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December 5, 2022

Accounting News Roundup: IFRS Add-on; Non-GAAP Reporting; Disappearing Oil | 12.10.15

SEC to Consider Letting U.S. Companies Use Global Accounting Rules as Add-On [WSJ]
The AICPA's SEC and PCAOB Developments conference is going on in DC which means SEC Chair Mary Jo White (among others) is saying lots of things. One of the things she's saying is that the Commission is considering a proposal from Chief Accountant James Schnurr to allow companies to include "[IFRS] as an add-on to their main financial statements." This recommendation, White says, "has 'the potential to be a useful next step” in considering how the U.S. should approach the global rules." In other words, the SEC is considering whether to consider Schnurr's recommendation as the next consideration re: IFRS. As you might expect, there's no timetable for all this considering.

Non-GAAP Numbers May Confuse Investors: SEC Chair [CFOJ
The other thing MJW talked about was how non-GAAP reporting metrics "are used extensively" and that companies should think long and hard about that. 

Management, such as chief financial officers and investor relations staff, should be attuned to the whether using non-GAAP numbers provides shareholders and others with information that is helpful to them. “Consider questions such as why are you using the non-GAAP measures and how does it provide investors useful information,” Ms. White said.

Company executives should also consider whether the explanations they give as to why they use non-GAAP numbers are “accurate and complete,” she added.

This sorta feels like a parent telling their teenager not to drink/have sex/smoke pot when they know in their heart that it's already happening. As if MJW thinks that if she reminds everyone how dangerous non-GAAP metrics are when used irresponsibly, they'll heed her warning and abstain.

Billions of Barrels of Oil Vanish in a Puff of Accounting Smoke [Bloomberg]
Of course, even GAAP can be confusing:

Companies such as Chesapeake, founded by fracking pioneer Aubrey McClendon, pushed the Securities and Exchange Commission for an accounting change in 2009 that made it easier to claim reserves from wells that wouldn’t be drilled for years. Inventories almost doubled and investors poured money into the shale boom, enticed by near-bottomless prospects.

But the rule has a catch. It requires that the undrilled wells be profitable at a price determined by an SEC formula, and they must be drilled within five years.

Time is up, prices are down, and the rule is about to wipe out billions of barrels of shale drillers’ reserves. The reckoning is coming in the next few months, when the companies report 2015 figures. 

Accounting magic!

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