Top Accounting Trends And Takeaways From The SEC And Financial Reporting Conference – Accounting Standards – Accounting and Audit

This month, Riveron sponsored and presented at the
42^nd Annual SEC and Financial Reporting Conference
hosted by the University of Southern California Leventhal School of
Accounting and the Financial Executives Institute (FEI).

The conference themes spanned materiality, evolving standards,
internal controls over financial reporting, and more. Riveron
experts have compiled key takeaways from the conference that will
be relevant for accounting and finance professionals preparing for
their companies’ quarterly and annual reporting.

In addition to Riveron’s presentation on artificial intelligence for CFOs and
controllers, the conference featured insights from accounting
industry leaders. These included the US Securities and Exchange
Commission (SEC) staff, members of the Financial Accounting
Standards Board (FASB), Fortune 100 finance and accounting
executives, and representatives from the top national accounting
firms.

The gathering provided an excellent opportunity to hear from
accounting leaders on the latest themes emerging from busy season
as companies refine their financial reporting practices and look
toward preparing for year end. Here are the important conference
takeaways for the office of the CFO:

Risk assessments, in-progress projects, and other topics
explored at the SEC and FASB leaders’ fireside chat

The conference began with a fireside chat featuring the SEC
Chief Accountant Paul Munter and FASB Chair Rich Jones. Both
leaders reiterated themes they had previously highlighted at the 2023 SEC conference.

Munter discussed several statements issued by his office,
addressing various practice issues from rigor in the statement of
cash flows to the tone at the top of accounting firms. He
emphasized that the accounting profession must prioritize quality
financial reporting, integrity, and professionalism over
growth.

Specifically, Munter highlighted the importance of financial
statement preparers and auditors performing a quality risk assessment. He commented that, in some
circumstances, the risk assessment process is too focused on a
narrow scope of information while not considering broader economic
circumstances that may impact the analysis. A holistic risk
assessment should consider the activities and results of companies
and examine the dynamic environment in which they
operate.

Rich Jones, the FASB Chair, highlighted the current FASB agenda.
He noted that, upon assuming his role, the FASB conducted an
outreach effort to identify topics relevant to investors and
preparers, ensuring that the FASB agenda output benefits investors.
Jones also mentioned the reconstituted Emerging Issues Task Force (EITF), which
addresses practice issues more swiftly and integrates them into the
FASB agenda with suggested solutions.

Jones outlined several projects in progress, including the
following:

Jones also highlighted several recently issued standards,
including the standard on digital assets, as an example of how the
FASB continues to look for ways to be responsive to industry
demands.

Current practice takeaways included materiality, data, and
internal controls

Beyond the presentations from the SEC Chief Accountant and FASB
Chair, the attendees heard from a panel of accounting firm leaders
regarding current practice and audit issues, a controllership
panel, and from the SEC Chief Accountant of the Enforcement
Division. The presentations covered a variety of topics and
concerns in current practice. Topics of note throughout the day
included:

Materiality: From cybersecurity to climate disclosures to the evaluation of a
misstatement, a thorough and objective assessment and documentation
of materiality is critical. In certain areas such as cybersecurity
and climate disclosures, defining materiality is a novel concept
and will take significant work with key stakeholders outside of the
financial reporting department. When it comes to the financial
statements, there continues to be significant SEC focus on the
evaluation of materiality with regards to evaluation of a
misstatement utilizing the guidance in SAB 99. The staff underscored that these
assessments should not be viewed as something that a company can
simply “document their way out of” but require objective
assessments of quantitative and qualitative factors, if
relevant.

Data Management and Systems: While the
conference did not dwell on the general shortage of accounting
talent, it did highlight strategies to cope with these shortages.
One key strategy is the implementation of robust data management
practices. Effective data management contributes to reliable
financial reporting and helps mitigate the impact of talent
shortages. For instance, Riveron led a discussion on AI in
Accounting that explored various use cases beyond large language models,
focusing on automating processes and enhancing data validation. The
controller roundtable further emphasized the importance of systems
that manage data effectively and the need for financial reporting
teams to rigorously validate that data. Good data practices are
essential for ensuring the accuracy and reliability of financial
reports, especially in an environment where accounting resources
are stretched thin.

Internal Controls over Financial Reporting:
Internal controls over financial reporting (ICFR) was a major focus
throughout the panels, highlighting several key problem areas:

• Sufficient Personnel and Expertise: Ensuring
  teams have the right personnel with the necessary expertise is
  crucial, particularly amid current talent shortages.




• Adequate Resources: Sufficient resources,
  including access to technology and AI, are essential to support
  robust internal controls.




• Information Flow: Critical information must
  reach the appropriate individuals for informed
  decision-making.




• Integration of Acquired Systems: Effective
  controls are necessary to ensure accurate financial data during
  system integrations.




• Cybersecurity Disclosures: Accurate and timely
  disclosures are vital in the face of increasing cyber threats.




• Risk Factor Disclosures: Properly identifying
  and disclosing risk factors is essential for transparent financial
  reporting.

Preparers should consider the total communication to investors,
beyond just the audited financials and footnotes. Investing in ICFR
and disclosure controls and procedures (DCP) can help identify
problems early, leading to better reporting and fewer issues
escalating to the division of enforcement.

Recurring conference topics relevant for the office of the
CFO

In addition to the key themes noted above, the conference
participants briefly mentioned several topics that often arise at
these events. The office of the CFO should continue to monitor
these topics throughout the year to ensure accounting and financial
reporting practices are aligned to the latest guidance.

SEC comment letter trends are a common subject
closely followed by preparers, and the following topics were
highlighted during the conference:

Emerging areas of comments, including:

“Evergreen” topics that continue to be a focus:

Additionally, the Division of Corporate Finance indicated other
trending consultation topics, which included:

• New SEC clawback rules and the use of the cover page
  checkboxes




• New segment reporting guidance and the application
  of the guidance to Non-GAAP measures




• Cybersecurity breaches and 8-K disclosures

Overall, the 42nd Annual SEC and Financial Reporting Conference
offered valuable insights from key regulators, standard-setters,
and industry leaders. While some topics remain consistent, the
focus on emerging issues highlights the ever-evolving financial
reporting landscape. Companies must stay vigilant and proactive in
their reporting practices to navigate these changes
effectively.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.