FOR IMMEDIATE RELEASE

SEC's Investor Advisory Committee Urges the Financial Accounting Standards Board to Reconsider and, If Appropriate, Repropose Amendments to the Core Financial Accounting Concept of Materiality

Washington, D.C. January 21, 2016 - The Investor Advisory Committee (IAC) empanelled by the Securities and Exchange Commission (SEC) today approved the submission of a comment letter to the Financial Accounting Standards Board (FASB) urging rejection of proposed changes to concepts of "materiality" embodied in FASB's Conceptual Framework for Financial Reporting and FASB's guidance on Notes to Financial Statements and urged the FASB to reconsider and, if appropriate, repropose amendments that would better accomplish its stated goals.

In late 2015 FASB issued two exposure drafts, or proposals, for public comment under its disclosure framework project. According to FASB's public statement issued in conjunction with these proposals, the objective of the project is to improve the effectiveness of disclosures by more clearly communicating when accounting standards mandate reporting of information that is most important to users of financial statements.

The proposed amendments to the conceptual framework for financial reporting and specific guidance on accounting standards regarding notes to financial statements focused on the determination of whether a potential matter for disclosure reached a level of "materiality" and therefore should require disclosure. Certain of the proposed amendments were purportedly intended to promote the appropriate use of discretion by organizations when deciding which disclosures should be considered material in their particular circumstances.

As part of its review of FASB's proposals, the IAC determined that the proposals would more likely reduce disclosure with the potential to adversely affect the quality of financial disclosure in U.S. financial markets without sufficient offsetting benefits to investors. While supportive of efforts to improve the quality and transparency of financial disclosure, the IAC concluded that FASB's proposals could have the opposite impact. The IAC urged FASB to reconsider the approach set out in its proposals.

In part, the IAC's comment letter pointed out that the proposals "[g]ranting issuers greater latitude to use discretion in evaluating the materiality of disclosures in the absence of a framework is fraught with the risk that disclosures that are unfavorable to the issuer are disproportionately viewed as immaterial and as a result excluded from the financial statements." The IAC went on to conclude that such a result is not in the best interest of investors.

About the Securities and Exchange Commission's Investor Advisory Committee

Established under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Investor Advisory Committee advises the SEC on regulatory priorities, the regulation of securities products, trading strategies, fee structures, the effectiveness of disclosure, and on initiatives to protect investor interests and to promote investor confidence and the integrity of the securities marketplace. Among other things, the Dodd-Frank Act authorizes the committee to submit findings and recommendations for review and consideration by the SEC.

Contact

To learn more about the Investor Advisory Committee's action, please contact Roy J. Katzovicz at rjk@saddlept.com

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