Earlier today the SEC Advisory Committee on Improvements to Financial Reporting (CIFiR or the ‘Pozen Committee’ for chair Robert Pozen) voted to approve publication of its final report. A press conference will take place at the SEC tomorrow, said Pozen, to recognize delivery of CIFiR’s final report to SEC Chairman Christopher Cox. Cox and Pozen will be joined at the press conference by FASB Chairman Robert Herz and PCAOB Chairman Mark Olson.
At today’s meeting, CIFiR concurred with the list of 9 changes to the report circulated to the committee in advance of the meeting, which Pozen described during the meeting. He said the changes were made in the past few days in response to issues raised by committee members and in light of eight final comment letters received. The changes were described by Pozen as largely technical in nature, and are reflected in CIFIR’s “Revised Draft Final Report v2 (Marked for Revisions to v1)” currently posted on SEC’s website.
One item on the list of 9 changes was to insert a new footnote (footnote 15, printed pg. 11, pdf pg 16) to define what CIFIR means by ‘investor preeminence” as that term is used in Recommendation 2.1, which says, in part: “Therefore, investor perspectives should be given pre-eminence15 by all parties involved in standards-setting.” Footnote 15 states: “We recognize the need for balance among all parties involved in the standard-setting process. We do not intend to suggest by this recommendation that investor input trumps all others. Instead, in cases where constituent views cannot be reconciled, we believe that all the investor perspectives should be afforded greater weight.” Pozen explained in describing the change at the meeting, “Not that it [investor perspectives] always wins, but it has greater weight.”
In addition to the list of 9 changes, one additional change was suggested during today’s meeting, by CIFiR member Ed McClammy. He suggested, and the committee agreed, to substitute the phrase “as well as” for the word “about” in the following sentence which appears in Recommendation 3.3 regarding disclosures during what is sometimes referred to as the ‘dark period’ when companies are undergoing restatements. With this change, Recommendation 3.3 now states (new words highlighted, deleted words in brackets): "The FASB or the SEC, as appropriate, should issue guidance on disclosure of financial and other reliable information during the period during which the impact of a financial reporting error is being evaluated or the restatement is being prepared, as well as the [delete: about] need for the restatement and [delete: about] the restatement itself to improve the adequacy of this disclosure based on the needs of investors.
SEC Chief Accountant Conrad Hewitt thanked Pozen and the committee, noting, “This is one reason I came to the commission.“ He added, “I had discussed with [FASB Chairman Robert] Herz before I accepted the position [of Chief Accountant], I was very concerned about complexity in the financial reporting system.” Hewitt said, “I am pleased with all the efforts everyone put into this,” and noted he had asked everyone to 'think outside the box” at CIFiR’s first meeting, and they accomplished that.
Hewitt also observed that a number of the committees’ recommendations are already underway in terms of being implemented. Pozen pointed out that CIFiR’s report has been updated to reference some of these recent developments, including SEC’s XBRL proposal issued in May, and the Interpretive Release on use of corporate websites approved for release by the SEC yesterday. Hewitt thanked Pozen “for your leadership in getting this accomplished.” Pozen thanked the committee as well as the SEC and FASB for their support, including by providing staff resources.
A clean copy of the final report will be posted on SEC’s website. A ‘compendium of recommendations” is provided in the Executive Overview on printed pages 8-18 (pdf pages 13-23) of CIFIR’s “Revised Draft Final Report v2 (Marked for Revisions to v1)”
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