June 19, 2018

Revenue Recognition: Corp Fin Plans Lighter Touch

This nice blog from Cooley’s Cydney Posner offers a bunch of interesting nuggets from an interview with SEC Chair Jay Clayton and Corp Fin Director Bill Hinman at a recent WSJ event. Here are the highlights:

1. Corp Fin’s Approach to Revenue Recognition Comments – Hinman reportedly said that the staff understands that the rule is complex to apply and is focused on helping issuers comply; the staff doesn’t “have a particular agenda or standard comments…We don’t expect to repeat the same comment for five different companies.” He contrasted the staff’s approach to revenue recognition with its approach to compliance with the SEC’s guidance on non-GAAP financial measures or compliance with GAAP, where the staff would often issue standard comment letters.

2. Talk to Staff for Reg S-X 3-13 Waivers – Hinman reportedly advised issuers to skip the 30-page treatises; first talk with the staff.

3. Mandatory Auditor Rotation Not Priority – Although some European regs require mandatory auditor rotation every 10 years, Clayton also noted that “mandatory rotation of company auditors ‘is not something that is front and center in my mind.’”

4. Fine-Tuning Dodd-Frank; Not Overhauling It – Clayton, speaking at the annual meeting of the WSJ’s CFO Network, said that “regulators are evaluating how postcrisis rules have performed in practice, and that he had concerns about some of the unintended side effects from some regulations. But any changes will be around the edges, keeping the core of postcrisis overhauls in place, he added. ‘I don’t think Dodd-Frank is changing a great deal, just to put a pin in it.’

Corp Fin Director Hinman Talks Cybersecurity Disclosures

Here’s the intro from this blog by John Atwood:

Bill Hinman, director of the SEC’s Division of Corporation Finance, said the staff is looking closely at companies’ risk disclosure surrounding cybersecurity in this year’s filings following the update to the SEC’s cyber guidance that was issued in February. At the PCAOB’s recent Standing Advisory Group meeting, he noted that some aspects of the guidance have been controversial, so he explained some of the Commission’s thinking behind the guidance.

Hinman said that the staff wanted to focus the guidance on a few areas to which it wanted to draw more attention. The first area was internal controls and how companies were designing internal controls so that when a cyber incident occurs, there were the right procedures in place to escalate the issue.

Companies should not just have IT personnel looking at cyber risks anymore, he said. The issues now should be brought to the attention of disclosure experts at the company, as well as the general counsel. Hinman said the staff wanted to remind companies that they should have procedures in place that would cause escalation to occur, so it was added to the guidance.

May-June Issue of “The Corporate Executive”

We recently mailed the May-June issue of “The Corporate Executive” – and it includes articles on:

– Court Decisions Breathe New Life into Lawsuits over Directors’ Compensation—And What You Need to Do about It
– Understanding the New Qualified Equity Grant Deferrals
– Elon Musk’s Mega Grant
– Rule 701 Disclosure Threshold Finally Increased

Broc Romanek