SEC to focus on risk disclosures?
It seems increasingly likely that the US Securities and Exchange Commission (SEC) may seek to develop disclosure requirements around economic risks, as recently signposted in remarks by senior associate chief accountant Kevin Vaughn. Speaking at a meeting of the Financial Accounting Standards Advisory Council, he stated that the Office of the Chief Accountant has “been paying close attention to the various factors affecting issuers as a result of the shifting economic and geopolitical conditions,” noting that this rapidly changing outlook is “continually introducing new risks.”
Vaughn further reminded stakeholders that it is incumbent on all parties in the financial reporting system, including preparers, auditors, and audit committees, to provide investors with information that is decision-useful in light of this dynamic economic environment. This means transparently disclosing how changes or economic uncertainty may affect the assumptions and estimates used in financial reporting, as well as the predictive value of historical information.
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