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Entering the new year, financial executives will experience a furious pace of change in the world of financial reporting. At least 10 major proposals are expected to be released by the Financial Accounting Standards Board, for which FASB seeks comment on the proposals’ costs, benefits and more, as FASB strives — along with the International Accounting Standards Board — to reach the goal of converging accounting standards by June 2011.
Companies recently implemented changes in interactive data reporting and electronic proxy delivery, to name but two initiatives. At press time, public companies were awaiting word as to what the U.S. Securities and Exchange Commission’s planned “next steps” would be regarding its proposed roadmap for when and if the SEC would permit — or require — American public companies to adopt International Financial Reporting Standards.
The FASB-IASB major convergence projects slated to be completed by 2011 include Financial Instruments, Consolidations, Derecognition, Fair Value Measurement, Revenue Recognition, Leases, Financial Instruments with the Characteristics of Equity, and Financial Statement Presentation.
Private companies also face a daunting amount of change coming from the FASB-IASB convergence projects as well. At a meeting in December, FASB’s Private Company Financial Reporting Committee (PCFRC) formally called upon FASB’s parent, the Financial Accounting Foundation (FAF), to take a leadership role in determining the future course of private company financial reporting in the U.S.
On the auditing front, the Public Company Accounting Oversight Board also announced an active agenda of standard-setting projects in the public company auditing arena, and the American Institute of Certified Public Accountants has remained active (in some cases, getting ahead of PCAOB) in continuing to set auditing standards for private company audits.
The fate of the PCAOB may lie in the hands of the U.S. Supreme Court, which is considering a case brought against the board challenging its constitutionality (oral arguments were presented on Dec. 7). In turn, some believe the verdict could potentially overturn the Sarbanes-Oxley Act of 2002.
Additionally, under Chairman Mary L. Schapiro, the SEC remains highly engaged as it continues to consider proxy access issues, executive compensation disclosures and a host of other regulatory issues flowing from financial regulatory reform. The SEC also continues to strengthen enforcement and other areas as part of its post-Madoff reforms.
Separately, the Committee on Sponsoring Organizations of the Treadway Commission (COSO), of which FEI is one of the founding members, continues to release thought papers on issues pertaining to risk management. In addition, COSO is working toward publishing an update of its last 10-year study of fraud.
From Washington, D.C., to capitals around the world, the U.S. government and the Group of 20 nations have been actively involved in legislative reforms, focusing on issues as part of financial regulatory reform that range from executive compensation to over-the-counter derivatives to consumer financial protection, investor protection and systemic risk regulation and oversight.
Tensions ran high in the fall in both the U.S. and in Europe over proposed amendments to congressional bills that could impact accounting standard setting in the U.S. — such as the Perlmutter/Lucas amendment — and over a delay in the European Union’s endorsement of the IASB’s new financial instruments standard, IFRS 9.
The role of government bodies in the U.S. and abroad remains a source of tension vis-à-vis the role of independent accounting standard-setters such as FASB and IASB. The level of scrutiny on application of accounting and auditing standards, and how those standards are set, will continue to be a focal point in the new decade.
Besides financial and accounting regulation, several key legislative priorities loom on the horizon and others remain incomplete as the second session of the 111th Congress commences.
At press time, Democrats continue to steadfastly shepherd health-care legislation through Congress. Regardless of the outcome, the health-care debate and its associated costs will likely continue for years as policymakers deal with contentious and evolving issues. Other priorities include climate-change legislation and tax policy.
With every House seat and at least 38Senate seats up for grabs in Election 2010, Democrats will have a limited amount of time to move their agenda before members of both parties focus their time and efforts on political campaigns. Policymakers also will grapple with mid- and long-term fiscal issues that have moved to the forefront, as President Obama has promised to lower the annual budget deficit in coming years.
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