SEC Commissioner Uyeda Emphasizes Importance of Maintaining High-Quality Accounting Standards

SEC Commissioner Mark T. Uyeda warned that "any failure by the International Accounting Standards Board ["IASB"] to adapt and update International Financial Reporting Standards ["IFRS"] to keep pace with complicated and evolving financial transactions could have profound implications on the global markets."

In his remarks before the Institute of Chartered Accountants in England and Wales, Mr. Uyeda emphasized the importance of a "robust" process to maintain "high-quality" accounting standards. He reiterated concerns expressed by SEC Commissioner Hester Peirce that the proposed creation of the International Sustainability Standards Board could detract efforts and resources from the IASB. He warned that the IFRS must continue to ensure that the IASB keeps its standards up to date with "complicated and evolving financial transactions."

As to the United States, Mr. Uyeda highlighted efforts from the Financial Accounting Standards Board to maintain U.S. GAAP, including (i) incorporating a crypto assets-related subtopic to its exposure draft for updated accounting standards and (ii) proposing amendments that would require entities to measure crypto assets at fair value and implement additional, related disclosure requirements. Mr. Uyeda said the update would more closely align the U.S. GAAP with IFRS for the accounting of crypto assets.

Mr. Uyeda reasoned that there "will always be errors and noncompliance" with financial reporting requirements. To reduce the likelihood of violations, he underscored the importance of a strong audit committee that (i) is active in overseeing company accounting procedures and (ii) assesses policies for their effectiveness. As to the SEC’s role in addressing violations, he argued that an enforcement program that is focused only on imposing monetary penalties without parallel actions to hold individuals accountable creates less of a deterrence for bad actors in the future.

Mr. Uyeda also brought up a recent rule proposal by the SEC that would include board members of companies that have non-financial expertise. Mr. Uyeda stated that this practice would risk a lack of knowledge among a company’s board members on the company's "financial reporting and core business." To that end, Mr. Uyeda called for the SEC to limit its role in influencing the composition of a company’s board members.