SEC to conduct study on adequacy of financial disclosures

The Securities and Exchange Commission is planning to conduct a study on whether financial disclosures provide the appropriate amount of information as part of an effort by the agency to better inform investors and prevent preparatory overlap.

“We intend to initially focus on whether the issue should be further explored, including, for example, whether there are any perceived gaps in the disclosures today, and what are the critical decision points regarding this issue of the dividing line between what should appear in the financial statements versus the broader reporting package,” Paul Beswick, the acting chief accountant at the SEC, said, according to Journal of Accountancy.

Beswick said that the SEC will hold a round table to discuss the issue with the Financial Accounting Standards Board, the Public Company Accounting Oversight Board, preparers and business representatives.

Investors armed with the latest technology are always interested in more information, while the preparers of financial statements have struggled to handle the increased amount of required disclosure. Some businesses have expressed concerns regarding the cost of preparing such complex financial reports.

“We’re living in an era marked by complexity and flux—in our economy, in financial reporting and auditing, and in the regulatory environment,” Richard Caturano, the chairman of the American Institute of Certified Public Accountants, said, Journal of Accountancy reports.

Beswick also said that projects completed by the FASB on interest-rate disclosures and disclosure framework have underscored the need for the analysis.

Brad O’Bryan, the chief accounting officer for Hyatt Hotels, said that the FASB and SEC need to work together.

“We believe that in order to make financial statement disclosures more effective and less redundant, the FASB and SEC need to undertake a joint approach with respect to this project,” O’Bryan said, according to Journal of Accountancy. “Further, we believe this would provide increased value to users of the financial statements…as this would promote a holistic view.”

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