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2024 Year-end toolkit: Year in review from the corner office · PwC's accounting podcast

• 0:00
  SPEAKER_00: Thought Leadership from PWC's National Office.
• 0:07
  SPEAKER_01: Hello, and welcome to PWC's Accounting Podcast.
• 0:10
  SPEAKER_01: I'm Heather Horn.
• 0:12
  SPEAKER_01: We're almost done with 2024, a year that had it all from the perspective of the finance team, from new SEC and FASP guidance to court challenges, and even a presidential election that could affect some regulatory agencies.
• 0:26
  SPEAKER_01: Our National Office Leader and Professional Practice Group leader join us to share the top things they believe CFOs and their teams should know about the year that was as the calendar turns to 2025.
• 0:38
  SPEAKER_01: This episode kicks off our year-end toolkit series that will run throughout January, bringing you a range of topics designed to help you through the year-end close process.
• 0:47
  SPEAKER_01: Even if you're not currently at year-end or involved in the company's close, this information is still relevant and foundational to all finance teams.
• 0:56
  SPEAKER_01: Because who doesn't love a year-in review?
• 0:59
  SPEAKER_02: I'm not expecting pencils down between that moment things change.
• 1:04
  SPEAKER_02: In fact, I think over the last couple of weeks, the pace at which guidance and and uh communications have been coming out have been accelerated.
• 1:12
  SPEAKER_02: And um, you can understand both sides of that discussion.
• 1:22
  SPEAKER_01: That was Tim Carey, PWC's National Office Leader, who's joined by Kyle Moffitt, PWC's National Office Professional Practice Leader.
• 1:29
  SPEAKER_01: Together, Tim and Kyle share important insights about these top 10 things to know and what it means for your reporting at year-end and next year in 2025.
• 1:39
  SPEAKER_01: Let's play the episode.
• 1:41
  SPEAKER_01: Tim, Kyle, welcome back to the podcast.
• 1:43
  SPEAKER_01: And Kyle, so nice to have you on the other side of the microphone for today, having to give some input into these topics.
• 1:50
  SPEAKER_01: And I think this can be a very exciting conversation about the hottest accounting, reporting, and auditing topics of 2024.
• 1:57
  SPEAKER_01: And even as I said that, I was thinking those words may not belong in the same sentence, but listeners, I promise.
• 2:03
  SPEAKER_01: Today perhaps they do.
• 2:05
  SPEAKER_03: Exciting times.
• 2:06
  SPEAKER_01: Exciting times.
• 2:07
  SPEAKER_01: So I think you know, overall point of today is not really to get into the detail, but more to give a year in review.
• 2:14
  SPEAKER_01: And I think with so much that's going on, both in the world and in accounting, reporting, sustainability reporting, it's kind of hard to take that step back and say, okay, what does this all mean?
• 2:24
  SPEAKER_01: So hopefully today can help bring it together.
• 2:27
  SPEAKER_01: Now, with that said, I thought where we could start is just some of the external factors that are impacting reporting.
• 2:32
  SPEAKER_01: And so, Kyle, I'll go over to you to kick things off, just the election, what this means, and what we think particularly when we look back and look ahead.
• 2:42
  SPEAKER_03: Yeah, so look, I think, you know, Tim and I both attended the uh the AI CPA conference, which is um held every December uh in DC.
• 2:51
  SPEAKER_03: And and obviously I think this was probably the one of all the conferences I've I've attended that was probably more politically charged than than any I've ever seen, frankly, in my entire career.
• 3:02
  SPEAKER_03: Um and I think you know, largely due to the fact that that you have you will have a Trump administration um and you will see kind of the pendulum swing um back in the direction um of you know likely um less regulation.
• 3:18
  SPEAKER_03: Um I think likely changes in in kind of how the the SEC um does a lot of their work, um potentially changes with the PCOB.
• 3:27
  SPEAKER_03: Um we heard a lot of that commentary when when we you know heard from uh Commissioner Ueda, um, who is you know likely uh either he or or Commissioner Peirce, uh both Republicans, uh will likely be named as acting chair for a period of time.
• 3:43
  SPEAKER_03: Um but look, here's the thing.
• 3:45
  SPEAKER_03: We we know that there is a a transition team um like with any other government agency, and that transition team pretty much hits the ground.
• 3:53
  SPEAKER_03: Um they're they're working now, but they will be um in the building at the SEC.
• 3:58
  SPEAKER_03: They will be focused on um pretty much helping the the leadership team transition to this next uh leadership team.
• 4:07
  SPEAKER_03: Um we we do know that Paul Atkins, a former commissioner, was nominated by the uh President Trump.
• 4:13
  SPEAKER_03: I think uh that that means Chair Gensler is out, and Chair Gensler has indicated he will step down um on inauguration day, which which is very interesting.
• 4:21
  SPEAKER_03: Usually they they leave beforehand.
• 4:23
  SPEAKER_03: Um that transition team will likely go into the building and start the process of kind of figuring out is there are there things that they can do in the near term um for the next couple of months until Paul Atkins is appointed, um voted in or confirmed by the Senate, um, which we could see probably sooner than than what we've seen in prior periods.
• 4:42
  SPEAKER_03: Usually it's around the April-May timeframe.
• 4:43
  SPEAKER_03: And and I think in this case, um it it might be sooner.
• 4:47
  SPEAKER_03: And so um, you know, we heard from UAADA that that there's going to be a focus on revisiting a lot of of some of the governance areas um that have been uh that we saw with the Dodd-Frank Act um years and years ago, that this current uh leadership team really focused on, you know, kind of bringing at least finishing the projects or finishing those rulemakings.
• 5:08
  SPEAKER_03: So pay versus performance, you know, CEO pay ratio, a number of topics.
• 5:12
  SPEAKER_03: Um they'll focus on proxy advisory firms, shareholder proposals, um much more.
• 5:18
  SPEAKER_03: Um and Commissioner Ueda even talked about the PCOB and kind of what they're thinking about doing with the PCOB.
• 5:24
  SPEAKER_03: Um you know, we we certainly could see when this new chair is is appointed that that there may be a focus on you know changing out at least at a minimum the leadership um of the PCOB.
• 5:37
  SPEAKER_03: Um so Chair Erica Williams, um, you know, she was you know put in that role by the the Biden administration um and by uh Chair Gary Gensler.
• 5:46
  SPEAKER_03: Um so I think we we could certainly see some changes there.
• 5:49
  SPEAKER_03: But I think I do think we we the leadership we've heard from a lot of these folks and what we've heard from another one of the representatives from uh the Republican side of the House um essentially saying that, you know, and he is now the named the chair um of the House Financial Services Oversight Committee.
• 6:09
  SPEAKER_03: So um certainly heard from him that that he's looking to uh change things.
• 6:13
  SPEAKER_02: The one thing that did stand out to me was a uh definite message from the Republicans that um it was time to put pencils down until um new new appointees had been named, um, and there was a point of view by the Democrats that the the work that had been uh undertaken and was in process was gonna continue to be released.
• 6:34
  SPEAKER_02: So there was a lot of back and forth.
• 6:35
  SPEAKER_02: Oh, yeah, yeah.
• 6:36
  SPEAKER_02: Um and said in very direct ways.
• 6:38
  SPEAKER_02: Right.
• 6:38
  SPEAKER_01: Yeah, and I guess maybe for either one of you, and not to get too much into the detail from what I heard, I was not at the conference, but that there was sort of a this is not business as usual.
• 6:49
  SPEAKER_01: This is not just a routine annual update, but there's some real maybe frustration or otherwise in the air that's going to be, I'll say, dealt with over the next year.
• 7:00
  SPEAKER_02: I I certainly picked up on that.
• 7:02
  SPEAKER_02: Um it was uh it was a very interesting conference, a lot of a lot of tense conversations, a lot of uh accounting and auditing drama for sure.
• 7:12
  SPEAKER_03: Yeah, it's it's shocking.
• 7:14
  SPEAKER_03: I mean, it's shocking.
• 7:15
  SPEAKER_03: Well, I mean, I look back to like 25 years ago when when I was at when I started at the SEC and then fast forward to where we are today, and it's it's night and day because you used to have commission votes that were five, zero, and now commission votes are three to two party lines.
• 7:31
  SPEAKER_03: And I don't think that's gonna change.
• 7:32
  SPEAKER_03: It's certainly not gonna change in in during this upcoming Trump administration.
• 7:36
  SPEAKER_03: I mean, it'll be interesting to see who is put in these various roles, but we will see a big change in the commissioner.
• 7:43
  SPEAKER_03: So um Jaime Lizaraga, one of the commissioners, Democratic commissioners, has indicated he will step down um for personal reasons.
• 7:50
  SPEAKER_03: Um we will see Hester Peirce, the Republican uh commissioner.
• 7:54
  SPEAKER_03: She will will has indicated she'll leave at the end of her term, which is this year.
• 7:58
  SPEAKER_03: So that's gonna be a lot of of turnover.
• 8:00
  SPEAKER_03: You know, I think there's there's a lot of of you know conversations about you know Caroline Crenshaw.
• 8:06
  SPEAKER_03: So I look, I think we will see a very different SEC leadership.
• 8:10
  SPEAKER_03: And then what happens is we see that trickle down throughout the organization.
• 8:14
  SPEAKER_03: Um it certainly will impact the enforcement, it'll impact rulemaking.
• 8:17
  SPEAKER_03: We'll see the agenda completely switch.
• 8:20
  SPEAKER_03: Um, but uh it's gonna be a while before we really see what this next chair will focus on.
• 8:25
  SPEAKER_03: I think he'll be open about what he wants to accomplish.
• 8:27
  SPEAKER_03: But as far as like particular rulemakings, um, I think it will take a while before they actually put that rulemaking agenda together and before it's actually published.
• 8:36
  SPEAKER_01: Yeah, so it's interesting again, I think for your average person who's listening, where and you know people in the world of accounting, what actually happened itself at the conference probably is not quite as interesting.
• 8:47
  SPEAKER_01: It's just the this overall idea of the tenor and sort of what we expect to see.
• 8:51
  SPEAKER_01: So just one more question before we move on then.
• 8:54
  SPEAKER_01: Do we really expect to see then sort of a cliff?
• 8:57
  SPEAKER_01: Or as you said, I mean, Tim, you mentioned this that there's sort of this idea the Democrats are saying, nope, we want to keep moving forward.
• 9:03
  SPEAKER_01: The Republicans are saying, You've got now six weeks, like put your pencils down.
• 9:07
  SPEAKER_01: So do we expect to see immediate changes starting January 20th, or what do we think?
• 9:12
  SPEAKER_02: Well, my first impression is that there's um I I'm not expecting pencils down between now and the time things change.
• 9:20
  SPEAKER_02: In fact, I think over the last couple of weeks, the pace at which guidance and and uh communications have been coming out have been accelerated.
• 9:28
  SPEAKER_02: And um, you can understand both sides of that discussion.
• 9:33
  SPEAKER_02: Um I I think what we all have to remember is there are very dedicated staff at the SEC and the PCOB who have jobs to do and they're gonna continue to get up every day and do their job, whether it's reviewing filings or responding to questions from registrants or auditors or inspecting uh audits, um, that that work will continue while they figure out how things are gonna proceed at the top.
• 10:00
  SPEAKER_01: All right.
• 10:00
  SPEAKER_01: So maybe moving on, because uh if we spend this much time on all of our topics, it's gonna be quite a long time.
• 10:06
  SPEAKER_01: We will.
• 10:06
  SPEAKER_03: We'll we'll fly through everything.
• 10:07
  SPEAKER_01: All right.
• 10:08
  SPEAKER_01: So let's move on though, because I think another big thing that we see impacting rulemaking and otherwise are you know what's going on at the Supreme Court.
• 10:18
  SPEAKER_01: And we've talked about this a bit before, Kyle, on the podcast, the Chevron decision and otherwise, but what would you share from that perspective?
• 10:23
  SPEAKER_03: Yeah, I mean look, I think Supreme Court's obviously the most important, right?
• 10:27
  SPEAKER_03: Because that is the law of the land.
• 10:29
  SPEAKER_03: I think, though, you there are a number of actions that we've seen in other courts, right?
• 10:34
  SPEAKER_03: Fifth circuit, recently some actions, you know, and the SEC has been sued on a lot of different fronts, right?
• 10:41
  SPEAKER_03: With respect to rulemaking, with respect to um, you know, some of the enforcement actions they brought, um, the individuals they brought those enforcement actions against.
• 10:49
  SPEAKER_03: So um but but yeah, I think anytime you see a Supreme Court case that, you know, that actually impacts an agency.
• 10:56
  SPEAKER_03: And so it it this you know, one of them actually in impacts all agencies, right?
• 10:59
  SPEAKER_03: Federal agencies, and that's the the one that overturned the Chevron doctrine or deference.
• 11:04
  SPEAKER_03: And I'm not gonna spend a lot of time talking about the case, but what I will say is it will have an impact.
• 11:10
  SPEAKER_03: Um and I think the point there is that, you know, when a good example to highlight it is the climate rule, that you have a final climate rule.
• 11:18
  SPEAKER_03: And I think that, you know, in a situation where an agency is not directed by Congress to actually take action and propose and adopt a rule, you know, the deference given to that agency by the courts is not gonna be there in the future.
• 11:32
  SPEAKER_03: And so what will likely happen, what that means is that the SEC and other agencies are really gonna have to have directives by Congress or really be grounded in what their mandate is, mission uh critical.
• 11:46
  SPEAKER_03: So if it's a the mission is capital formation, investor protection, it's gonna be a more challenging.
• 11:51
  SPEAKER_03: You can't just say, well, it's the investor protection mandates.
• 11:54
  SPEAKER_03: We we think climate is important for investors to make an informed investment and voting decision.
• 12:00
  SPEAKER_03: And so we're gonna go ahead and propose rules.
• 12:02
  SPEAKER_03: Well, Congress didn't direct the SEC to undertake that.
• 12:06
  SPEAKER_03: They didn't direct the SEC to come up with required emissions disclosures.
• 12:09
  SPEAKER_03: So I think it's it that's gonna be an important piece because everything that this next administration will try to accomplish, they're gonna ensure that they are complying with the rules and the laws that are in place and likely are not going to do a lot without having Congress backing what they want to do.
• 12:26
  SPEAKER_03: The other one is the Jarkeese case, and that's really it's important to highlight because it it may limit what the SEC can do with respect to enforcement actions.
• 12:37
  SPEAKER_03: And so um historically, you had an in-house and administrative courts that that were actually hearing these cases.
• 12:44
  SPEAKER_03: These these folks are hired by the SEC.
• 12:47
  SPEAKER_03: They're hired by the commission and put into these roles to hear these cases.
• 12:52
  SPEAKER_03: And I think there were a lot of uh a lot of conversations over the years over how that that wasn't just not appropriate.
• 12:57
  SPEAKER_03: And we we saw with this court case that the SEC essentially lost.
• 13:02
  SPEAKER_03: Um, and so their authority to to essentially they can bring actions, but to put them in front of an administrative law judge within the SEC, um, that essentially has kind of been thrown out.
• 13:11
  SPEAKER_03: And so it doesn't give them that that ability to bring, you know, as many actions.
• 13:16
  SPEAKER_03: There's a lot that likely will be challenged in the courts moving forward.
• 13:19
  SPEAKER_03: So it'll be interesting to see kind of how that impacts this future of the agency itself.
• 13:24
  SPEAKER_03: But I think as far as this administration, they are a Republican-led administration, they're probably not going to be really aggressive in their approach to either rulemaking or some of these actions they bring.
• 13:36
  SPEAKER_03: They still will bring actions, right?
• 13:38
  SPEAKER_03: And say they still will focus.
• 13:40
  SPEAKER_03: I think what we see will will be a focus on insiders, on individuals, um, more so than we see actions on companies.
• 13:47
  SPEAKER_03: So I think we'll see a switch in kind of how enforcement does things.
• 13:50
  SPEAKER_03: So I think these Supreme, in a nutshell, these Supreme Court cases will impact the rulemaking agenda of the SEC and will also impact the enforcement actions of the SEC.
• 14:01
  SPEAKER_01: So, Tim, I know you spent a lot of time visiting with clients, visiting with the engagement partners, others within the firm.
• 14:08
  SPEAKER_01: From your perspective, would you say that there's general understanding of the potential sort of momentous impact of some of the changes we've seen this year from these cases?
• 14:18
  SPEAKER_01: Or is it, oh yeah, I read something about that, and not really grasping that actually this really is not business as usual anymore?
• 14:26
  SPEAKER_02: So I would say it is a widely discussed topic.
• 14:29
  SPEAKER_02: Um, but I would tell you those that are currently involved in either um drawn out comment letter processes or uh those that are in enforcement already have a deeper appreciation for what this means.
• 14:44
  SPEAKER_02: I think if you're one that follows SEC releases, like Kyle and I do, and I know you do too, Heather, we can already start to see the impact just from the number of cases that have been uh dismissed and uh closed out.
• 14:58
  SPEAKER_02: So yeah, if you're paying attention, I think everybody understands the importance of both of these rulings.
• 15:04
  SPEAKER_01: Yeah, very interesting.
• 15:05
  SPEAKER_01: So maybe let's go on then to talk about some of what's sort of date today, I'll call it at the SEC.
• 15:10
  SPEAKER_01: And I think there's two topics we've spent a lot of time thinking about and talking about, and again, ones that there may be some changes next year, but starting with the first headline is would be uh crypto.
• 15:22
  SPEAKER_01: And again, that's something I think that came up last week, Kyle, or at a minimum has been in the headlines quite a bit since we've had uh the election results.
• 15:29
  SPEAKER_01: So, what are we thinking from a crypto perspective, what we might see?
• 15:33
  SPEAKER_03: Well, I think the broader implication is goes beyond kind of what what we're you know, we'll talk about with respect to the staff accounting bulletin that addresses um you know the particular requirement or gap requirement with respect to crypto.
• 15:49
  SPEAKER_03: And and and I think the the thing that I look to is the fact that it's very unclear what would constitute a security under the federal securities laws.
• 15:57
  SPEAKER_03: And so we've seen a lot of of offerings or companies try to try to do offerings, but it wasn't it's not very clear as to if something is a security or not.
• 16:07
  SPEAKER_03: Um and so the SEC certainly has brought a lot of actions.
• 16:11
  SPEAKER_03: Um, and so a lot of the commentary from the Republican side of things has been hey, you should not be bringing you know these cases and you're regulating by enforcement.
• 16:22
  SPEAKER_03: Set up a framework, uh help companies determine what should be subject to the analysis, how to walk through the analysis.
• 16:29
  SPEAKER_03: So set up some sort of framework.
• 16:31
  SPEAKER_03: Maybe there should be rulemaking.
• 16:33
  SPEAKER_03: Um, but I think the other piece that we heard um from Commissioner Ueda at the conference was well, they're gonna be looking to rescind SAB topic 121.
• 16:43
  SPEAKER_03: Um, and so that's a staff accounting bulletin that covers crypto and custody and essentially the grossing up on the balance sheet of the asset and then of course the related liability.
• 16:52
  SPEAKER_03: But I think the question there is then gonna be all right, well, well, how do you undo it?
• 16:56
  SPEAKER_03: Like, how do you do it quickly?
• 16:58
  SPEAKER_03: Um, what does that look like?
• 16:59
  SPEAKER_03: Companies have already put this, a lot of companies have put this on their balance sheet already.
• 17:03
  SPEAKER_03: And so do you do they just rescind it and take it off the balance sheet?
• 17:07
  SPEAKER_03: You know, what does that look like moving forward?
• 17:10
  SPEAKER_03: So I think a lot of things for them to think about uh move you know, with respect to the SAB topic, you're making a face.
• 17:17
  SPEAKER_03: What was that?
• 17:18
  SPEAKER_01: Well, so I I I know we're not supposed to hit go into detail, but I have to ask this question because I'd be remiss if I didn't.
• 17:24
  SPEAKER_01: So if we see immediate action on this, then what does that mean for companies?
• 17:28
  SPEAKER_01: So January 20th.
• 17:29
  SPEAKER_01: Good question.
• 17:30
  SPEAKER_01: Is it a transition period?
• 17:31
  SPEAKER_01: Yeah, it's right in the middle of the recording.
• 17:33
  SPEAKER_03: Then that's what a lot of lawyers are worried about.
• 17:35
  SPEAKER_03: Right.
• 17:36
  SPEAKER_03: Right?
• 17:36
  SPEAKER_03: Like there are lawyers that are really concerned.
• 17:39
  SPEAKER_03: And when you think about securities lawyers, right, they're always thinking about class action lawsuits and from investors.
• 17:44
  SPEAKER_03: And an investor says, Hey, I invested in this company because of their assets.
• 17:49
  SPEAKER_03: Well, those assets are not that they may be restated, revised, or you know, changed.
• 17:55
  SPEAKER_03: And so if that's the case, what does that look like?
• 17:58
  SPEAKER_03: I don't know.
• 17:59
  SPEAKER_02: Yeah, there's been a lot of talk about that.
• 18:01
  SPEAKER_02: Is there an effective date?
• 18:02
  SPEAKER_02: Is it no longer gap?
• 18:04
  SPEAKER_02: Um, or what might be the most likely outcome?
• 18:07
  SPEAKER_02: Is this uh is this an accounting that is preferred?
• 18:10
  SPEAKER_02: And do you go through the preference letter process and deal with it that way?
• 18:14
  SPEAKER_02: I think um it's fair to say that there is some a lot of uh debate about whether that's the right accounting, and the people that are um trying to deal with that are not in the details enough to understand like once the the decision is made to repeal it, then how do we deal with it?
• 18:34
  SPEAKER_01: Yeah, and I think I mean, Tim, that kind of goes to if I understand another message we're starting to hear from companies is that stability is also important.
• 18:43
  SPEAKER_01: And so some of the changes are good, but also knowing what the rules are is is good.
• 18:47
  SPEAKER_02: So you're I think I think that's the approach that that or the the thing that we talk about the most and I talk about most personally.
• 18:55
  SPEAKER_02: It doesn't matter whether you're talking about the SEC or the PCOB or rulemaking or accounting rules.
• 19:00
  SPEAKER_02: I think preparers and auditors and investors, they just all want something that's consistent, understood, everyone knows how to measure it, everyone knows where the bar is so that we can continue on with getting a lot of the colours.
• 19:14
  SPEAKER_02: How do I stay in that fairway?
• 19:15
  SPEAKER_02: How do I stay in the fairway?
• 19:17
  SPEAKER_01: And you don't want the fairway jumping on in the middle of year end for many, many companies.
• 19:23
  SPEAKER_02: One of the things that we heard over and over in the in the conference was uh a desire uh that or a comment that said everybody in the room was really here to because they're interested in good, accurate, transparent financial reporting, and it sh that shouldn't get mired down in politics.
• 19:40
  SPEAKER_02: And so I think what we're all saying is we hope that you know we just are we're accountants and we're not politicians and we'd like to just stay in that lane.
• 19:47
  SPEAKER_03: The thing though that I would say to that too, though, Tim is like I agree.
• 19:52
  SPEAKER_03: Um but but I think it's important to understand that politics do have an impact and influence our profession today.
• 20:02
  SPEAKER_03: And it's why you know, you can have whatever view you want on it, but it is a real thing because of the oversight function of Capitol Hill over regulators over Wall Street, right?
• 20:13
  SPEAKER_03: So it's it's not it's not gonna go away anytime soon.
• 20:17
  SPEAKER_03: I think it will continue to look a lot like this.
• 20:21
  SPEAKER_03: Um I think the one thing I say kind of the silver lining it is at least we're relevant.
• 20:26
  SPEAKER_03: At least the profession's relevant.
• 20:28
  SPEAKER_02: Well, that and and the uh the old adage that uh be careful what you wish for exactly when they get it.
• 20:34
  SPEAKER_02: Yeah um, you know, I think everybody needs to understand that what may look good in the in one year um may not look good in the next.
• 20:43
  SPEAKER_02: And and moving from one end of the spectrum back to the next is uh is a tough way to earn it.
• 20:49
  SPEAKER_03: A perfect segue into the PCOB.
• 20:51
  SPEAKER_01: It is, although I have to say, I think people also could cope a little better with this if it's the middle of the summer instead of the middle of the winter.
• 20:57
  SPEAKER_01: But at any event.
• 20:58
  SPEAKER_01: All right, I was gonna stick with SEC for two more topics, then we'll go to the PCOB.
• 21:03
  SPEAKER_01: This one I think is maybe a little more straightforward again, probably not something you normally hear with this topic, but cyber and the SEC rule.
• 21:10
  SPEAKER_01: Again, not that the rule itself is straightforward, but compared to some of these other things.
• 21:13
  SPEAKER_01: But what's the latest on that, Kyle?
• 21:15
  SPEAKER_03: Well, I think it's it's important to highlight it, right?
• 21:18
  SPEAKER_03: Because what we heard, we did have there was a cyber panel at the AICPA conference, and we were we actually had some really good speakers.
• 21:25
  SPEAKER_03: We had some lawyers speak, a couple of lawyers that actually have an accounting, or actually all three lawyers on the panel had accounting backgrounds.
• 21:32
  SPEAKER_03: Um, and then you know you you also had a regulator, you had the SEC up there.
• 21:35
  SPEAKER_03: And I think I think the the message here is look, don't assume that the SEC is just going to kind of roll over.
• 21:41
  SPEAKER_03: I mean, the SEC will still be focused on on cyber.
• 21:44
  SPEAKER_03: It is a concern of both sides of the aisle.
• 21:46
  SPEAKER_03: Um, I think this um when you look at some of the disclosure requirements, setting aside the incident reporting in the in the form AK, we don't need to spend a lot of time on that.
• 21:55
  SPEAKER_03: But I think it's important for companies preparing for year end to think about their disclosure.
• 22:00
  SPEAKER_03: The annual disclosures in the 10K, because I can tell you that the comments we're seeing and what I expect we'll see over the coming six months will be a heavy focus on those disclosures and ensuring they comply line by line.
• 22:15
  SPEAKER_03: And so I tell a lot of companies go through your current disclosures today.
• 22:20
  SPEAKER_03: You had a year, you had a trial run, go through those current disclosures, compare them to what is required by that item, by the rule, and ensure that you've addressed every single point there.
• 22:30
  SPEAKER_03: Because if you've not, we've seen the staff ask questions.
• 22:33
  SPEAKER_03: You never know.
• 22:34
  SPEAKER_03: They may add they may tell you they want you to amend the filing to include more detailed disclosures.
• 22:38
  SPEAKER_03: So that can be an inconvenience.
• 22:40
  SPEAKER_03: So it's it's you're better off kind of making sure that you comply with those disclosure requirements as written.
• 22:45
  SPEAKER_01: Well, and obviously uh compliance is extremely important.
• 22:48
  SPEAKER_01: So my next question is not to suggest otherwise, but you did make a comment about STC comments over the next six months.
• 22:54
  SPEAKER_01: We've also just been talking about this change in administration, change to commissioners, and otherwise.
• 22:59
  SPEAKER_01: And sometimes I know we've talked in other forums that that can impact the STC comments, but it sounds like Kyle, you think in this case that just everyone asked that question.
• 23:09
  SPEAKER_03: And I I can tell you if just from my experience, it takes a little bit of time before things trickle down.
• 23:14
  SPEAKER_03: You you typically see kind of a change overnight with obviously you'll see it with rulemaking, the agenda will change.
• 23:18
  SPEAKER_03: Um with the enforcement division, you'll see some changes pretty quickly.
• 23:23
  SPEAKER_03: With respect to other divisions and offices throughout the agency, it takes a little while before things trickle down to the staff, um, unless they're given a directive.
• 23:31
  SPEAKER_03: And so, you know, when I look back to the last administration, you know, the the leadership team gave this, you know, corp fin team the directive to issue more comments.
• 23:40
  SPEAKER_03: And we saw that.
• 23:40
  SPEAKER_03: And we saw a lot of good targeted, laser-focused comments on a number of topics.
• 23:46
  SPEAKER_03: Um, and and I would say we probably will see that continue until they're given a directive.
• 23:52
  SPEAKER_03: Hey, you know, take your hands back a little bit, you know, lay off, you know, on some of the comments, or hey, maybe we don't need to focus on, let's say, climate compliance with the 2010 interpretive guidance that says talk about climate risk and your risk factors, you know, all of those related disclosures, you know, setting aside the climate rule that that's out there.
• 24:11
  SPEAKER_03: This is what is required today.
• 24:13
  SPEAKER_03: If you have a risk and it's material, you should disclose it.
• 24:15
  SPEAKER_03: Do I think this future SEC leadership team will be issuing that comment?
• 24:20
  SPEAKER_03: Probably not, but but you never know.
• 24:22
  SPEAKER_01: But to the point, sticking with what we were talking about with cyber in particular, we can expect, at least if you are predicting, to continue to see comments.
• 24:31
  SPEAKER_01: And again, compliance with the rules is always something that we're pretty straightforward.
• 24:36
  SPEAKER_01: Yes, exactly.
• 24:37
  SPEAKER_01: All right.
• 24:37
  SPEAKER_01: So you mentioned enforcement.
• 24:39
  SPEAKER_01: So perfect segue into my uh other SEC question before we move on, which is to go to you, Tim, and and to talk a little bit about enforcement and anything broad that we want to talk about, um, either related to cyber or otherwise.
• 24:53
  SPEAKER_02: Well, sticking on the uh cyber conversation, the other thing that I think gets a lot of talk and we've seen come across is as you're making your disclosures or you are um responding to comment letters, make sure that there's a clear understanding about what your company is currently doing versus what is aspirational or intended.
• 25:17
  SPEAKER_02: Love that point.
• 25:18
  SPEAKER_02: I think even with the best intentions, sometimes it's easy to overstate uh things that um are being done on the cyber front or things that happen during an event.
• 25:29
  SPEAKER_02: And and I think we just all need to be very clear and um make sure we're sticking to the facts.
• 25:36
  SPEAKER_02: Um the other things that stick out along cyber was, and I think we've been saying this, Kyle, I heard you say this a year ago, is you know, trying to understand when disclosure is necessary is challenging, particularly when you come to the point in the process when you have to determine whether it's material.
• 25:54
  SPEAKER_02: And to have a well-documented process that talks about who makes that determination, what factors to consider, um, the process about uh what goes into it, along with a you know real-time contemporaneous documentation of those discussions are very important and very compelling as you're having discussions um with the staff.
• 26:18
  SPEAKER_02: Um from an enforcement perspective, I think the courts have made it clear that you know these the that Sarbines Oxley is limited to controls over financial reporting and that controls over cyber uh incidents and the like do not fall into that category.
• 26:36
  SPEAKER_02: However, please be careful about how you think through disclosure controls and procedures, because what clearly covers them is how you describe them and when you disclose them, and those are part of uh DC and P.
• 26:49
  SPEAKER_02: And so if you have controls out there that don't have someone in in the C in your Cecil organization or other parts of your IT organization, I think it's important to get them involved in that process and again have those those documented.
• 27:04
  SPEAKER_01: All right, good reminder before year end on that.
• 27:06
  SPEAKER_01: So let's stick with regulators then and move on to a regular regulator.
• 27:11
  SPEAKER_01: I don't think we really spoke about on the podcast before this year, because I think traditionally there's been a view that the PCOB is the auditor for us, not for companies.
• 27:21
  SPEAKER_01: But what we've seen over the past year, or maybe a little longer, is that the PCOB's rulemaking impacts accounting firms, but then also trickles through and impacts companies.
• 27:33
  SPEAKER_01: Now, I think probably a big question, and again, coming from the conference last week, is do we expect that trend to continue?
• 27:41
  SPEAKER_01: And then once we set sort of that stage, we can talk a little bit about some of the specific rulemaking.
• 27:46
  SPEAKER_01: So maybe, Tim, I'll go to you.
• 27:48
  SPEAKER_02: Sure.
• 27:48
  SPEAKER_02: So when I think about the past 12 to 18 months and the PCOB, the thing that sticks out is just the volume of rulemaking.
• 27:57
  SPEAKER_02: It's been intense to say the least.
• 28:00
  SPEAKER_02: Um I think there's been 10 proposals for new standards, uh, 10 projects finalized in various states.
• 28:09
  SPEAKER_02: I think generally, as you point out, Heather, many times preparers are not as interested in what this rulemaking is.
• 28:16
  SPEAKER_02: I think once um NoClar was uh introduced for the first time, uh a lot of stakeholders um started to be more engaged and more attentive about the rulemaking process and what those rules were.
• 28:31
  SPEAKER_02: So as for NoClar, I think everybody knows for now, at least there's not an expectation the final rules are going to be proposed.
• 28:39
  SPEAKER_02: So I think that's uh on the side and we'll see what um what comes of that.
• 28:45
  SPEAKER_02: The two proposals that are out there now that are getting the most attention are um rules over reporting of firm metrics and reporting of engagement metrics.
• 28:56
  SPEAKER_02: Again, I think most folks would would think those are more auditor focused.
• 29:01
  SPEAKER_02: Uh one rule requires publication of certain information about an accounting firm.
• 29:06
  SPEAKER_02: The other rule on engagement metrics uh requires certain reporting uh of specific engagements and specific clients and registrants.
• 29:18
  SPEAKER_02: Um I'll talk more about the engagement metric proposal because it impacts uh, I think, both preparers and auditors, and it really is requiring auditors to file in their Form 10K detailed information uh about the audit that includes uh information about hours of um spent on the engagement, a breakdown of those hours by staff level, uh things like hours of training by individual and years of industry experience.
• 29:49
  SPEAKER_02: And um, you know, there's a lot of controversy around it because there is uh I think some strong disagreements about what is the cost of providing that information versus the perceived benefit.
• 30:02
  SPEAKER_02: Um, I think companies now are starting to get engaged because they're also concerned about what might be inferred uh by someone who doesn't have experience with auditors, doesn't have access to have discussions with the auditors of the company.
• 30:19
  SPEAKER_02: What things could they interpret out of the data that may be um misleading or or result in a different um answer or a different conclusion on quality?
• 30:31
  SPEAKER_02: Um so so there are a lot of concerns about that.
• 30:34
  SPEAKER_02: Um those rules have gone now to the SEC for final approval.
• 30:39
  SPEAKER_02: Um it's uh we're in the final comment period.
• 30:42
  SPEAKER_02: I think the uh the letters are due um right around December 25th.
• 30:48
  SPEAKER_02: So as somebody at the conference said, um happy holidays.
• 30:53
  SPEAKER_02: Um we'll see what what happens with them.
• 30:55
  SPEAKER_02: But that's probably the the new rule that rulemaking activity that's getting the most attention.
• 31:00
  SPEAKER_03: Yeah, I think I think kind of layering on that, Tim, it's just I mean, just the point about like the benefit, right?
• 31:07
  SPEAKER_03: Like, I mean, clearly, you know, it's how does it contribute to audit quality, right?
• 31:15
  SPEAKER_03: I think I think that some of the other standards that the PCOB is has proposed and adopted, you you can see how how it would contribute to audit quality.
• 31:22
  SPEAKER_03: I think the the conversations I've had you know with with a number of folks um kind of across the profession has been, well, how is this going to contribute?
• 31:30
  SPEAKER_03: And so I think that's gonna be the big ticket item with that one.
• 31:35
  SPEAKER_02: I I I think you're right.
• 31:36
  SPEAKER_02: I um I I would also say all the firms today, at least the the bigger firms, provide audit quality of reports that try to give visibility into similar metrics in a much more detailed fashion.
• 31:53
  SPEAKER_02: And the benefit of doing it in that environment is that you have the ability to provide a lot of context and narrative about what the numbers mean.
• 32:02
  SPEAKER_02: I think also as the audit rules are changing and as the use of technology is increasing, the audit is changing dramatically.
• 32:11
  SPEAKER_02: And so the the metrics on individual engagements they are changing and they will change at an even more rapid pace over the next five years than they have in the past.
• 32:24
  SPEAKER_02: So the metrics being proposed today, how relevant are those going to be five years from now?
• 32:30
  SPEAKER_02: And what's great about the you the use of transparency reports by audit firms is you have the ability to change those metrics over time, continue to lay out the ones you have historically, not so so that everybody sees what happens to metrics over time, but also introduce and change with the environment.
• 32:50
  SPEAKER_02: Uh, we think we think that that's a very important point.
• 32:53
  SPEAKER_01: But I guess if I just take a step back and uh well, I'd be remiss if I didn't say for people who want to know more about these all these proposals and everything else, they should listen to the podcast I did with Brian Croto because we go into a lot of detail and talk about pros and cons and some different things.
• 33:09
  SPEAKER_01: Uh so I do think that's important background.
• 33:11
  SPEAKER_01: But if I just think about this conversation and what Tim described in terms of these metrics and the sort of burden and otherwise, and I put this in the context of the discussion we had about the election and potential changes at the SEC, I mean, Kyle's terrible at predicting things, maybe SS Tim.
• 33:29
  SPEAKER_03: I I can predict this stuff.
• 33:31
  SPEAKER_03: That's about it.
• 33:33
  SPEAKER_01: Do you I mean, do we expect that these rules will move forward?
• 33:37
  SPEAKER_01: And maybe more broadly, what do we have any big picture expectations from a PCOB perspective?
• 33:43
  SPEAKER_02: I think it's tough to say.
• 33:45
  SPEAKER_02: I think if you do the math about the number of days that we all have to respond to the SEC and the number of days the SEC then has uh to put it into um effect, which then requires the vote of the SEC commissioners, that there is time in that calendar to get that passed.
• 34:10
  SPEAKER_02: I think the unknown is the level of or and number of comments that the SEC receives.
• 34:17
  SPEAKER_02: They have to review those and and weight them and uh factor those into the decision.
• 34:24
  SPEAKER_02: So um their ability to get it done in that time is gonna be somewhat dependent on the um the the the number of comments.
• 34:33
  SPEAKER_02: As to whether it's gonna get passed, um I think they're gonna work hard to get it done.
• 34:38
  SPEAKER_02: Um I do feel like there's gonna be a lot of comments, so I think that they're going to have a um have a big task ahead of them.
• 34:48
  SPEAKER_02: But if I had to put money down, I I I think it might might pass, yeah.
• 34:52
  SPEAKER_01: But then I guess so it passes, then the new administration comes in, we have new SEC commissioners, then what happens?
• 35:01
  SPEAKER_03: So it's interesting, right?
• 35:02
  SPEAKER_03: Because the budget will be approved pretty soon for the PCOB.
• 35:08
  SPEAKER_03: So then the SEC approves that budget.
• 35:10
  SPEAKER_03: So they're not gonna be able to kind of hold the purse strings at least for now, I don't think.
• 35:15
  SPEAKER_03: Um, the the other piece is you know, there's a lot of commentary around, well, is it subject to the Congressional Review Act?
• 35:23
  SPEAKER_03: And I think the straight answer.
• 35:26
  SPEAKER_03: Which we don't have a straight answer.
• 35:27
  SPEAKER_03: I think the impression I get from talking to a number of folks is no, it it would not be.
• 35:31
  SPEAKER_03: But could Congress take some sort of action?
• 35:34
  SPEAKER_03: What vote would they have to have to get something to move forward?
• 35:38
  SPEAKER_03: Like I there's a lot of questions about what the this administration could do, but there's certainly a lot of of strings they can pull to maneuver and figure out how to kind of maybe potentially soften the blow.
• 35:51
  SPEAKER_03: Um, but whether they are wanting to do that, I think remains to be seen.
• 35:54
  SPEAKER_03: Because we just have no idea who will the next if if there is a new leadership team, what that leadership team at the PCOB will look like.
• 36:00
  SPEAKER_02: Right.
• 36:00
  SPEAKER_02: And I also I also wonder the new the new boards, like where is this gonna fall in their priority?
• 36:06
  SPEAKER_02: They've got a lot of things that they're really interested in in uh addressing.
• 36:11
  SPEAKER_02: I'm not sure this makes it to page one.
• 36:14
  SPEAKER_01: But I guess maybe a key point before we move on to the FASB, you know, we talked earlier in this conversation about Sab 121 and it's gonna be priority to undo that.
• 36:25
  SPEAKER_01: Now we're saying this one, oh, we think it's gonna pass.
• 36:28
  SPEAKER_01: And then we start talking about all these other mechanisms that would be needed to undo it.
• 36:33
  SPEAKER_01: And I think maybe Kyle, this is not uh a podcast about rulemaking, but it might be helpful perspective for people to understand why the difference between what the commission can do with stab 121 versus if this rule is adopted.
• 36:47
  SPEAKER_03: So with SAP 121 is a little bit, it's unique, right?
• 36:50
  SPEAKER_03: Because it is a staff position.
• 36:53
  SPEAKER_03: So if the staff, the SEC, publishes something, that can be rescinded like tomorrow, right?
• 36:58
  SPEAKER_03: So there's a lot of staff positions out there.
• 37:00
  SPEAKER_03: And then now obviously anytime you rescind something, it it obviously has consequences.
• 37:05
  SPEAKER_01: Well, obviously, yeah.
• 37:06
  SPEAKER_03: But but again, I mean we talked about the SAB 121 case.
• 37:09
  SPEAKER_03: But I think as far as like rulemakings, right, there there is what they call the Congressional Review Act, where you, you know, when there is a transition, you can revisit rules that, you know, let's say that let's say the SEC has adopted within a certain window, um, and and they could Congress could step in and say, no, you know, we're gonna overturn that.
• 37:28
  SPEAKER_03: We don't agree with it, we don't like it.
• 37:30
  SPEAKER_03: Um, in this case, right, it's it's different because this is the PCOB, the commission of the SEC approves these rules, not and is not subject to, but but I think the question is, well, through Congress's oversight of the SEC, then how does that impact?
• 37:48
  SPEAKER_03: And can they, is there something there that they can they can pull back on?
• 37:53
  SPEAKER_03: I I don't think I've heard anyone say or point to anything where they can say they've said, hey, you know, all these PCOB rules that have been adopted over the last or the standards have been adopted over the last year, you know, no one has said to me that that those are going to be rescinded.
• 38:06
  SPEAKER_03: And I think, like with NoClar, the noncompliance of laws and regulations, what we've seen, what we've heard there, obviously that's the reason why they kind of held off on that one, because I think very polarizing topic.
• 38:17
  SPEAKER_03: Um, one that I think had they really pushed hard to push through, um, I do think that one would get a lot of comments and would have taken them a long time.
• 38:27
  SPEAKER_03: Whereas I think this one on firm engagement metrics, may it be worth it?
• 38:31
  SPEAKER_03: And I think firm and engagement metrics is not gonna get a lot of commentary.
• 38:34
  SPEAKER_03: Now it doesn't sound that interesting, actually, just like from a title point of view.
• 38:38
  SPEAKER_02: Right.
• 38:39
  SPEAKER_01: All right.
• 38:39
  SPEAKER_01: Well, it definitely sounds like uh we need to bring it up.
• 38:42
  SPEAKER_02: I do think just one last thought.
• 38:45
  SPEAKER_02: I do think there's gonna be renewed focus on cost benefit.
• 38:48
  SPEAKER_02: I think there's been a lot of questions about the rigor and um to those as well.
• 38:55
  SPEAKER_02: And at the FCC.
• 38:56
  SPEAKER_02: And so I do think that that that's something that's gonna get a lot more, a lot more play.
• 39:01
  SPEAKER_03: Trevor Burrus, Jr.
• 39:02
  SPEAKER_03: And that was one of the things I'm glad you brought that up, because when we heard from the congressman um French Hill, he had indicated that they want to revisit kind of the cost-benefit, you know, essentially your economic analysis, the Administrative Procedures Act, certain things that are in place.
• 39:18
  SPEAKER_03: And I think when you have a majority in the House of the Senate, and of course the the White House, the potential to make significant change.
• 39:24
  SPEAKER_01: Yeah.
• 39:24
  SPEAKER_01: Well, it definitely sounds like we need to Brian back to explain some of this.
• 39:27
  SPEAKER_01: Because again, given all the potential sort of flow through impact to our clients.
• 39:32
  SPEAKER_01: All right, a couple more topics I wanted to hit.
• 39:34
  SPEAKER_02: I don't think he's available.
• 39:35
  SPEAKER_02: I think he's working on the comment letter.
• 39:37
  SPEAKER_03: Well, he and I did a podcast on the impact of a lot of this stuff on companies for year end.
• 39:43
  SPEAKER_03: So the impact on preparers.
• 39:44
  SPEAKER_03: So that's a good podcast for the computer.
• 39:45
  SPEAKER_01: That's right, and that'll be coming out.
• 39:47
  SPEAKER_01: So people should listen to that.
• 39:48
  SPEAKER_01: So just trying to remind people that you were our guest host there.
• 39:51
  SPEAKER_01: That's right.
• 39:52
  SPEAKER_01: I was the guest host.
• 39:53
  SPEAKER_01: All right, there we go.
• 39:53
  SPEAKER_01: So a couple more topics here, one of which is the FASB.
• 39:57
  SPEAKER_01: And I on this one, I don't want to go too much into detail of the rule of the new standards that have been issued, um, recognizing that that this is an accounting podcast.
• 40:06
  SPEAKER_01: But I think what is probably of maybe bigger interest to from a listener point of view for this particular podcast is where where does the FASB fit into all this?
• 40:16
  SPEAKER_01: So we've seen some big rulemaking.
• 40:18
  SPEAKER_01: I mean, we saw the segments, we saw DICE, we saw the income tax disaggregation.
• 40:25
  SPEAKER_01: And they just seem to be sort of continuing with their agenda, notwithstanding all this, I'll call it turmoil.
• 40:30
  SPEAKER_01: Otherwise, and you know, again, from your two point of view, what do you think?
• 40:35
  SPEAKER_02: Yeah, well, I think the the FASB will continue to set their agenda and focus on making uh good rulemaking and with with good due process.
• 40:46
  SPEAKER_02: We'll see if 121 gets thrown back to them.
• 40:51
  SPEAKER_02: Um I think for the moment they're very busy on segments and dice and the new uh income tax disclosures, and they've got a pretty full plate there.
• 41:01
  SPEAKER_02: So I don't see dramatic change uh coming down to the FASB.
• 41:06
  SPEAKER_02: Um I do see some work uh for preparers in adopting those um those three uh those three new standards.
• 41:13
  SPEAKER_02: And uh, you know, I would say that generally what I hear is that, you know, I think on DICE in particular, there were a lot of a lot of concerns raised initially around um around several items and that the rules they have now now been approved was very responsive to those those rules and you know, I think is much more palatable um in the final standard.
• 41:38
  SPEAKER_02: And I think what many would say is boy, if we could get that process going um with all rulemaking, it would be uh a step in the right direction.
• 41:46
  SPEAKER_03: I think that's that's kind of the same that that I've been hearing too is with Dice is just the the fact that the voices were heard.
• 41:56
  SPEAKER_03: And I think what what a lot of the reaction or response to kind of the SEC's rulemaking, um a lot of folks kind of their view is well, we're providing comment, but is the SEC really listening?
• 42:09
  SPEAKER_03: So so I do think that when you talk about kind of what's gonna happen to the FASB, I think the thing that I think about is are they gonna still go down this path of focusing on investor protection?
• 42:18
  SPEAKER_03: Of course they will, right?
• 42:19
  SPEAKER_03: We're certified public accountants, right, for a reason.
• 42:22
  SPEAKER_03: And and and you know, they're they're looking for this granular information.
• 42:26
  SPEAKER_03: Investors want that information for years, um, you know, number of years in a row, probably frankly from 2016 to 20, um, when I was at the SEC, we met with investor groups constantly, um, you know, analysts, they want more information.
• 42:42
  SPEAKER_03: I mean, they they want the general ledger, right?
• 42:44
  SPEAKER_03: They want what they can get their hands on, whatever a company's willing to give them.
• 42:47
  SPEAKER_03: But you know, that that is not gonna stop.
• 42:49
  SPEAKER_03: They're always gonna ask for more.
• 42:50
  SPEAKER_03: And I think the question is, to your point about cost benefit, when the FASB is doing their work, is ensuring that they really are balancing kind of their mission and thinking about the cost benefit for some of the standards that they're doing.
• 43:04
  SPEAKER_03: Yeah.
• 43:04
  SPEAKER_02: Now, if you were talking about what new standards are we getting the most discussions about, I don't think I would say dice.
• 43:11
  SPEAKER_02: I would definitely think uh segments would be a list of uh measures of profitability and single segment reporting and the like.
• 43:20
  SPEAKER_02: I'm sure you guys have done a podcast on that already.
• 43:23
  SPEAKER_02: Aaron Powell We have.
• 43:24
  SPEAKER_03: We have a podcast with our deputy chief accountants talking about a lot of these topics, um accounting across the board.
• 43:31
  SPEAKER_03: So that's certainly something that people look at.
• 43:33
  SPEAKER_03: But we do have individual podcasts on a lot of these topics too.
• 43:36
  SPEAKER_01: So yeah, maybe the last comment or question on this one, Tim, is again, sort of taking your perspective from all these companies, the companies and PwC pr people that you're speaking with, are you feeling that people are ready for this?
• 43:51
  SPEAKER_01: There's a lot of additional detail, it's a lot of additional work.
• 43:55
  SPEAKER_01: And again, it does sort of seem like there's a a a lot of other things overshadowing.
• 44:00
  SPEAKER_01: adoption of these standards.
• 44:01
  SPEAKER_02: So I think as it relates to segments, the one that I'm a little worried about is whether single segment reporters have really understood what all of this means to them and aren't aren't simply saying, well, I'm a single segment.
• 44:17
  SPEAKER_02: It should be pretty easy.
• 44:18
  SPEAKER_01: Oh well I don't care about that.
• 44:20
  SPEAKER_02: Pretty easy.
• 44:21
  SPEAKER_02: And then, you know, I think there's been a lot of healthy debate about, you know, how to report certain certain measures, how to um how to uh decide what information to include and certainly the whole topic about a second um measure profitability.
• 44:38
  SPEAKER_02: Being well debated, I mean this is the kind of stuff that I joined and stayed in the profession for not the earlier part of our conversation.
• 44:47
  SPEAKER_02: These are these are interest to me these are interesting and important.
• 44:50
  SPEAKER_01: I mean very important from an investor perspective.
• 44:54
  SPEAKER_03: On the segment to your point about the the the measure of profit or loss, that that additional measure that if it's not calculated in accordance with GAAP, right, then then you have to comply with the SEC's not GAAP rules.
• 45:04
  SPEAKER_03: Like it's that that issue has been you know discussed at least kind of you know on the SEC or the CAQ's SEC regulations committee where we meet with the SEC to talk about a lot of different topics, reporting topics and and this is one of them.
• 45:19
  SPEAKER_03: I mean it it it was up until last month or the month before.
• 45:22
  SPEAKER_03: I mean it it took you know since AI CPA conference last December when they were talking about all of this to you know 10 months later before we actually had kind of gotten some feedback or reaction from the staff on a lot of the questions that that we you know assurance providers others had you know preparers as well but on the the topic itself I think that the the biggest piece that stood out to me when you were talking about you know the the the single segments whatever is really even for those companies right it's the importance of controls processes and controls over this and like you better be paying attention to signal segment companies because this is something you're not just gonna have to do it at year end.
• 46:03
  SPEAKER_03: This is this is a quarterly reporting thing right it has a quarterly reporting impact.
• 46:08
  SPEAKER_03: And so you will have to think about your significant segment expenses and that's not something that companies you know some companies have disclosed them um over the years.
• 46:16
  SPEAKER_03: You certainly see a lot of companies have a lot of detailed information but again I think it's it's what does that look like and I do think segments is an area that's ripe for comment because nothing is changing with respect to how you determine your segments.
• 46:31
  SPEAKER_02: Right?
• 46:32
  SPEAKER_03: So the staff's gonna look at it and say we're coming hard at you because nothing's changed on the analysis of what's an operating segment, what's a reportable segment what's changing is going to be additional disclosures.
• 46:43
  SPEAKER_03: The staff loves to issue comments on additional disclosures and they will be focused on that and I think we heard it from the people we heard from from from Corpfin um at the conference but then conversations we have with with with some folks that seem to think that it's gonna be an area that's it's top of the list.
• 46:59
  SPEAKER_03: It always is top of the list anyway so I think it's gonna be number one next year.
• 47:03
  SPEAKER_01: All right I'm gonna keep track of this prediction Kyle this prediction is going to be right all right let's move on talking about predictions to uh climate we can't skip that and I know we we talked about this briefly earlier but I do in a in a a webcast that I think the outlook is bleak.
• 47:21
  SPEAKER_03: You did say that but but I but I've heard others say that they think it's dead.
• 47:26
  SPEAKER_01: That's although I heard that it wasn't quite so negative that the conference last week as to say well it was completely dead but I guess more to come.
• 47:36
  SPEAKER_03: Trevor Burrus I I I didn't hear completely barely clocked I did hear it from from some folks and I've actually heard that from Roz Brooks our public policy leader um so I I you know I think that that there's a lot of again we talk about the strings that can be pulled by the new administration so irrespective of what happens in the courts what I will say is if if the chamber does not prevail right the chamber is sued and this is the SEC and that this is in court the chamber does not prevail right and some or all of the rule is yep you're good to go SEC go ahead and implement these you know these new rules and come up with compliance dates um the chamber will likely appeal and the question would be if they appeal yeah who at the SEC is going to want to continue to defend this not this current not the new leadership team the current leadership team but they're gonna be gone as of 120 2025.
• 48:29
  SPEAKER_01: Yeah I mean I think though in some ways this talking about the SEC climate rule it's interesting.
• 48:34
  SPEAKER_01: However it's really a distraction from what's really going on from a sustainability reporting perspective.
• 48:39
  SPEAKER_01: And I do think companies that are overly pivoted onto the SEC rule and not paying attention to California, not paying attention to Europe, not paying attention to all the jurisdictions that are adopting ISSB, you know you're kind of you're missing the boat a little bit there.
• 48:54
  SPEAKER_02: So again from a reminder's point of view, what what are you thinking from sustainability perspective I think that's why I didn't hear people saying sustainability is dead.
• 49:04
  SPEAKER_03: Sustainability is not climate from the SEC maybe maybe sustainability absolutely is not I agree.
• 49:10
  SPEAKER_03: Yeah.
• 49:11
  SPEAKER_03: Look I I think I think it's imperative that companies continue.
• 49:16
  SPEAKER_03: I mean I don't don't assume that you know the suit of California the chamber suit of in California for them imposing their requirement don't assume that that's going to have a maybe a similar outcome or um so it it remains to be seen what will happen there.
• 49:32
  SPEAKER_03: There's rumors kind of back and forth on on that I think I think the message we've been you know kind of delivering because there are some requirements today right for reporting and we won't get into all the details on all that because there's an awful lot.
• 49:45
  SPEAKER_03: But what I'll say is you know when you think about the greenhouse gas emissions disclosures to potential the requirement potentially for limited assurance and then one day reasonable assurance this is not something that that companies can ignore.
• 49:57
  SPEAKER_03: And I think you know we've talked about this Heather in a number of of you know webcasts podcasts of you know the the positive here I can say kind of the silver lining is there is commonality right with respect to CSRD in California.
• 50:12
  SPEAKER_03: But CSRD, I mean you've been working on it there's a lot to unpack there.
• 50:17
  SPEAKER_03: And right now there's only a few companies that are going to have to report 2024 in the US, right?
• 50:23
  SPEAKER_03: In on you know 2025 reporting on 2024 data, but that's gonna really be a huge number next year and then thereafter.
• 50:33
  SPEAKER_03: And so I think that that's going to be a huge burden for companies.
• 50:36
  SPEAKER_03: There's a lot of disclosure requirements a lot of reporting that needs to needs to happen.
• 50:42
  SPEAKER_03: And so you got to make sure that you have the controls in place processes and controls you have the right people you have a cross functional team focused on it across the organization that that everyone has a seat at the table um that there is communication that you understand what's required.
• 50:56
  SPEAKER_03: We talk a lot about this like where do you have to report you know are you scoped in to you know do you have to file in or report in California?
• 51:05
  SPEAKER_03: Do you have to report in you know where in Europe do you have to report and thinking about all of those reporting obligations similar to what you do with statutory reporting and ensuring that you are in a position to comply with these requirements and then understanding okay there are commonalities what can we leverage across each of these locations we have to report but we know there's a lot in CSRD to unpack.
• 51:27
  SPEAKER_03: I think that's going to be a huge challenge for companies and and an area that's going to continue to evolve and that really an important kind of plug for our continued you know thought leadership in this space because it is evolving on a daily basis.
• 51:41
  SPEAKER_03: You give me updates like morning and afternoon.
• 51:44
  SPEAKER_01: Absolutely absolutely the only thing maybe Kyle I so I obviously I agree with what you said there's one characterization though that I think some of our colleagues in the uh corporate reporting space and Nadia Picard and others would probably take exception to which you frame this as a burden.
• 52:02
  SPEAKER_01: And I think based on some of the studies and other work that they've done in uh doing benchmarking and surveys and otherwise with companies that are in wave one of adoption of CSRD, truly there is also an opportunity in terms of integrating with your strategy and otherwise that when I say the word burden, it applies to multiple requirements.
• 52:24
  SPEAKER_03: 100% and I think that's going to be the challenge right global reporting and getting to a consistent place.
• 52:29
  SPEAKER_03: It's like you talk about IFRS and US gap convergence like is there going to be convergence can you leverage your reporting in other locations to report and I think that's that's the big burden is just keeping up with where you have to report what the requirements are.
• 52:42
  SPEAKER_03: But I agree with you.
• 52:43
  SPEAKER_03: I think as far as opportunities leveraging your your ability to kind of capitalize on those opportunities we're seeing that and you're seeing we're gonna see it in the reporting right and then I think you see it with the EU taxonomy and kind of how you prove that out that'll be very interesting.
• 53:01
  SPEAKER_01: I think this whole thing is very interesting in terms of seeing what's going to happen next.
• 53:04
  SPEAKER_01: So some more to come and then I think that's a topic for whole other series of podcasts as it's raining as we're recording this.
• 53:13
  SPEAKER_01: Okay.
• 53:13
  SPEAKER_01: Gentlemen we've talked about a lot today I think hit most of the hot topics so maybe I'll go to sort of dealer's choice and no no player's choice and let you guys choose uh your final topics and sort of your final thoughts or key reminders uh for the year.
• 53:30
  SPEAKER_01: So Tim to you first.
• 53:32
  SPEAKER_02: Well what kind of podcast would it be if we didn't talk about AI?
• 53:35
  SPEAKER_02: Fair enough certainly continue to have a lot of discussions on AI although I would say that those conversations are really starting to evolve in a more meaningful way.
• 53:45
  SPEAKER_02: I think we're all now talking not about AI, but we're talking about specific types of AI or what what what tool are you bringing to solve a problem?
• 53:55
  SPEAKER_02: Is it machine learning?
• 53:56
  SPEAKER_02: Is it a generative AI application?
• 53:59
  SPEAKER_02: Are machine learning and AI too overbuilt for the function we're starting to get a lot more discussions about bringing the right solution to the right problem.
• 54:09
  SPEAKER_02: I would say we're seeing companies that are much further along today than they were last December, but we haven't really seen a lot of companies deploying AI in large scale, significant meaningful ways.
• 54:27
  SPEAKER_02: They're really more looking at what are the best use cases and then how do I get them through our governance structure and what should that governance structure look like.
• 54:39
  SPEAKER_02: And so I'm encouraged by the fact that everyone seems to be coalescing around the need for a governance structure to begin with, which is a big first step.
• 54:51
  SPEAKER_02: And then also like what are the risks about yeah um you need to think about um what are the risks on the inputs?
• 54:58
  SPEAKER_02: What are the risks on um the corpus that are being used?
• 55:03
  SPEAKER_02: What are the risks in the output?
• 55:05
  SPEAKER_02: How do you test them?
• 55:06
  SPEAKER_02: How do you take responsibility?
• 55:08
  SPEAKER_02: How do you make sure you have the human intervention needed to get to the right answer.
• 55:13
  SPEAKER_02: And so those are all the right things to be focused on and those are the things that we consistently hear.
• 55:19
  SPEAKER_02: So I think that's the my my my topic of choice and I would say my prediction for 2025 would be that um we'll see a lot more use of of AI tools next year than than we have this year.
• 55:33
  SPEAKER_03: Aaron Ross Powell I feel like Kyle could learn from you about making predictions because I I think it's highly likely yours will come prediction that's all right Kyle to that point because I think that's a great point and it was it was funny because we did a a CPE session this morning with our TMT practice.
• 55:53
  SPEAKER_01: So technology media and telecommunications okay so that would be our technology media telecommunications practice for our listeners benefit.
• 56:02
  SPEAKER_03: So so we actually talked about the AI CPA conference, what we heard you know and and then you had like so you talked a little bit about the SEC, you talked about the FASB, you talk about the PCOB and other other panels and we didn't get a lot of questions.
• 56:14
  SPEAKER_03: So I I figured okay well maybe I'm not that interesting so no one's no one's gonna ask questions or but it but it was it but it was interesting because what what I actually was talking to one of our um auditing folks who presented, she says she got a ton of questions on generative AI.
• 56:31
  SPEAKER_03: And so I think to your point, right, as you think about financial reporting and also kind of the audit um you know as well I think I think we will obviously see a heavy focus on that in the coming year.
• 56:42
  SPEAKER_03: I guess my takeaway in all of this would be really just paying attention to kind of what's going on with the SEC, the FASB and the PCOB.
• 56:50
  SPEAKER_03: And as much as you we talked on this this podcast about hey, you know, people provide comment and you know different reactions to whether you know these regulators or or um standard setters actually you know listen to the feedback.
• 57:03
  SPEAKER_03: I mean look their job is to do what they are you know tasked with doing so um you know the SEC in their oversight function, right, Gary Gensler tasks the team and says here's what I want to accomplish and then they you know put something out and then they get feedback they get comments and they consider those comments.
• 57:20
  SPEAKER_03: They're required to consider comments and they do and they go through and as you know my time working on rules we spend a lot of time pouring through all the letters that were sent in on rulemakings to evaluate okay what's in here?
• 57:33
  SPEAKER_03: What does this mean?
• 57:35
  SPEAKER_03: Have we thought about this?
• 57:36
  SPEAKER_03: And you kind of run that down all of these regulatory and standard setting bodies, they do that.
• 57:41
  SPEAKER_03: And so it highlights for me the importance of engaging with our regulators and standard setters not just the accounting firms but also you know preparers and and whether that's through industry trade groups or or whoever I think it's important for people to pay attention to what's coming down the pike because obviously it's going to impact everything that the organization does moving forward.
• 58:03
  SPEAKER_03: And so as I think about kind of what's going on at the FASB, you know, there's a lot that's on the agenda.
• 58:09
  SPEAKER_03: They're focused on software they're focused on updates to Cecil they're focused on environmental credits which I know is an area that you've been following our team has been following so I think that the important message here is stay engaged and you know provide input.
• 58:22
  SPEAKER_01: All right well gentlemen it's always such a pleasure to talk to you it should be interesting to see what 2025 brings.
• 58:27
  SPEAKER_01: Thanks so much for joining me today.
• 58:29
  SPEAKER_01: Thank you.
• 58:30
  SPEAKER_01: That's our show for today tune in next week for more fresh episodes so that you never miss any of our audio content follow the PWC Accounting Podcast wherever you listen to your podcasts.
• 58:43
  SPEAKER_01: And to stay up to date on all our latest accounting and reporting news sign up for our newsletter at viewpoint.pwc.
• 58:52
  SPEAKER_01: From Thought Leadership at PWC, I'm Heather Horn.
• 58:57
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