SEC Investor Committee Urges FASB to Reconsider "Materiality" Standard (with Lofchie YouTube Selection)

The SEC Investor Advisory Committee ("IAC") expressed concern at a recent meeting that a proposal by the Financial Accounting Standards Board ("FASB") to "clarify" the disclosure standard of materiality would entail "significant and substantive alteration to the current definition." Such substantial alteration "has the potential to adversely affect the quality of financial disclosure," the IAC said.

The IAC suggested that the FASB should (i) maintain the FASB's current definition of "materiality" or (ii) withdraw its proposals and provide more complete information regarding the implications and consequences of any revisions to that definition.

Alternatively, the IAC recommended that, at a minimum, the FASB should:

• clarify that disclosures listed in the Accounting Standards Committee are required unless the issuer and the auditor determine that the disclosures are immaterial; and
• develop a framework to evaluate the materiality of disclosure that focuses on qualitative disclosures.

In her opening remarks at the IAC meeting, SEC Chair Mary Jo White said this: "Further discussion, to ensure that all perspectives are fully considered, should be helpful as [FASB members] continue their work on these subjects."