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Quarterly Update: Accounting and the SEC

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During the recent Accounting and SEC Update webinar, Weaver professionals discussed the regulatory, accounting and reporting issues that public companies are facing.
8 minute read
February 1, 2023

Weaver’s December 15, 2022 Accounting and SEC Update highlighted four areas: recent accounting pronouncements and upcoming effective dates, credit impairment under ASC 326 (CECL), pay versus performance disclosures as well as comment letter trends and other year-end reminders. Across these areas, the SEC is increasingly emphasizing disclosures. Regulators want more context behind financial results, which will take more time for audit and reporting teams to prepare.

Recent Accounting Pronouncements

Six accounting standards updates (ASUs) with effective dates in 2023 for calendar year-end public entities:

Credit Impairment Under ASC 326 (CECL)

While previously effective for larger filers, seven current expected credit loss (CECL)-related ASUs go into effect in 2023. While CECL is generally viewed as most significantly impacting large financial institutions, it also applies to trade receivables and potential challenges should not be overlooked. Unless your entity operates solely on a cash basis, there is most likely an impact.

Keep in mind the spirit of the guidance, which is to give investors more useful and timely information, and generally results in earlier recognition of expected or potential credit losses.

Under ASC 326:

Many filers already have processes, systems, and controls in place to pull historic data and create up-to-90-day analyses. Now, filers need to layer on future economic considerations. Take time to understand the guidance and elections, and to document your calculation methods, processes, and procedures.

Pay versus Performance: Item 402(v) of Regulation S-K

Companies with fiscal years that ended on or after December 16, 2022, are required to disclose additional information about executive compensation in an entities proxy disclosures. The disclosures help investors understand the relationship between executive compensation for named executive officers (NEOs) and the principal executive officer (PEO) and a registrant’s financial performance. The disclosure requirements also apply to SRCs, but with certain scaled requirements.

Executive compensation is a tabular disclosure and includes the following key information for a period of five years (three years for SRCs):

Other disclosures:

Comment Letter Trends

Heading into 10K season, the “usual suspects” are still front-and-center in SEC comment letters: revenue recognition, business combinations, and non-GAAP measures.

Consistency, clarity, specificity … We expect these to continue to be key themes in the coming year and to have bearing on rising issues, such as:

For additional information, visit Weaver’s Executive Resource Center and sign up for our quarterly series to stay informed.

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