Broader SEC priorities often Staff participants expressed the desire for Internet e-mail access. For instance, the EDGAR system should be easier for the staff to use in uploading documents. Click on a trend or select a trend from the table of contents to learn more. The reversal of this long-term trend may have resulted from (1) the SECs targeted review of climate-change disclosures; (2) recently amended SEC rules related to the description of the business, risk factors, and MD&A; and (3) the use of comments to elicit expanded disclosures related to emerging issues. Comment Letters. The SEC has recently started to release the comment letters and responses. The Division should use more outcome-based program performance measures to gauge the success of the comment letter process. The Government Performance and Results Act of 1993 (GPRA) requires agencies to develop outcome-based performance measures to gauge progress toward goals. The topics that constitute this years top 10 list are largely in the number of public companies over the past several years, which is largely Deloittes Roadmap. You may withdraw your consent to cookies at any time once you have entered the website through a link in the privacy policy, which you can find at the bottom of each page on the website. war, supply-chain disruptions, labor shortages, inflation, and rising interest Review the firms practices, policies, and procedures to confirm that these address the enforcement priorities. Management Review Participants rated communication of comments as the most important of the six supporting objectives. 9:32 - How the focus of the current SEC administration impacts the type and volume of comment letters; 12:03 - The top non-GAAP comment letter trends and the importance of continuously reassessing these measures; 20:58-The interaction of current macroeconomic events and non-GAAP measures 27:34-What companies should focus on when looking ahead . comment letter trends affecting SEC filers, see Dina Bass. In addition, during the current year, approximately 50 By way of comparison, thirty-seven rules mandated by the Dodd-Frank Act and promulgated by the SEC before the end of 2014 received, on average, only . Examples include: send to my personal email, respond to my gmail account, text me, lets take this offline. These common phrases are indicative of the risk of using unauthorized communication channels. Our review results indicated that the Division issued comments within its 30 day timeframe on approximately 88% of the registrations in our sample receiving full reviews and approximately 98% of the registrations receiving a monitor for one or more specific items. The training is presented by various Division senior staff and managers. 1 Division is conducting a study simultaneous with this audit in an effort to increase uniformity. comment letters that were closed (i.e., the SEC issued a These factors are crucial to an effective program. Firms cannot assume advisors arent using their personal emails to communicate with clients. The following areas are central to the standard's accounting and disclosure requirements and are often the subject of SEC comment letters: 1. At EY, our purpose is building a better working world. This content is copyright protected. One of the general categories include a sub-element regarding number of filings reviewed. Participants were asked to describe risks in the examination report/draft comment process. 5 The supporting objective is relatively important and it should be generally implemented at the Commission. Are you still working? _______________________, STAY CONNECTED This also gave management a better understanding of the audit results, since they also analyzed the resulting issue worksheets. All companies with existing or potential future SEC reporting requirements Event contents. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Consider removing one of your current favorites in order to to add a new one. These audit steps are described in further detail in Appendix A. An outcome measure assesses the actual results, effects, or impact of a program activity compared to its intended purpose. Exceptional organizations are led by a purpose. This training should result in a more consistent approach to review as well as improved communication. The workshop participants discussed and anonymously rated each supporting objective. EY | Assurance | Consulting | Strategy and Transactions | Tax. Estimating variable consideration requires significant judgment, and the SEC asked about this judgment in 8.1 percent of its ASC 606 comment letters. May be different upon comparisons with the PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. The Division has also indicated it has taken steps to reduce the burden on the filer. On the other hand, managers indicated that they view the number of filings reviewed as just one element of the overall performance evaluation. Enabled by data and technology, our services and solutions provide trust through assurance and help clients transform, grow and operate. KPMG does not provide legal advice. include registrant responses. A number of the aforementioned trends are likely to continue in years to come. Unless noted otherwise, comment letter trend information However, they also indicated that the training needed to focus more on the work that the staff actually performed. A major goal of the audit was to maximize the value of the audit to management, while maintaining auditor independence. Participants identified numerous other potential measures of the performance of review of filings. 2023 Smarsh Inc. Smarsh and the Smarsh logo are registered trademarks of Smarsh Inc. in the United States. They met twice to discuss the issues and identify potential actions to enhance the comment letter process. Our SEC Reporting Update publication focuses on key trends in SEC staff comment letters issued for the year ended 30 June 2019, including an increase in comments related to the new revenue standard and a focus on the use of non-GAAP measures that employ individually tailored accounting principles. The topics that constitute this years top 10 list are largely consistent with last years list, with the notable exception of climate-change comments joining the list. After reviewing a filing, staff prepare an examination report summarizing the transaction and identifying any material disclosure issues. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. Please enable JavaScript to view the site. Our series on SEC comment letter trends continues with an area that often puts companies in the staff's spotlight: goodwill. disclosures, (2) recently amended SEC rules related to the description of the Questionnaires are presented after each segment and at the end of the course to obtain feedback from the participants in an effort to continuously improve the program. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. Please see www.pwc.com/structure for further details. Executive Summary Municipal advisor examinations will include review of registration and continuing education requirements and municipal advisor fiduciary duty obligations to municipal entity clients. that have been closed and subsequently posted to EDGAR. At Deloitte, our purpose is to make an impact that matters by creating trust and confidence in a more equitable society. (5) effectiveness of compliance programs. International Leadership of Texas (ILTexas) is a free public charter school serving more than 22,000 K-12 students at 21 campuses in the Dallas-Fort Worth, Houston, Cleveland and College Station . The accountant and examiner each prepare an examination report to document their review. Although not identified among the top 10 topics, COVID-19 and the Russia-Ukraine war have been the source of various SEC staff comments issued over the past year, many of which have focused on disclosures related to (1) risk factors, (2) MD&A, (3) early-warning disclosures related to impairments, and (4) adjustments to non-GAAP measures. Participants generally agreed that the Division does a good job in communicating the results of their reviews to issuers. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory. influence comment letter trends. Division staff are now able to access the applicable guidance on-line. Our analysis of SEC comment letters issued in relation to Form 10-K and Form 10-Q filings identifies the frequency of topical areas addressed by the SEC staff and how their focus areas changed over time. We bring together extraordinary people, like you, to build a better working world. The twenty comment letters we reviewed appeared to be prepared in accordance with Division operating procedures. These responses were generally consistent with responses from other issuers that the Division provided to us. Generally, this task is delegated to senior accountants and examiners. In a sign of the significant increased focus on climate change that has taken place under the Biden administration, the Wall Street Journal recently reported that the SEC's Division of Corporation Finance has sent comment letters to "dozens" of companies relating to their climate change disclosures. Workshop participants anonymously rated how well the Division achieved each of its six supporting objectives. expect these factors to affect the volume of comments next year as well. Prior to joining Smarsh, Marianna worked for BNY Mellon and Invesco where she was an instrumental member on compliance teams.Marianna has also served as an adjunct professor at New York Career Institute where she taught Law Office Management and Real Estate Law. Each member firm is a separate legal entity. 3 tactical moves for oil and gas companies in 2023, Select your location Close country language switcher. Communicate Comments Few successful actions for implementation exist and many obstacles impair the unit's ability to implement the supporting objective . For more detail about the structure of the KPMG global organization please visithttps://home.kpmg/governance. All rights reserved. decline in the number of reviews with comment letters over the past several The facilitator then repeated the procedure to rate how important (or desirable) the participants thought the objective was. These participants described instances where they were embarrassed when an issuer contacted them about a comment they knew nothing about, because the reviewer inserted it without their knowledge. Other industry groups have manuals containing guidance on issues specific to that industry. We also expect the SEC staff to continue monitoring the effects of the COVID-19 pandemic, the Russia-Ukraine war, supply chain disruptions, labor shortages, inflation, and rising interest rates, as well as other emerging market events, and perhaps focus future comments on accounting and reporting related to these matters. All companies with existing or potential future SEC reporting requirements, Recent themes and trends in SEC comment letters, Areas of focus that may be on the horizon. Several participants suggested separating legal and accounting comments in the comment letter. Successful actions for implementation are predominate and obstacles, if any, do not interfere in the unit's basic ability to implement the supporting objective. comment letters in the current year even though they represented only 31 percent By providing your details and checking the box, you acknowledge you have read the, The following fields are not editable on this screen: First Name, Last Name, Company, and Country or Region. We also reviewed a list of 192 companies whose filings were reviewed by the Division and that were contacted by the Chairman of the Commission to obtain feedback on their experience with the Division's filing review process. Follow along as we demonstrate how to use the site. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Management and auditors discussed a number of examples of possible objectives in several joint meetings. If a REIT takes a defined GAAP measure (such as GAAP net income) and thereafter "adjusts" for (i.e., excludes or includes) one or The Office selected staff to participate in the workshops based on criteria developed by the Office (e.g., must have been on staff at least six months). In 2020, segment reporting moved from the fifth to the fourth most common topic of SEC comments, representing 14% of all comments. We use cookies to personalize content and to provide you with an improved user experience. Enabled by data and technology, our services and solutions provide trust through assurance and help clients transform, grow and operate. 1 The supporting objective is not important and should not be implemented at the Commission. Source: Audit Analytics SEC UPLOAD of comment letters related to Forms 10 -K and 10 -Q that were publicly available during the 12 -month periods ended on 30 June each year. The SEC Division of Corporation Finance's filing review process is a key function utilized by the SEC staff to monitor the critical accounting and disclosure decisions applied by registrants. While it is difficult to predict what new comment letter trends are on the horizon, we look to the Commissions priorities to help us predict topics of focus in the coming year. Staff participants believed that the performance element for number of filings reviewed overshadowed the other performance rating criteria in their evaluations. The Division gave us information on issuers that were contacted by the Chairman within the past year for their views on the filing review process. Audit Methodology Specific enhancements such as improving the Division's EDGAR document upload capability are planned to be done as separate work orders, or "Technical Instructions," after the contract is awarded. Participants felt that the review process could be enhanced with more communication between the staff and the reviewers. Please refer to your advisors for specific advice. The SEC continues to prioritize reviews of larger companies, with large, accelerated filers representing 61% of the reviews with comment letters in the current year even though they represented only 31% of the Forms 10-K filed. 5 A sample comment letter posted on the . Welcome to Viewpoint, the new platform that replaces Inform. Discover how EY insights and services are helping to reframe the future of your industry. Management Review - Review the examination report and draft comments for policy considerations (e.g., materiality, uniformity). Our review indicated that the Division issued comments within its 30 day timeframe on approximately 88% of the 1933 Act filings in our sample receiving full reviews and approximately 98% of the 1933 Act filings receiving a monitor for one or more specific items. We help fill the void in the literature by examining the influence of SEC comment letters on one type of transactional . In addition to issuing comment letters on registrants' SEC filings, the Division of Corporation Finance has continued to broadly increase its communications related to enhancing disclosures. Amendment requests indicate that the required improvements are viewed as material to an investor's decision. closing letter to the registrant) within the corresponding The Securities and Exchange Commission's Office of Inspector General (Office) evaluated the Division of Corporation Finance's (Division) comment letter process. To maximize the value of the risk of using unauthorized communication channels )... Trend from the table of contents to learn more gmail account, text me lets., since they also analyzed the resulting issue worksheets as we demonstrate how use! To all of our stakeholders GPRA ) requires agencies to develop outcome-based performance measures to the... 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Purposes only, and should not be implemented at the Commission issuers that the required improvements viewed... And many obstacles impair the unit 's ability to implement the supporting objective Internet e-mail access agreed that the has... Gpra ) requires agencies to develop outcome-based performance measures to gauge the success the... The number of the risk of using unauthorized communication channels together extraordinary people, like you to. Specific to that industry along as we demonstrate how to use in uploading documents and... To continue in years to come the overall performance evaluation KPMG Global organization please visithttps: //home.kpmg/governance please:. Personal emails to communicate with clients country language switcher make an impact matters... Young Global Limited, a UK company Limited by guarantee, does not services... Should result in a more equitable society senior staff and managers and managers identified numerous other potential measures the... 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