44th USC & FEI SEC and Financial Reporting Conference: Day One

Day one of the 44th Annual USC & FEI SEC and Financial Reporting Conference focused on a rapidly evolving financial reporting landscape shaped by regulatory modernization, emerging technologies, and increasingly complex accounting and reporting challenges. Discussions throughout the day highlighted the importance of stakeholder engagement, professional judgment, and workforce readiness as regulators, standard-setters, preparers, auditors, and academics navigate significant changes across the profession.

Opening Keynote Session: Fireside Chat With the SEC and the FASB

The conference opened with a fireside chat moderated by Paul Beswick, Partner and Chief Accountant at EY LLP, featuring Kurt Hohl, Chief Accountant of the U.S. Securities and Exchange Commission’s (the SEC) Office of the Chief Accountant, and Rich Jones, Chair of the Financial Accounting Standards Board (FASB). The discussion focused on regulatory modernization, standard-setting priorities, and the evolving financial reporting landscape.

Key Takeaways

Regulatory modernization remains a key SEC focus: Hohl described the Commission’s ongoing review of existing regulations, like stripping away layers of accumulated rulemaking to reassess which requirements remain necessary and effective. He encouraged stakeholders to actively participate in the rulemaking process through comment letters and direct engagement with SEC staff.
Stakeholder engagement is increasingly important: Both Hohl and Jones emphasized that meaningful participation from preparers, auditors, investors, and other stakeholders is critical to effective rulemaking and standard-setting. Jones discussed FASB’s ongoing agenda consultation process and the board’s increased emphasis on early stakeholder outreach, noting that significant input is often gathered before exposure drafts are issued. As a result, he encouraged stakeholders to engage early in the standard-setting process rather than waiting until proposals are released.
Materiality and disclosure effectiveness were recurring themes: Both speakers stressed the importance of focusing disclosures on information that is meaningful to investors and applying professional judgment rather than defaulting to increasingly lengthy disclosures. Jones noted that disclosures should be evaluated based on how investors use the information in making capital allocation decisions, while Hohl reiterated the importance of focusing on information that is truly material.
Auditor independence remains foundational: Hohl emphasized that the SEC is not seeking to weaken auditor independence requirements, but rather to evaluate whether the existing framework remains effective as firm structures, technology, and alternative ownership models continue to evolve.
Artificial intelligence (AI) is an area of active monitoring: Hohl noted that the SEC is closely monitoring how companies and audit firms are incorporating AI into financial reporting, audit procedures, and quality control processes while seeking to avoid impeding innovation.
International standard-setting remains a priority: Both speakers highlighted the importance of global coordination in accounting and auditing standards while noting challenges related to the governance and funding of international standard-setting organizations. Jones also discussed the continued collaboration between the FASB and the International Accounting Standards Board (IASB) to reduce complexity and improve comparability for global market participants.

Current Accounting Practice Issues

Moderated by Tom Barbieri, Partner and Chief Accountant at PwC, and Brandon Coleman, Partner and Chief Accountant at Deloitte, this session featured Jackson Day, Technical Director of the FASB, and Sheri York, SEC Deputy Chief Accountant of the Accounting Group. The discussion focused on emerging accounting issues, recent standard-setting activity, and areas attracting increased attention from regulators and investors.

Key Takeaways

The SEC’s consultation process remains an important resource for registrants: York discussed the SEC Office of the Chief Accountant’s (OCA) pre-filing consultation process, which allows companies to engage with SEC staff on novel or complex accounting matters before filing. She encouraged early consultation when significant judgment or emerging issues are involved.
The FASB’s standard-setting agenda remains active: Day highlighted continued progress across the FASB’s technical agenda, including new projects, multiple forthcoming exposure drafts, and ongoing activity within the Emerging Issues Task Force (EITF). He encouraged stakeholders to participate in the comment process as proposals are released.
Implementation of the Disaggregation of Income Statement Expenses (DISE) standard is a near-term priority: Both speakers emphasized that public companies should be actively preparing for the new disclosure requirements. While implementation readiness varies across organizations, companies should begin evaluating data availability, processes, and disclosure requirements well ahead of the effective date. It was reiterated there is no planned deferral period.
Digital assets continue to generate significant accounting questions: York noted that digital assets remain one of the most frequent topics discussed with SEC staff, particularly issues involving staking arrangements and stablecoins. The discussion also highlighted ongoing FASB efforts to address accounting questions in this area.
Private credit and fair value disclosures remain under scrutiny: Investor demand for greater transparency around credit quality, loan modifications, and valuation assumptions continues to drive regulatory and standard-setting attention. York emphasized the importance of applying market participant assumptions and maintaining robust valuation processes for Level 3 measurements.
Data center arrangements are creating complex accounting challenges: The rapid growth of AI and digital infrastructure investments has increased focus on accounting issues involving data center arrangements, including consolidation, lease accounting, revenue recognition, and investment considerations. Given the complexity of these arrangements, early engagement with auditors and regulators was encouraged.
Tariff-related accounting requires clear policies and disclosures: York noted that companies have adopted different approaches to accounting for tariff-related refunds and recoveries. Regardless of the model selected, companies should apply their accounting policies consistently and provide transparent disclosures regarding significant judgments and uncertainties.

Current SEC Developments and Financial Reporting Updates

Moderated by John White, Partner and Chair of the Corporate Governance and Board Advisory Practice at Cravath, Swaine & Moore LLP, and Chair of the Advisory Council of the USC SEC and Financial Reporting Institute, this session featured Aaron Anderson, Chief Accounting Officer at Meta, Melissa Rocha, Partner in KPMG’s Department of Professional Practice, and Heather Rosenberger, Chief Accountant, Division of Corporation Finance (Corp Fin), SEC. The discussion focused on the SEC’s evolving rulemaking agenda, disclosure reform initiatives, and practical considerations for registrants navigating a changing reporting environment.

Key Takeaways

Semi-annual reporting remains a significant proposal under consideration: The discussion highlighted the SEC’s opt-in proposal that would allow certain registrants to elect semi-annual reporting, prompting companies to reassess what information investors truly need between annual reporting periods.
Regulation S-K reform may reduce duplicative and outdated disclosures: Feedback received by the SEC has focused on streamlining repetitive disclosures, eliminating stale information, and simplifying reporting requirements in areas such as risk factors and executive compensation.
Filer status reform could expand accommodations for a larger population of public companies: Proposed changes would simplify filer categories and potentially allow more registrants to qualify for scaled disclosure and reporting accommodations.
Climate-related reporting obligations remain complex despite proposed SEC changes: While the SEC has proposed rescinding its 2024 climate disclosure rules, panelists emphasized that climate-related reporting obligations may still arise under California requirements, European Union regulations, and existing SEC disclosure requirements.
Registrants should maintain a disciplined approach to disclosure decisions and SEC engagement: Rosenberger emphasized the importance of evaluating material trends and uncertainties through a cross-functional process that includes finance, accounting, legal, and operational stakeholders. She also encouraged companies to take a thoughtful approach to SEC comment letter responses, noting that complete responses, direct communication with staff, and clear supporting analysis often lead to more effective outcomes.

Modernizing PCAOB Oversight: A New Chapter for Audit Regulation

Moderated by Andrew Call, Dean and Alan Casden Dean’s Chair at the USC Leventhal School of Accounting, this session featured Jim Logothetis, Chair of the Public Company Accounting Oversight Board (PCAOB). Logothetis discussed the PCAOB’s mission, the modernization of its inspections program, and his vision for a more transparent, technology-enabled, and stakeholder-focused regulator.

Key Takeaways

The PCAOB is reevaluating its oversight model for the next generation of capital markets: Logothetis emphasized that while the PCAOB’s inspections program has contributed significantly to audit quality since its creation under the Sarbanes-Oxley Act, the scale and complexity of today’s capital markets warrant a reassessment of how the board fulfills its oversight responsibilities.
Stakeholder engagement is a central component of the PCAOB’s strategy: Logothetis highlighted the board’s efforts to increase transparency and solicit broader stakeholder input, including seeking public feedback before drafting its strategic plan and committing to ongoing communication regarding how stakeholder input influences board priorities.
The inspections program is evolving toward a quality control-focused approach: The PCAOB is evaluating ways to place greater emphasis on firms’ systems of quality control while continuing to perform engagement-level reviews. Logothetis noted that future inspections will increasingly focus on whether a firm’s quality control system is designed and operating effectively.
The PCAOB is considering targeted revisions to QC 1000: In response to stakeholder feedback, the board is evaluating whether certain aspects of QC 1000 may warrant refinement before the standard becomes fully effective, reflecting a willingness to revisit implementation concerns earlier than has traditionally been the case.
Artificial intelligence and talent development present significant challenges and opportunities for the profession: Logothetis stressed that technological advancements will increase the need for specialized expertise within both audit firms and regulatory organizations. While technology will continue to reshape auditing, professional judgment, objectivity, and technical competence will remain critical to audit quality.
Coordination with the SEC remains an area of focus: Logothetis discussed ongoing efforts to evaluate how the PCAOB and SEC can work together more effectively in areas such as enforcement while maintaining a strong focus on investor protection.

Current AI Implementation Issues

Moderated by Aaron Anderson, Chief Accounting Officer at Meta, this session featured Andrew Call, Dean and Alan Casden Dean’s Chair at the USC Leventhal School of Accounting, Michal Dusza, SEC Deputy Chief Accountant of the Professional Practice Group, and Chris Spraberry, Partner and National Lead of the Controllership Transformation Practice at Deloitte. The discussion focused on AI governance, internal controls, workforce development, and the evolving role of professional judgment in an AI-enabled profession.

Key Takeaways

AI governance should be treated as an enterprise-wide responsibility: Panelists emphasized that AI governance cannot be owned by a single function. Effective governance requires organization-wide oversight while allowing individual business functions to identify, evaluate, and deploy AI use cases within an appropriate risk and control framework.
Management accountability for financial reporting remains unchanged: Dusza noted that the use of AI does not alter management’s responsibility for the accuracy of financial reporting or the effectiveness of internal control over financial reporting (ICFR). Organizations should understand how AI tools are being used, assess their reliability, and maintain appropriate oversight of both internally developed and third-party AI solutions.
Existing control frameworks remain relevant: While regulators have not issued AI-specific financial reporting guidance, the panel emphasized that established frameworks, including COSO and existing SEC guidance on ICFR, provide a strong foundation for evaluating AI-related risks, controls, and documentation requirements.
Organizations are beginning to rethink how controls operate in an AI environment: The discussion highlighted the distinction between AI used within business processes and AI functioning as a control activity. Panelists noted that organizations will need new approaches to validating AI outputs, monitoring model performance, and evidencing control effectiveness.
Professional judgment remains a uniquely human responsibility: Despite rapid advances in AI capabilities, the panel emphasized that professional skepticism, contextual understanding, and judgment remain essential components of accounting, auditing, and financial reporting.
Workforce readiness requires a mindset shift: Panelists stressed that preparing the next generation of professionals is about more than learning new tools. Both industry and academia must rethink how accounting and finance professionals are trained, with greater emphasis on critical thinking, business judgment, and understanding the underlying economics of transactions.