropriate ICFR, as well as the various other, near-final accounting standards for leases and financial instruments. OCA remains available to registrants for consultation.

Thank you for your attention.

[1] Financial Accounting Standards Board.

[2] International Accounting Standards Board.

[3] See background information published by the FASB, available at

[4] See background information published by the FASB, available at

[5] PricewaterhouseCoopers - Financial Executives Research Foundation 2015 Survey, The new revenue recognition standard: Assessing impact and implementation, available at

[6] Id.

[7] Office of the Chief Accountant.

[8] Guidance for consulting with OCA is available at

[9] See SEC Staff Accounting Bulletin (SAB) No. 74 (Topic 11:M), Disclosure of the Impact that Recently Issued Accounting Standards Will Have on the Financial Statements of the Registrant When Adopted in a Future Period

[10] See Report and Recommendation Pursuant to Section 401(c) of the Sarbanes-Oxley Act of 2002 on Arrangements with Off-Balance Sheet Implications, Special Purpose Entities, and Transparency of Filings by Issuers available at

[11] See background information published by the FASB, available at

[12] See background information published by the FASB, available at

[13] See background information published by the FASB, available at

[14] A Financial Crisis Advisory Group (FCAG) was assembled and asked to identify any accounting issues that require the FASB and IASB’ urgent and immediate attention as well as issues for longer-term consideration. On July 28, 2009, the FCAG issued their Final Report. See also background information published by the FASB, available at

[15] See SAB No. 102 (Topic 5:M) — Selected Loan Loss Allowance Methodology and Documentation Issues, available at, and Securities and Exchange Commission Accounting Series Release No. FR-28 (Article 9, Section 401.09), “Accounting for Loan Losses by Registrants Engaged in Lending Activities” (December 1986).

[16] For example, I have encouraged that type of dialogue as part of new standard transition activities because it often fosters education about the core principles within the guidance.

[17] Preparers and auditors also may wish to consider various external resources that discuss how to form and document professional judgment. For example, see the Center for Audit Quality, Professional Judgment Resource, available at

[18] All data on 2014 and year to date 2015 restatements are analyzed by OCA staff using data downloaded September 25, 2015 from the Audit Analytics database, available at For comparisons to data prior to 2014, see Scholz, S. 2013. Financial Restatement: Trends in the United States; 2003-2012; see also the Center for Audit Quality (Washington, DC) available at

Print Facebook Twitter Email Share
Facebook Twitter Email
Modified: Dec. 8, 2015