From December 9-11, representatives from the Securities and Exchange Commission (SEC or the Commission), the Public Company Accounting Oversight Board (PCAOB or the Board), the Financial Accounting Standards Board (FASB), and other speakers participated in the 2024 AICPA & CIMA Conference. They discussed various accounting, financial reporting, auditing, and regulatory topics that are critical to organizations heading into 2025. Summarized below are the key highlights.

Regulatory Landscape

  • Leadership changes: SEC Commissioner Mark Uyeda and U.S. Rep. French Hill discussed anticipated changes under the new administration, including President-elect Donald Trump’s nomination of Paul Atkins as SEC Chair.

Remarks by PCAOB Chair and Board Members

  • Improvements in deficiency rates: PCAOB Chair Erica Williams noted significant improvements in Part 1.A deficiency rates at large firms but stressed the need for continued focus on reducing deficiencies.
  • Focus areas for 2025: Christine Gunia, Director of the PCAOB’s Division of Registration and Inspections, highlighted 2025 inspections will focus on industries affected by economic volatility, the use of generative artificial intelligence (AI), and audit execution challenges.

Remarks by SEC Chief Accountant

  • Statement of Cash Flows: Mr. Munter highlighted the importance of the statement of cash flows for investors and reminded stakeholders that the statement of cash flows and its related disclosures should be given the same level of quality attention as other financial statement components.

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Remarks by Senior SEC Staff Members on Accounting and Disclosure Matters

  • Financial instruments: Gaurav Hiranandani, Senior Associate Chief Accountant in the SEC’s Office of the Chief Accountant, discussed the classification of financial instruments as liabilities versus equity, particularly the complexities of warrants.
  • Recent ASUs: Mr. Hiranandani discussed the scope of recently issued Accounting Standard Updates (ASUs) by the FASB including those on segment reporting, income tax disclosures, and disaggregation of income statement expenses.
  • Deconsolidation guidance: Jonathan Perdue, an SEC Professional Accounting Fellow, explained the application of ASC 810 for deconsolidation of subsidiaries, emphasizing the importance of considering the substance of transactions.
  • Deconsolidation of a subsidiary accounted for on a lag: Mr. Hiranandani discussed a situation in which a company sold a subsidiary that had been reported on a three-month lag. The company wanted to recognize three months of income statement activity directly in shareholders’ equity, with adjustments to the subsidiary’s assets and liabilities at the sale date, which the SEC staff disagreed with.  

Division of Corporation Finance Practice Matters

  • Segment reporting: Staff from the SEC’s Division of Corporate Finance discussed the interaction between ASC 280 and the SEC’s non-GAAP guidance, with reminders on the disclosure of additional non-GAAP segment profitability measures.
  • Auditor responsibilities: Heather Rosenberger, Chief Accountant in SEC’s Division of Corporate Finance, explained that auditors are responsible for evaluating compliance with ASC 280 regarding additional non-GAAP segment profitability measures in financial statement notes. However, they do not assess compliance with the SEC’s non-GAAP guidance or determine if these measures are misleading. Non-GAAP disclosures in the segment note that are not audited should be labeled “unaudited.”  Auditors may choose to highlight unaudited items in their opinion.

Enforcement Matters

  • SEC enforcement: Ryan Wolfe, Chief Accountant in the SEC’s Division of Enforcement, discussed the SEC’s approach to reducing or waiving penalties for registrants in non-fraud cases if they improve their internal controls and financial reporting. He also covered enforcement matters related to audit quality and independence, and an audit committee case.

Remarks by FASB Chair and Staff

  • Stakeholder feedback: FASB Chair Richard Jones emphasized the importance of stakeholder feedback in the standard-setting process, with several due process documents outstanding for public comment. Mr. Jones and Jackson Day, FASB Technical Director, discussed the importance of cost and benefit considerations in the standard-setting process.

Artificial Intelligence

  • Opportunities and risks: Speakers discussed the use of AI in accounting and financial reporting, with the PCAOB encouraging stakeholder engagement on the application of auditing standards in the context of AI.

For more information on the accounting and reporting matters that are relevant to your organization, stay tuned for our detailed publication in the new year. We’ll review key disclosure and reporting reminders for upcoming filings, SEC rulemaking, and other activities impacting financial reporting. To better understand and prepare for accounting changes on the horizon, contact CrossCountry Consulting.

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Bob Michaels

Technical Accounting Lead

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Contributing authors

Amit Goel

Olivier Bouwer

Pavel Katsiak