United States

Disclosures for new accounting standards


SEC Staff Accounting Bulletin (SAB) 74 (codified in SAB Topic 11.M), Disclosure of the Impact that Recently Issued Accounting Standards will have on the Financial Statements of the Registrant when Adopted in a Future Period, requires that when a recently issued accounting standard has not yet been adopted, a registrant should discuss the potential effects of the future adoption in its interim and annual SEC filings. The Center for Audit Quality recently issued Alert No. 2017-03, SAB Topic 11.M – A Focus on Disclosures for New Accounting Standards, which encourages preparers, audit committees and auditors to focus on the disclosure of impending changes in accounting principles.

In addition to discussing internal control considerations and other matters related to implementation of new standards, the Alert reminds registrants of the following SAB 74 disclosures expected to be included in financial statements in the periods before new accounting standards are effective:

  • A comparison of current accounting policies to the expected new accounting policies
  • The status of implementation
  • Consideration of the effect of new footnote disclosure requirements in addition to the effect on the balance sheet and income statement
  • Disclosure of the quantitative impact of new accounting standards if it can be reasonably estimated
  • Disclosure that the expected financial statement impact of new accounting standards cannot be reasonably estimated
  • Qualitative disclosures

As discussed in our article, Disclosures for recent accounting standards issued but not yet adopted, the SEC staff also has reminded registrants of the need to evaluate the appropriate financial statement disclosures regarding the following Financial Accounting Standards Board Accounting Standards Updates (ASUs) that have been issued but not yet adopted:

  • ASU 2014-09, Revenue from Contracts with Customers (Topic 606)
  • ASU 2016-02, Leases (Topic 842)
  • ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments