A key outside advisory committee wants the Securities and Exchange Commission to be more open to accepting an accountant's judgment in interpreting standards.
The Advisory Committee on Improvements in Financial Reporting met and issued a
The committee also suggested that a safe harbor might be set up to help protect accountants who use their judgment, but acknowledged that there might be hurdles such as requiring changes in existing statutes. The committee acknowledged that regulators might object to a reliance on professional judgment.
"Regulators assert that they do respect judgments, but may also express concerns that some companies and auditors may attempt to inappropriately defend certain errors as 'reasonable judgments,'" said the report.
The committee also objected to alternative accounting policies, which could lead to incomparable and inconsistent reporting, as well as unnecessarily increasing the volume of accounting literature to address each alternative accounting policy. However, the committee acknowledged that alternative accounting could have merit in some circumstances by showing management intent. Similarly the committee also had objections to industry-specific guidance.
The report discussed the phased adoption of Extensible Business Reporting Language by companies for reporting their financial information to the SEC. The committee noted that preparers who had participated in the SEC's voluntary XBRL program had indicated that the initial number of hours for tagging their financial statements ranged from 80 to 100 hours but dropped significantly for subsequent reports. However, representatives of smaller public companies were concerned about the high initial implementation costs.
