SEC leans away from industry-specific guidance

SEC‘s advisory
committee on improvements to financial reporting (CIFR), which had its second
open meeting on Friday, suggested standard-setters could reduce complexity by
swinging away from industry-specific rules in favour of activity-specific
guidance to cut back on accounting literature.

The subcommittee noticed the existing system had multiple ways to account for
the same economic transaction and suggested the
Financial Accounting Standards
(FASB) analyse all of its industry-specific rules and decide which
ones should be kept.

Robert Herz, FASB chairman, an observer of the CIFR meetings, said the
concept would be in line with the convergence project between his board and the
International Accounting Standards Board (IASB). Fewer of IASB’s standards were
aimed at specific industries, he said.

Robert Pozen, CIFR chairman, said it was ‘quite a dramatic proposal’ and the
subcommittee appeared to favour the suggestion that it was ‘more important what
an activity is than what the entity is’, but reducing industry-specific rules
would likely take a long time. CIFR will make final recommendations to SEC next

Further reading:

Minority of CFOs show support for audit standards

Protest against scrapping ‘bottom line’ figures

Related reading

Fiona Westwood of Smith and Williamson.