- The shifting outlook for the economy is “continually introducing new risks” that companies should disclose in financial reports, Kevin Vaughn, senior associate chief accountant with the Securities and Exchange Commission (SEC), told the Financial Accounting Standards Advisory Council at a meeting Tuesday.
- The SEC’s Office of the Chief Accountant has “been paying close attention to the various factors affecting issuers as a result of the shifting economic and geopolitical conditions” such as Russia’s invasion of Ukraine, supply chain issues, inflation, labor shortages and rising interest rates, Vaughn said.
- “We’re reminding stakeholders that it’s incumbent on all parties in the financial reporting system, including preparers, auditors, and audit committees, to provide investors with information that is decision useful in light of this dynamic economic environment by transparently disclosing how changes or economic uncertainty may affect the assumptions and estimates used in financial reporting and the extent to which material events or uncertainties may impact the predictive value of historical financial information,” Vaughn said.
Vaughn spoke Tuesday during a Financial Accounting Standards Board’s (FASB) advisory council meeting. He was one of the speakers listed under the agenda’s “current hot topics” section.
Vaughn’s focus on transparent disclosures bolsters efforts by the SEC initiated as early as May to press companies to provide details on how the war in Ukraine was affecting their finances. The regulator drew up a list of requests that staff sent to corporate executives asking for information on such issues such as the impacts stemming from sanctions as well as import or export bans, The Wall Street Journal reported May 4.
The focus on disclosures related to the uneven economy also comes as public companies will need to disclose further details regarding how top executives are paid, according to new regulations announced by the SEC last month.
Separately, Vaughn also reported that Acting SEC Chief Accountant Paul Munter has recently highlighted the importance of auditor independence, as well as the importance of auditing firms prioritizing their independence when involved in restructuring transactions.