SEC looking at Trump proposal on quarterly financial reporting

12 de noviembre 2018

Publicado: AccountingToday

Presidente Comisión de Valores de Jay Clayton dijo la SEC está estudiando una propuesta del presidente de Trump para cambiar el ciclo trimestral de información financiera para las empresas públicas.

En agosto, Trump pié, “Al hablar con algunos de los principales líderes de negocios del mundo, le pregunté qué es lo que haría negocios (puestos de trabajo) aún mejor en los EE.UU. ‘informes trimestrales Stop & Go a un sistema de seis meses, dijo uno . Esto permitiría una mayor flexibilidad y ahorrar dinero. He pedido a la SEC para estudiar!”

Clayton indicó el lunes que la SEC está tomando en serio la propuesta. “El presidente tenía razón al plantear esta cuestión”, dijo durante la conferencia actuales problemas de información financiera Financial Executives International en Nueva York. “Se tocó un nervio porque yo no creo que ninguno de nosotros queremos nuestra muy importantes empresas del sector privado que se ejecutan en un cuarto a corto plazo a base de trimestre. Eso es importante. Espero que la mayoría de los equipos de gestión tienen un plan estratégico que sale dos, tres o cuatro años y están buscando invertir más de ese horizonte. Mira, hay gente en esta sala que tienen las industrias donde su horizonte de inversión es de 10, 15, 20 años. No se puede estar ejecutando su organización para el 31 de diciembre de este año en exclusiva “.

Sin embargo, Clayton también se refirió a algunos de los beneficios de la presentación de informes trimestrales para los inversores. “Dicho esto, se puede ver el otro lado de la misma, que es que nuestros mercados de capitales están sedientos de información”, dijo. “Ellos tienen sed de información periódica fiable, comparable. Eso es una realidad. Por lo que el presidente planteó un punto muy bueno, y estamos buscando en ella “.

Clayton noted that oftentimes, investors pay more attention to the earnings press releases than the 10-Q quarterly financial reports and 10-K annual reports. “I can give you some observations that are informing the way I think about it,” he said. “You go through the Q process times a year and then the K process. There was a time when in many cases the earnings release would come out before the Q. If the stock moved after the Q came out and not when the earnings release came out, you had a big problem. You had a huge problem, which meant really all of the quarterly information that was necessary for the market was in the earnings release. So one of the questions I’ve been asking myself is do we need that Q process every quarter, or do we need it every six months with something that is less voluminous, but still provides all of the quality information that investors need? It’s a good question, but in terms of a quarterly reporting cycle, I think we all have to recognize that whether it’s your credit agreement or indentures, all of these other parts of your corporate ecosystem, they’re based around this concept. But I very much support the president’s question of are we managing too much for the short term and what can we do about it?”

SEC chief accountant Wesley Bricker noted that the question of dispensing with quarterly financial reports has been on the SEC’s radar for years now, pre-dating Trump’s tweet. “This has been on an agenda through the Reg S-K concept release where we got valuable input in 2015,” he said during a press conference. “That input in 2015 has contributed to our thinking on our Regulatory Flexibility Agenda, which is where the commission and all other government agencies describe their outlook for the next 12 months. On that agenda, which is available online, it includes an entry for looking at the frequency of reporting and the nature of internal reporting. That’s designed as a request for comment, not a specific proposal, and certainly not a final rule. It’s a request for comment to continue to gather input from how the balancing of information in our marketplace and the thirst for information has changed with the duplication that may arise with an earnings release and a 10-Q quarterly filing.”

Tax Reform Guidance

Clayton and Bricker also discussed how companies have been providing other disclosures, including how they responded to the SEC’s Staff Accounting Bulletin No. 118, which came out shortly after the Tax Cuts and Jobs Act passed last December. It offered guidance on how companies could account for income taxes after the far-reaching changes in the corporate tax code under the legislation.

“For many of you, you understand related to the timely disclosure of information about income taxes, particularly where income tax law had changed days before many companies were closing their books,” said Bricker. “So the way we thought through that circumstance was balancing how to get timely information to the marketplace consistent with the normal reporting cycle, but also to reflect the practicability of getting the change in tax law digested into the accounting records. So I think the approach they landed on was one of letting management describe to the marketplace where they are.”

Clayton praised the work of the SEC’s Office of the Chief Accountant and the Division of Corporation Finance in releasing the guidance on the new tax law. “It happened right near the end of the year, and they came out with guidance very quickly, and the guidance had this very practical element to it,” he said. “It was ‘OK, you know the rules, you know the calculations are going to be difficult, but we expect you to do what you can reasonably do in the time allotted for it, and inform us along the way of how you’re looking at it.’ That’s pretty simple, but it took a lot of engagement, a lot of foresight and many times at the commission you measure success by the number of complaints. We haven’t received any complaints from the investment community, the preparer community or the audit community, so my hat is off to our chief accountant and his team and the head of the Division of Corporation Finance and his team did a terrific job on this.”

Brexit Disclosures

Clayton and Bricker were asked whether similar staff accounting bulletins might be released by the SEC about other issues, and they cited Brexit as an important area for companies.

“One of the areas that probably doesn’t need a SAB 118, but does benefit from continued focus by this group is a topic like Brexit,” said Bricker. “For many of you, or many of your companies, you have activities with integrated supply chains, integrated financing around the globe, that all depend upon or are impacted by the negotiations between Britain and the EU. That’s an area where disclosure has come along, but I’ll say this year-end should deepen as you understand the connectedness of your businesses to those issues on things like the assumptions that go into asset valuations, the assumptions that go into income, the assumptions that even go into the basis of presentation, whether it’s a going concern basis or a liquidation basis, the assumptions that go into your financing, and the narratives that bring all of that together so that investors understand that circumstance and how companies are managing.”

Clayton believes companies should be providing more disclosure about their plans for Brexit, especially if there’s a “hard Brexit” in which the EU and the U.K. fail to come to terms on an agreement for a smooth transition.

“Wes described this at the preparer level,” said Clayton. “Let me just say at the disclosure level more generally, we are focused on Brexit disclosure and we are going to be more focused on it going forward. We have seen a wide range of disclosure in the same industries — Company A with a fairly detailed discussion of how management is looking at the issue of Brexit and the impact for its company, and Company B with what I would say is a macro policy statement that Brexit is coming and it presents a risk. I want to see the disclosure to the extent that it’s material and appropriate gravitate toward Company A. My personal view is that the potential impact of Brexit has been understated, and that those impacts will start to manifest themselves before the current Brexit ‘go live’ date. If you add together I would say the more cautious disclosure in the marketplace, you start to get greater unease as to the knock-on effects of a no deal or a hard Brexit. I would expect companies to be looking at this closely and sharing their views with the investment community.”

CECL Implementation

Financial Accounting Standards Board vice chairman James Kroeker discussed the current expected credit losses standard at the conference, and whether there are plans to modify it in response to letters from some groups.

“Accounting standards should reflect how the business is run, both from the eyes of management, but then to reflect that in a way that is aligned with economic activity,” he said during a press conference. “To the extent that accounting wasn’t doing that in the past, that was the incurred loss approach, which is disconnected from the risk. There were criticisms about does that in and of itself build an economic pattern that risk becomes much more apparent right at the time when you enter into a crisis. If you recall at the time, there was a lot of discussion about how the incurred loss approach was pro-cyclical, so figuring out whether or not providing that information to investors better aligns with risk management, my view would be that actually provides at least from the investors’ investing of capital greater stability that you have that insight. Of course, the letter talks about that interaction with regulatory capital, which is separate and apart from the information that investors get for making their decisions.

Observó que FASB sigue muy de cerca el progreso de un grupo de recursos de transición que ha sido creado para ayudar a las empresas a hacer la transición a la nueva norma. “El número de preguntas que están ahí fuera en CECL han disminuido y el volumen no ha sido significativa, incluso para empezar”, ha apuntado. “Pero en cuanto a la comprensión de una aplicación razonable de CECL y de la gente buena disposición para ponerlo en práctica, seguimos recibiendo mensajes positivos. Es decir, la gente no está detrás de la curva. CECL es la norma promulgada, por lo que insta a la gente a seguir adelante, esperando para ponerlo en práctica en la fecha efectiva “.


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