|FROM: ||J. Minke-Girard|
|RE: ||Release Nos. 33-8098; 34-45907; International Series Release No. 1258
File No. S7-16-02
|DATE: ||July 12, 2002|
On June 4, 2002, Chief Accountant Robert Herdman and Professional Accounting Fellow David Kane met with representatives of the Financial Reporting Committee of the Institute of Management Accountants. Following are comments received from that group.
Critical Accounting Policies
- IMA indicated that 2001's disclosures could have been improved had the information in the Chief Accountant's speech in February 2002, which discussed practical implementation issues, been available earlier.
- IMA expressed concern that the accounting literature and SEC rules result in redundancies. For example, the IMA believes that the business section of the 1934 Act filing should include the nature of the business, the related risks, along with the accounting for the business. Instead, current accounting literature and rules require that information to be dispersed throughout the filing, and it believes that bringing that information together would improve the quality of financial reporting.
- IMA indicated that Audit Committees and Boards of Directors had increased their involvement and discussion of critical accounting policies. The IMA believes that discussion was very beneficial.
- IMA was concerned about the sensitivity requirements in the rule proposal. It believes that aggregating information, particularly with companies that have multiple product lines, would be difficult.
- IMA generally believes that disclosures would improve over time. As a result, they want flexibility in the final rules so companies have judgment as to how and what is communicated.
- IMA was unclear whether the rule proposal required a quantification of different alternatives (in addition to the qualitative discussion) when a first time accounting policy is adopted.