Securities and Exchange Commission Chief Accountant Donald T. Nicolaisen said his agency would soon embark on a process aimed at helping investors distinguish between bad restatements and those that are made simply because of changes in accounting policy, Dow Jones reported.
The initiative, according to Nicolaisen, could help accounting standard-setters through a proposal that would require U.S. companies to conform to the international policy of applying any accounting changes retroactively.
Currently, U.S.companies generally make a one-time cumulative adjustment in the year of the accounting policy changes.
The Financial Accounting Standards Board, said it expects to issue the proposal for public comments as part of a larger convergence initiative to align U.S. accounting standards to those set by the International Accounting Standards Board.
Even though a retroactive adjustment approach can lead to better comparisons of year-over-year results, critics opined that companies could hesitate to embrace the proposal due to the negative connotation of a restatement.
Nicolaisen said that the SEC is expected to release additional guidance shortly to ensure companies provide more meaningful disclosures in their reports to shareholders.
- WebCPA staff
