The SEC staff reiterated that registrants must disclose their estimates of the financial impact of upcoming changes to accounting standards in their financial statements. Specifically, the SEC addressed ASU 2014-09 on revenue recognition, ASU 2016-02 on leases, and ASU 2016-13 on credit losses. If a registrant cannot reasonably estimate the impact, they must say so and provide additional qualitative disclosures about how their accounting policies may change. The SEC emphasized the importance of these disclosures for investors, regardless of whether a company uses US GAAP or IFRS.

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A publication of the Professional Standards Group
January 2017
SEC Staff Reiterates Announcements Regarding Disclosures Related to Recently
Issued Accounting Standards
During a recent AICPA conference, the Securities
and Exchange Commission (SEC) staff once again
stressed the importance of SEC registrants disclosing
their estimates of the financial impact of future
accounting standards updates within their financial
statements.
SEC staff had raised the issue in a Financial
Accounting Standards Board (FASB) meeting earlier
in the fall to specifically address three significant
accounting standards changes that are on the
horizon: Accounting Standards Update (ASU) No.
2014-09, Revenue from Contracts with Customers
(Topic 606); ASU No. 2016-02, Leases (Topic 842);
and ASU No. 2016-13, Financial Instruments—Credit
Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments.
The requirement to disclose the future expected
impact of adoption of a new accounting standard
comes from a codified SEC Staff Accounting Bulletin
(SAB), Topic 11M Disclosure Of The Impact That
Recently Issued Accounting Standards Will Have On
The Financial Statements Of The Registrant When
Adopted In A Future Period (which is also known to
many as SAB 74). Topic 11M (or SAB 74) states that
registrants should evaluate each new accounting
standard to determine the appropriate disclosure.
Registrants must also recognize that the level of
information available will differ with respect to various
standards and from one registrant to another.
According to Topic 11M, the objective of the disclosure
should be to:
(1) Notify the reader of the disclosure documents that
a standard has been issued that the registrant will
be required to adopt in the future; and (2) Assist the
reader in assessing the significance of the impact that
the new standard will have on the financial statements
of the registrant when adopted.
The following disclosures should generally be
considered by the registrant:
• A brief description of the new standard, the date
that adoption is required and the date that the
registrant plans to adopt, if earlier.
• A discussion of the methods of adoption allowed
by the standard and the method expected to be
utilized by the registrant, if determined.
• A discussion of the impact that adoption of the
standard is expected to have on the financial
statements of the registrant, unless not known or
reasonably estimable. In that case, a statement
to that effect may be made.
• Disclosure of the potential impact of other
significant matters that the registrant believes
might result from the adoption of the standard
(such as technical violations of debt covenant
agreements, planned or intended changes in
business practices, etc.) is encouraged.

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Copyright ©2017, Mayer Hoffman McCann P.C. All rights Reserved.
MHM (Mayer Hoffman McCann P.C.) is an independent CPA firm that is a member firm of Kreston International Limited, a global network of independent accounting firms.
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The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation. Please
contact your MHM auditor to further discuss the impact on your audit or audit report.
During the September EITF meeting, the SEC staff
announced that if a registrant does not know or cannot
reasonably estimate the impact that adoption of ASUs
2014-09, 2016-02 and 2016-13 is expected to have
on the registrant’s financial statements, the registrant
should make a statement to that effect. In addition,
the registrant should consider additional qualitative
financial statement disclosures to assist the reader
in assessing the significance of the impact that the
standards will have on the financial statements of the
registrant when adopted. The additional qualitative
disclosures should include a description of the effect
of the accounting policies the registrant expects
to apply, if determined, and a comparison to the
registrant’s current accounting policies. An example
might be to state that the timing of revenue recognition
is expected to be accelerated under the new standard
because it will be recognized at a point in time versus
over the term of the contract. In addition, the registrant
should describe the status of its process to implement
the new standards and the significant implementation
matters yet to be addressed.
At the 2016 AICPA National Conference on Current
SEC and PCAOB Developments held in December,
the SEC staff repeated the message and further
expanded on it. The SEC staff noted that these
incremental qualitative disclosures would be helpful to
investors regardless of whether the registrant applies
U.S. GAAP or IFRS. The SEC staff also mentioned
that a registrant should not be reluctant to disclose
reasonably estimable quantitative information
merely because the ultimate impact of adoption may
differ, even if it’s only for a subset of the registrant’s
arrangements, such as one product category or
revenue stream.
For More Information
If you have specific comments, questions or concerns
about applying Topic 11M, please contact Rich
Howard or Christine McAlarney of MHM’s Professional
Standards Group. Rich can be reached at rhoward@
cbiz.com or 949.450.4402. Christine can be reached
at cmcalarney@cbiz.com or 727.572.1400.