SEC Chief Accountant Wesley Bricker discussed (i) the role of financial reporting in financial markets, (ii) the Financial Accounting Standards Board ("FASB") credit losses standard-setting efforts, and (iii) compliance with auditing and reporting requirements in connection with initial coin offerings ("ICOs").
In a speech at the AICPA National Conference on Banks and Savings Institutions, Mr. Bricker explained how the Office of the Chief Accountant ("OCA") helps to support a three-part mission: (1) to protect investors, (2) to maintain fair, orderly, and efficient markets, and (3) to facilitate capital formation. He described the critical role of high-quality financial reporting in managing and pricing risk in the financial and capital markets system. He highlighted how "banks, in particular, are both users and providers of financial reporting information as they intermediate between those who have funds to save or invest and those who need financing."
Mr. Bricker next focused on FASB's expected credit losses standard for bank loans. He asserted that the new standard aims to (i) produce earlier recognition of credit losses, (ii) increase transparency concerning the quantity of credit losses, and (iii) improve user understanding, realizability of assets, and other important facets of financial information. Mr. Bricker recognized that transition efforts will be important to ensure the successful implementation of the new standard, and pointed to a previous SEC Financial Reporting Release and a Staff Accounting Bulletin as important sources of guidance on accounting for loan losses. Mr. Bricker highlighted international efforts to develop a new credit loss standard, and said that certain firms will need to implement processes in order to comply with both international and U.S. reporting standards. Mr. Bricker also described how the Public Company Accounting Oversight Board is actively overseeing accounting activity, and has made significant process on fulfilling the goals of its standard-setting agenda.
Mr. Bricker also covered certain accounting aspects of an SEC report on initial coin offerings. See previous coverage of the Decentralized Autonomous Organization investigative report on applying federal securities laws to companies relying on distributed ledger technology to publicly distribute tokens in exchange for virtual currency. Mr. Bricker underlined that companies subject to registration and reporting requirements are also subject to various requirements for the filing of audited financial statements. He recommended that holders of ICO coins should consider the application of accounting guidance in addressing how they should be treated in financial statements.
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