Over the years, the SEC’s Accounting leaders have used the Baruch College Financial Reporting Conference to message disclosure review initiatives, such as the non-GAAP review that happened in 2016. At last week’s conference, Corp Fin’s Chief Accountant Lindsay McCord warned that the Staff is scrutinizing how companies account for climate-related risks and impacts based on accounting rules. A blog from Cooley’s Cydney Posner has more details:
According to McCord, as they conduct reviews of SEC filings, the staff will consider the impact of environmental matters in the application of current accounting standards, such as the standards for asset retirement, environmental obligations and loss contingencies. In that regard, at the same conference, Acting SEC Chief Accountant Paul Munter referred the audience to FASB guidance, issued in March, regarding the intersection of ESG and financial accounting standards, which addresses accounting as well as management disclosures.
The FASB guidance gives examples of how GAAP can intersect with ESG – e.g., going concern evaluations, risks and uncertainties disclosures, inventory issues, impairments, contingencies, and tax estimates. Page 48 of this slide deck from the conference walks through how the finance function fits in to ESG governance & controls – from data collection, to data controls, to reporting know-how. It notes that assurance over non-financial reporting is slowly increasing (see the internal controls resources in our “ESG” Practice Area).
In light of how these remarks build on February’s directive to the Corp Fin Staff to scrutinize climate change disclosures, it’s a good idea to loop in your financial reporting team on your climate disclosures. SEC Chair Gary Gensler also said last week before the House Financial Services Committee that the Commission would likely propose disclosure rules later this year.
-Liz Dunshee, TheCorporateCounsel.net May 10, 2021
