March 22, 2016

SEC Speaks: Revenue Recognition Guidance

According to this Bloomberg article, SEC Chief Accountant Jim Schnurr told attendees at the recent “SEC Speaks” conference that the SEC will deem the views of the “FASB/IASB Joint Transition Resource Group for Revenue Recognition” (TRG) to be practical guidance for purposes of implementing the new standard – and will expect companies to adhere to those views despite the fact that the TRG’s views are not FASB or IASB authoritative pronouncements or standards.

Notwithstanding the fact that the release announcing the formation of the TRG – and other information on FASB’s website about the group – specifically disclaim the TRG’s issuance of any guidance, Schnurr reportedly stated: “From a practice point from my office, we would expect a registrant to follow the guidance that comes out of those deliberations’ of the TRG… ‘If a company chose to take a different approach’ from what the TRG concluded, ‘we would expect them to come in and talk to us about why they were not following’ what the TRG had found.'”

Access heaps of resources in our “Revenue Recognition” Practice Area, and my prior blogs on the new standard:

SEC Administrative Proceedings Triple Since 2010

Among the noteworthy trends identified in this recent report – SEC Enforcement Activity Against Public Company Defendants: Fiscal Years 2010 – 2015 – from Cornerstone Research and NYU: In the context of increasing scrutiny and challenge of the constitutionality and overall fairness of its administrative proceedings, the proportion of actions the SEC brought as administrative proceedings more than tripled from 21% in fiscal 2010 to 76% in fiscal 2015.

Additional key findings and trends include:

  • The total number of SEC enforcement actions in fiscal 2015 represented a 7% increase compared to record-breaking fiscal 2014, and was 10% above the median for fiscal years 2010 through 2015. The increase was fueled by a record level of independent actions.
  • From fiscal 2010 to fiscal 2015, the majority of actions against public company defendants involved either Issuer Reporting and Disclosure or FCPA violations.
  • The total number of enforcement actions initiated by the SEC generally increased over the past six fiscal years; however, the number of actions against public company defendants remained relatively stable. During this period, the SEC initiated a median of 735 actions per year with the total number of enforcement actions trending upward beginning in fiscal 2014 to a record 807 actions in fiscal 2015.
  • In fiscal 2015, more than 80% of public company defendants settled concurrently with the filing of the action. Concurrent settlements in civil actions dropped substantially, while concurrent settlements in administrative proceedings increased.
  • Following the passage of Dodd-Frank in 2010, which enabled the SEC to seek monetary penalties against an array of defendants in administrative proceedings, the majority of large penalties and disgorgements imposed on public company defendants have occurred in administrative proceeding cases.

See also Gibson Dunn’s 2015 Year-End Securities Enforcement Update, and Shearman & Sterling’s Year-End Review.

More on “The Mentor Blog”

We continue to post new items daily on our blog – “The Mentor Blog” – for members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

– CEOs Claimed Almost Half of New Board Seats in 2014
– Board Approach to Strategy & Risk
– DOJ Compliance Counsel Controversy
– Board Risk Committee Considerations
– Audit Fee Disclosures

– by Randi Val Morrison