NORWALK, Conn. - Not all restatements are bad. That's a message securities regulators are looking to send investors, in light of a potential accounting-rule change.
Securities and Exchange Commission Chief Accountant Donald Nicolaisen said at a Financial Accounting Standards Advisory Council meeting Thursday that the agency will soon undertake a process aimed at helping investors distinguish between "bad restatements" and those that are made simply because of accounting policy changes.
The move could help accounting standard-setters get through a proposal that would require U.S. companies to conform to the overseas practice of applying accounting changes retroactively. Right now, while international rules call for companies to adjust prior years' financial statements as if the accounting policy change had occurred then, U.S. companies generally make a one-time cumulative adjustment in the year of the switch.
The Financial Accounting Standards Board, which writes U.S. bookkeeping rules, expects to issue the proposal in the coming weeks for public comments, as part of a package of changes designed to bring U.S. standards in line with those set by the International Accounting Standards Board.
Companies, even though they generally agree that the retroactive adjustment approach can lead to better comparisons of year-over-year results, could still hesitate to embrace the proposal because of the negative connotation of a restatement.
Details of the SEC process won't become known until FASB publishes its proposal.
