Investor groups are raising alarms that the high-profile committee studying ways to simplify financial reporting might actually make things worse with some proposals on how to handle materiality and the correction of financial statement errors.
The Securities and Exchange Commission’s special Committee to Improve Financial Reporting held a two-day public meeting earlier this month in California, where numerous participants—mostly those representing investor groups—worried that supposed fixes to materiality and error correction would make financial reporting less transparent. In particular, they panned ideas to change the current standard for materiality so that some large errors still could be considered immaterial and to state that prior-period financial statements should only be restated for errors material to those prior periods.
