SIFMA sent comments to the IRS regarding the regulations under section 951A that were issued on June 21, 2019. The…
FASB Accounting Standards Update Disclosure Improvements
Mr. Shayne Kuhaneck
Acting Technical Director
401 Merritt 7
PO Box 5116
Norwalk, CT 06856-5116
Re: File Reference No. 2019-600. Proposed Accounting Standards Update (ASU) Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative
Dear Mr. Kuhaneck,
The Securities Industry and Financial Markets Association (“SIFMA”)1, appreciates the opportunity to respond to the Financial Accounting Standards Board’s (“FASB’s”) request for comment on the proposed Accounting Standards Update (“ASU”) Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. We appreciate both the Securities and Exchange Commission’s (“SEC’s”) and the FASB’s efforts to update and simplify their respective disclosure frameworks. However, we believe that the proposed codification of these requirements is based on the incorrect assumption that all, or significantly all, Public Business Entities (“PBEs”) are currently subject to Regulation S-X (“Reg S-X”) 2 and Regulation S-K (“Reg S-K”) 3. Based on this incorrect assumption, the Board expects the proposed Accounting Standard Update (“ASU”) to be a mere codification of existing practices; requiring minimal change for preparers to implement.4 This assumption is particularly inaccurate for the financial services industry. Although, our industry does have some PBEs (i.e., broker-dealers) that are currently subject to Reg S-X, our industry has significantly more PBEs (both broker-dealers and banking entities), that are not currently subject to these regulations. Therefore, we strongly urge the FASB not to move forward with this proposed ASU.
Our main concern with the scope is due to the fact that the FASB definition for PBEs is significantly more expansive than the SEC’s definition of “registrant”. 5 These incremental requirements would represent a significant increase in preparer time, including implementation time, and PCAOB audit costs. For our industry alone, there are 3,607 FINRA registered broker-dealers6 (i.e., PBEs), the majority of which are smaller private firms that would now be newly subject to these requirements. The increase in scope and cost associated with the proposed codification does not justify the benefit for our industry and runs counter to FINRA and other regulators’ efforts to reduce the burden on these entities.