The Center for Audit Quality has some tips to share directly from the staff of the Securities and Exchange Commission on how companies should handle some transition issues as they adopt new consolidation accounting rules.

The CAQ’s SEC Regulations Committee met recently with SEC staff to discuss some reporting issues related to how new accounting under Accounting Standards Codification Topic 810 Consolidation (originally Financial Accounting Statement No. 167) should be reflect in various filings with the SEC. The staff commented on how the adoption of ASC 810 should be considered when filing certain registration statements, how the transition provisions of ASC 810 apply to certain entities, and whether adoption of ASC 810 triggers reporting related to acquisitions, material events and certain pro forma reporting.

Adam Brown, a partner at audit firm BDO, said the guidance doesn’t pertain to adoption of the new consolidation accounting rules directly, but rather the effect it has on other SEC filings. It’s not unusual for the SEC staff to offer guidance on how to portray certain accounting information when a new accounting pronouncement allows companies to adopt a standard retrospectively, or by looking back into prior periods, Brown said.

With respect to the filing of registration statements, the SEC said when a filing incorporates the most recent 10-K in addition to interim statements that include the date of adoption, companies should recast prior period annual statements to reflect a material retrospective application of ASC 810. If companies adopt ASC 810 prospectively or if the retrospective application of the new rules is not material, such recasting would not be required.

SEC staff also indicated they’ll be looking for consistency between the application of ASC 810 in financial statements and in the table of selected financial data, but they apparently won’t protest inconsistency as long as it’s disclosed. “In all cases, the SEC staff expects a registrant to disclose to which periods it has retrospectively applied Statement 167 and, if necessary, the fact that certain periods are not comparable to the periods for which the audited financial statements are provided,” the CAQ wrote in its alert.

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