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FASB Drops Materiality Project

After two years of controversy, the Financial Accounting Standards Board (“FASB”) is scrapping plans to continue work on its proposal to amend the definition of materiality. The project, which commenced in September 2015, set out to align U.S. GAAP’s meaning of materiality with the legal interpretation regulators and courts use so companies can carefully decide their disclosures in financial statement footnotes. Work on the materiality amendments ended Wednesday, November 8. Board members did not expect to receive criticism for Proposed Accounting Standards Update No. 2015-310, Notes to Financial Statements (Topic 235): Assessing Whether Disclosures Are Material. Wall Street investors led the. Read More.

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Audit Committees Continue to Improve Transparency of External Oversight

For the fourth consecutive year, audit committees are improving transparency regarding their external auditor oversight. The news was revealed by the Center for Audit Quality (“CAQ”) and Audit Analytics’ new report, Audit Committee Transparency Barometer (“Barometer”), which stated that audit committees are voluntarily increasing the information disclosed to investors and stakeholders. This year’s Barometer report features year-over-year comparisons of significant audit committee disclosure areas for various-sized companies, including: 37 percent of S&P 500 companies’ proxy statements have increased discussion of the audit committee’s considerations in endorsing the selection of the audit firm (13 percent rise from 2014); 24 percent of mid-cap companies have increased. Read More.

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SEC Approves Updates to Auditor’s Report

The Securities and Exchange Commission (“SEC”) has unanimously approved an audit reporting standard by the Public Company Accounting Oversight Board requiring significant improvements to certain public company reports. Such improvements aim to make the auditor’s report more informative and address the communication of critical audit matters (“CAMs”) and disclosures concerning auditor tenure. The new auditor’s report is expected to offer investors meaningful insight regarding audits, such as important estimates and judgments, substantial unusual transactions, and other potential risk areas for an organization. Speaking on the objective of the auditing standard, SEC Chairman Jay Clayton said investors will benefit from a. Read More.

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Non-GAAP Guidance Updated by Corp Fin Staff

Staff members of the Securities and Exchange Commission’s Division of Corporation Finance (“Corp Fin”) have revised the Compliance and Disclosure Interpretation, Non-GAAP Financial Measures . The update includes guidance concerning business combination transactions and adds the following two questions: Are financial measures included in forecasts provided to a financial advisor and used in connection with a business combination transaction non-GAAP financial measures? Does the exemption from Regulation G and Item 10(e) of Regulation S-K for non-GAAP financial measures disclosed in communications relating to a business combination transaction extend to the same non-GAAP financial measures disclosed in registration statements, proxy statements and tender offer statements? The Compliance and. Read More.

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SEC to Propose Simplifying Regulation S-K Disclosure Requirements

In a unanimous decision, the Securities and Exchange Commission (“SEC”) has agreed to a proposal that would update and streamline some disclosure requirements under Regulation S-K. The proposed amendments stem from SEC staff recommendations in the Report on Modernization and Simplification of Regulation S-K, issued in November 2016 as required by the Fixing America’s Surface Transportation Act, and include the following: Management’s Discussion and Analysis (“MD&A”): The proposal would allow companies to skip discussion within MD&A of the oldest period included in a filing if it was part of and discussed in a previous report and is not significant. Companies. Read More.

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SEC Chief Accountant Credits Interpretive Guidance for Curbed Misuse of Non-GAAP Measures

Securities and Exchange Commission (“SEC”) Chief Accountant Wesley Bricker is crediting the reduced misuse of non-GAAP measures to the Compliance and Disclosure Interpretations (“C&Dis”) issued in May 2016. Bricker said the interpretive guidance for Regulation G, regulation covering non-GAAP financial information, has helped companies become better disciplined and disclose to investors the use of non-GAAP measurements. Bricker spoke on the C&DIs in October at the National Association of Corporate Directors’ Global Board Leader’s Summit. He remarked that since the C&DIs were issued, public companies have quit highlighting non-GAAP measures more predominately than their audited results. Companies have also established policies. Read More.

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