United States: SEC Chief Accountant Reviews Implementation Of New Accounting Standards
Last Updated: November 23 2017

SEC Chief Accountant Wesley Bricker reviewed the implementation of the new Generally Accepted Accounting Principles ("GAAP") standards, the new auditor's reporting model, and the role of distributed ledger technology (e.g., blockchain) in financial reporting. In remarks before the Financial Executives International 36th Annual Current Financial Reporting Issues Conference, Mr. Bricker emphasized the importance of reliable financial reporting, accounting and auditing to well-functioning capital markets.

Mr. Bricker explained that public companies have already made significant progress in the phased implementation of the new revenue standard, and that the transition is in its final stages. He said that some companies may still need to hasten their efforts in order to meet timely implementation obligations. Mr. Bricker cautioned that companies must pay attention to requirements regarding internal controls that address judgments and estimates necessitated by the new standard and associated documentation requirements (see, e.g.Staff Accounting Bulletin 74).

Mr. Bricker said he anticipates that the adoption of the leases standard (effective in 2019) will be a "significant effort." This process will require several steps, he explained, including the evaluation of contracts to determine the applicability of the new standard. He cautioned against waiting until the implementation of the revenue standard to begin efforts to implement the leases standard, and warned that leaving insufficient time may prohibit companies from making reasonable judgments or completing required accounting analyses.

Regarding the credit loss standard, Mr. Bricker stated that it will result in greater transparency and provide more useful information for investors and other market participants. He claimed that the credit loss standard will reduce information asymmetries that emerge within the current framework for the assessment of expected credit losses.

Mr. Bricker also addressed the recent SEC adoption of a Public Company Accounting Oversight Board ("PCAOB") auditing standard that made significant changes to the auditor's report. The most notable change is the establishment of a requirement that auditors identify critical audit matters within their audit reports. Mr. Bricker asserted that substantial efforts will be necessary to ensure effective implementation. He encouraged the PCAOB to conduct a post-implementation review to evaluate whether additional changes or adjustments are necessary.

Finally, Mr. Bricker said that the Office of the Chief Accountant is working to understand blockchain technology within the framework of existing securities laws, particularly accounting- and auditing-related rules. He encouraged all accounting industry members to be aware of and assess trends and developments in technology in order to recognize their potential impact on financial reporting to investors.

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