SEC Chief Accountant Urges Audit Committees to Oversee Revenue Standard Implementation
Securities and Exchange Commission (“SEC”) Chief Accountant James Schnurr has called for audit committees to begin their oversight in the implementation of the new revenue recognition standard, Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), ahead of its 2018 effective date. In a speech at the October 23rd Audit Committee Summit, Schnurr told attendees that many audit committees have held preliminary discussions with management about the upcoming standard and some have even started assessing how the new guidance might affect their companies.
However, for proper oversight, Schnurr encourages audit committees to be more involved and take a holistic view including evaluating:
- Management’s detailed implementation plan
- Impact on information systems
- Impact on business processes and controls
- Impact on compensation
- Impact on contractual arrangements
- Impact on tax planning strategies
- Management’s planned transition method and related disclosures
Audit committees are also encouraged to challenge auditors’ interpretations of the new standard.