It has been a while since we posted about critical accounting estimates. While this is now a normal part of MD&A it is surprising how many folks in our workshops don\u2019t know where the \u201cofficial\u201d guidance for this disclosure is found.<\/p>\n
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There is a bit of confusion in the history of this disclosure. It all started in the post-Enron period with concerns about the quality of accounting principle selection discussed in FR 60 (the FRs are Financial Reporting Releases, interpretations that are approved by the SEC Commissioners). This release addressed the aggressive use of accounting principles and required disclosure in plain English of \u201cCritical Accounting Policies\u201d. FR 60 did not describe in great detail exactly what a critical accounting policy was or what disclosures should be made. You can find this brief FR, for perhaps historical purposes, here<\/u><\/a>.<\/p>\n <\/p>\n FR 60 was issued as a \u201cquick fix\u201d and the SEC planned to follow it with a formal rule for this disclosure. The rule was proposed, but it was never actually finalized<\/strong>. Instead the SEC<\/strong> dealt with this disclosure in <\/strong>FR72<\/u><\/strong><\/a>. If you scroll to Section V towards the end of FR 72 you will find the requirements for disclosure of critical accounting estimates.<\/p>\n <\/p>\n www.sec.gov\/rules\/interp\/33-8350.htm<\/u><\/a><\/p>\n <\/p>\n (As you read this FR, note the evolution in terminology from Critical Accounting Policies to Critical Accounting Estimates.)<\/p>\n <\/p>\n Don\u2019t forget to look at the most recent Staff guidance in this area in FRM Section 9500, which gives guidance on disclosure of critical accounting estimates in the area of goodwill impairment.<\/p>\n <\/p>\n Here are a few key issues about disclosure of Critical Accounting Estimates:<\/p>\n <\/p>\n <\/p>\n To help understand this disclosure, here is a recent comment from the SEC:<\/p>\n Critical Accounting Policies and Estimates<\/p>\n <\/p>\n <\/p>\n As always, your thoughts and comments are appreciated!<\/p>\n","protected":false},"excerpt":{"rendered":" It has been a while since we posted about critical accounting estimates. While this is now a normal part of MD&A it is surprising how many folks in our workshops don\u2019t know where the \u201cofficial\u201d guidance for this disclosure is found. There is a bit of confusion in the history of this disclosure. It … Continue reading Comment of the Week \u2013 Critical Accounting Estimates<\/span> \n
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