Our series on SEC comment letter trends continues with a spotlight on inventory and cost of sales.
In each episode of our What’s trending in SEC comments series, our guests bring you the latest themes in comment letters from the SEC’s Division of Corporation Finance for the most common topical areas of the financial statements.
This week we focus on inventory, cost of sales, and income statement presentation. Pat Durbin, PwC National Office Partner, joined Heather Horn to break down some of the questions raised in these comments, giving you a deeper understanding of the SEC staff’s expectations, as well as context and insights into the GAAP requirements.
Topics include:
  • 3:34 - What types of comments are companies getting? Pat and Heather discuss the main themes of comments. Common questions relate to the presentation of cost of sales and other income statement line items.
  • 5:21 - Completeness of cost of sales. Pat gives an overview of comments that issuers have received about the completeness of their cost of sales and how to avoid some common pitfalls.
  • 11:25 - What about the classification of operating expenses? There is very little explicit guidance on how to classify operating expenses and what to disclose. Pat and Heather discuss some of the diversity in practice and tips for providing the right level of context in your disclosures.
  • 18:27 - Navigating the application of SAB topic 11-B. Pat and Heather discuss how to appropriately address this SEC staff guidance.
  • 22:14 - What about comments on inventory? Inventory can be a material line item for many companies that sell products. Pat and Heather discuss some of the inventory comment letter trends and some of the disclosures that might require more judgment.
  • 24:09 - Key takeaways and reminders. Pat closes with helpful advice when making decisions about income statement presentation, and how to convey key judgments to the reader. Heather tries to stump Pat with some niche accounting questions.
About our guest
Pat Durbin is a partner in PwC’s National Office. Pat is a partner in PwC’s Assurance National Office and has over 30 years of experience. He has expertise in financial reporting and extensive experience serving board, C-suite, and senior management level executives across a variety of industries and geographies both in the US and internationally.
About our host
Heather Horn is PwC’s National Office thought leader, responsible for developing our communications strategy and conveying firm positions on accounting and financial reporting matters. She is the engaging host of PwC’s accounting and reporting weekly podcast and quarterly webcast series, as well as periodic webcasts for the power and utilities industry. With over 30 years of experience, Heather’s accounting and auditing expertise includes financial instruments and rate-regulated accounting.
Transcripts available upon request. Please send requests to us_podcast@pwc.com.

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