As noted in this blog, the FASB issued two exposure drafts last week that address the use of materiality to help companies eliminate unnecessary disclosures in their financials. In addition, the exposure drafts are an attempt to have the FASB’s conceptual framework become better aligned with the legal concept of “materiality” established by the US Supreme Court.
The exposure drafts are part of the FASB’s disclosure framework project – and address the use of materiality in two ways:
– Helping companies use discretion when determining which disclosures in notes to financial statements should be considered “material,” and
– Helping FASB understand the reporting environment in which it sets accounting and reporting standards.
The exposure drafts are “Qualitative Characteristics of Useful Financial Information” – and “Notes to Financials – Assessing Whether Disclosures Are Material.” We’re posting memos in our “Materiality” Practice Area.
The Business Roundtable has a new white paper that argues that the materiality standard for determining disclosure obligations best protects investors and facilitates the capital markets…
PCAOB Auditor Inspections Will Focus on Three Areas
Last week, as noted in this blog, the PCAOB issued this “Staff Inspection Brief” to highlight the three general areas that it will focus on going forward during inspections: auditing internal control over financial reporting; assessing and responding to risks of material misstatement; and auditing accounting estimates, including fair value measurements. These are among the most common areas where inspectors found significant deficiencies in the past several years. In addition, PCAOB inspectors consider the current economic environment and related developments in their reviews. For example, economic uncertainty stemming from the financial crisis and the sluggish global economy has in the past factored into the audits and the areas selected for inspection.
Hat tip to the Society of Corporate Secretaries for noting how the PCAOB recently posted an updated Standard-Setting Agenda – and that based on comments received on its reproposal, the Staff anticipates recommending that the audit engagement partner disclosure be required on the new PCAOB form that was proposed as an alternative to disclosure in the auditor’s report. By the way, I just calendared this new webcast: “Audit Committees in Action: The Latest Developments.”
Coming? Disclosure Simplification for Smaller Companies
As noted in this Cooley blog, at last month’s meeting of the SEC’s Advisory Committee on Small and Emerging Companies, the Committee approved a set of recommendations in an effort to harmonize the jumble of rules that apply to the various categories of small companies and expanding the application of the small-company disclosure accommodations generally. Funny because I was just reliving some old memories with Brian Lane yesterday about the “Disclosure Simplification Project” that came out in 1996…
See this interview for a perspective of the disclosure effectiveness project underway related to accounting & the financials…
– Broc Romanek