June 13, 2016

Revenue Recognition: How to Prepare Transition Disclosure

Hat tip to Steve Quinlivan for pointing out this speech by SEC Deputy Chief Accountant Wes Bricker last Thursday that contains his views about transition disclosure as the effectiveness of the new revenue recognition standard nears. Here’s an excerpt from Wes’ speech:

Speaking of disclosures, the SEC staff has long advised that a registrant should provide transition disclosures to investors of the impact that a recently issued accounting standard will have on its financial statements when that standard is adopted in a future period.

The preparation of the transition disclosures should be subject to effective ICFR and disclosure controls and procedures. As management completes portions of its implementation plan and develops an assessment of the anticipated impact the standard will have on the company’s financial statements, internal and disclosure controls should be designed and implemented to timely identify relevant disclosure content from the implementation assessments and to ensure, where necessary, that appropriately informative disclosure is made.

Investors should expect the level of transition disclosures to increase as a company progresses in its implementation plans and, when necessary, engage with company management to understand these disclosures.

Tomorrow’s Webcast: “Proxy Season Post-Mortem – The Latest Compensation Disclosures”

Tune in tomorrow for the webcast – “Proxy Season Post-Mortem: The Latest Compensation Disclosures” – to hear Mark Borges of Compensia, Dave Lynn of and Morrison & Foerster, Ron Mueller of Gibson Dunn analyze what was (and what was not) disclosed this proxy season.

Yates Memo: Counterproductive Impact?

Here’s an excerpt from this blog by Kevin LaCroix that analyzes this new research from the Chamber of Commerce:

Individual actors “may find their own legal interests to be at odds with those of the company’s.” This dynamic could lead to “an ‘every man for himself’ mindset within the company.” Junior employees may refuse to cooperate, at least without their own legal representation. Other may decide to secure their own attorneys, without going through corporate channels.

These impacts could add complexity, expense and delay to the company’s efforts to complete its investigation in order to receive cooperation credit. Perhaps even more importantly, these factors could have a “chilling effect” on the company’s ability to fully investigate and develop the full factual record needed to secure cooperation credit. The upshot could be that in the end this internal dynamic could “impede the corporation’s ability to perform what is intended by the Yates memo – to gather facts and report to the Department any individuals engaged in wrongdoing.” Rather than allowing the agency to leverage a corporation’s access to information, “the Yates Memo’s impact is likely to have the opposite effect.”

Broc Romanek