May 20, 2016 — CAQ SEC Regulations Committee Releases Highlights of March 21, 2016, Joint Meeting With SEC Staff

Accounting Journal Entry

CAQ SEC Regulations Committee Releases Highlights of March 21, 2016, Joint Meeting With SEC Staff

May 20, 2016 — Today, the Center for Audit Quality (CAQ) posted to its Web site highlights of the March 21, 2016, CAQ SEC Regulations Committee joint meeting with the SEC staff. Topics discussed at the meeting include:

Current financial reporting matters:
- Transition questions related to the FASB’s new leases standard (ASU 2016-02 1). The Committee and the SEC staff concluded that retrospective adjustments to the selected financial data table2 should reflect the ASU’s transition provisions, which require lessees to apply the new standard to capital and operating leases that exist on or after the date of the standard’s initial application (i.e., the beginning of the earliest comparative period presented in the financial statements). Accordingly, a company that adopts the new standard in fiscal year 2019 would retrospectively revise its selective financial data table for fiscal 2019, 2018, and 2017. While the company would not need to revise its data for fiscal 2016 and 2015 to reflect the adoption of the ASU, its disclosures should explain any lack of comparability of the amounts in the two earliest years.
  As stated in the meeting highlights, the SEC staff indicated that it is considering “whether and, if so, how to communicate any views related to” a registrant’s requirement to “revise its annual financial statements in connection with a new or amended registration statement filed after the new leasing standard has been applied in a set of interim financial statements (e.g., the March 31, 2019 Form 10-Q), but before the annual financial statements for the year of adoption have been filed (e.g., in the December 31, 2019 Form 10-K).”
- The lack of availability of FAST Act3 initial filing accommodations to registrants other than emerging growth companies (EGCs) and to SEC forms other than Forms S-1 and F-1.
- Confirmation that the guidance on conflict minerals in the SEC staff’s April 29, 2014, public statement is still current.
- Updates to the SEC’s FRM,4 particularly the changes to paragraph 11100.2 on the presentation of supplementary quarterly financial data required by Regulation S-K, Item 302, in EGC filings.
- Status of disclosure effectiveness initiatives related to Regulation S-X and Regulation S-K.
  Editor’s Note: On April 13, 2016, the SEC issued a concept release seeking comments on certain disclosure requirements in Regulation S-K.5 The SEC also issued a release in the fall of 2015 requesting public comment on the effectiveness of the financial disclosure requirements in Regulation S-X that apply to certain entities other than the registrant.6
- Recent remarks made by the SEC staff related to non-GAAP measures.
  Editor’s Note: Recently, there has been a dramatic increase in the press coverage and SEC scrutiny of non-GAAP measures. The intense focus on these measures results from the expansion of their use and prominence, the nature of the adjustments, and the progressively large difference between the amounts reported for GAAP and non-GAAP measures. On May 17, 2016, the SEC updated its Compliance and Disclosure Interpretations (C&DIs)7 on non-GAAP financial measures to provide additional guidance on what it expects from companies using these measures.8
- Providing supplemental pro forma information in MD&A when a registrant adopts the new revenue guidance in ASC 6069 on a modified retrospective basis.
Current practice issue:
- The application of the general instructions applicable to EGCs for Form S-1 or Form F-110 with respect to pro forma financial information for a fiscal year that a registrant reasonably believes will not be included in a registration statement at the time of a contemplated offering.

Footnotes

FASB Accounting Standards Update No. 2016-02, Leases. When effective, the ASU will supersede FASB Accounting Standards Codification (ASC) Topic 840, Leases, and create ASC 842, Leases.

As required by Regulation S-K, Item 301.

Fixing America’s Surface Transportation Act. See Deloitte’s December 8, 2015, journal entry for information about changes to disclosure requirements as a result of the FAST Act. See also Deloitte’s January 15, 2016, journal entry for information about the SEC’s interim final rules implementing certain FAST Act provisions.

SEC’s Division of Corporation Finance Financial Reporting Manual.

For more information, see Deloitte’s April 18, 2016, Heads Up.

For more information, see Deloitte’s October 6, 2015, Heads Up.

C&DIs are not rules, regulations, or statements of the SEC; instead, they provide general guidance on the views of the SEC staff on a variety of issues.

For more information, see Deloitte’s May 19, 2016, journal entry and April 7, 2016, Heads Up.

FASB Accounting Standards Codification Topic 606, Revenue From Contracts With Customers.

General Instruction II.C of Form S-1 and General Instruction II.E of Form F-1 were recently added to these respective forms to implement part of the requirements of the FAST Act.