Mark Kronforst, Chief Accountant in the SEC’s Division of Corporate Finance (CorpFin), told attendees at FEI’s Current Financial Reporting Issues (CFRI) conference will monitor revenue-related disclosures carefully as part of its investor protection mandate, but does not plan to be aggressive in issuing comment letters as companies adjust to the new standard.
“This is a very big change, it’s complicated and companies have put a lot of time and effort into this,” Kronforst said. “We’re not going to try to regulate this one company at a time.”
Kronforst added the commission understands the higher degree of judgment involved in the new revenue standard, and that revenue-related disclosures are likely to become more informative over the first three or four quarters when companies report earnings under the new guidance.
“We’re not going to try to influence those disclosures one registrant at a time,” he said. “If something is clearly wrong or omitted, we’ll comment on that, but we want to avoid the comment process to be the centerpiece of this effort.”
As public companies prepare for the new revenue standard, Kronforst said the SEC staff is similarly receiving training about the standard’s provisions as well as potential industry-specific nuances.
Kronforst also said if registrants have questions about the standard or other disclosures, the division is willing to work with companies collaboratively to help resolve those issues. For many simple matters, calling the staff is easier for everyone than having to respond to written inquiries.
“People think writing to us is difficult and time-consuming, and I would say we’ve been making an effort to encourage people to call us first,” Kronforst said.
“If you give us a fact pattern and talk to the people listed in the [SEC’s] Financial Reporting Manual, they are more than willing to say whether you should write. Or if its something with a clear answer, they’ll say ‘don’t bother.’ You can get preliminary feedback by just calling.”
Similarly, if a company receives a comment letter, a phone call to the SEC staff can provide a faster resolution than responding in writing, said Kyle Moffatt, Associate Director of the SEC’s Disclosure Standards Office.
Moffat suggested registrants start by calling the staff accountant who has reviewed the filings, since that professional is most familiar with the company’s circumstances.
“The preference for us is not to go multiple rounds of letters,” Moffat said. “We’d like to get it resolved quickly so we can close our review and move on.”
Kronforst also said companies contacting the SEC staff in writing should avoid including background information about the company that is not relevant to the issue they are inquiring about.
“If you’re a public company, we know about you,” he said. “There’s no need to tell us how many lawn mowers you’ve sold.”