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Disclosures relating to a change in accounting principle, a change in estimate, and a correction of an error often receive attention in SEC staff comment letters. Comments request further quantitative and qualitative analysis on the accounting and disclosure judgments applied by management in these areas.
The SEC staff comments relating to accounting changes and errors asked registrants to provide:
  • additional information regarding management’s evaluation of materiality in accordance with SAB Topics 1.M and 1.N; and
  • clarification regarding whether adjustments relate to a change in estimate or correction of an error.
Comment Examples
Guidance references
  • With respect to the impact of the error on the current year we note qualitatively you do not expect it to be material to your profitability or trends in 2020. Please explain why the error is quantitatively immaterial to the current year in light of your guidance.
  • We note you revised the required minimum payment percentage for purposes of determining delinquency statistics for receivables.Tell us (1) the reason for this change and how you considered whether it constituted a change in accounting policy or principle or a correction of an error under ASC 250; (2) whether you performed an analysis to evaluate the significance of this change to your delinquency statistics for prior periods and tell us the results of this analysis and (3) whether you evaluated the impact of this change to your allowance methodology.
  • Please provide us your materiality analysis supporting the determination that the errors were immaterial to the two quarters affected and did not require a restatement of financial results in amended Forms 10-Q considering the guidance in SAB Topic 1M and ASC 250. Please identify the factors that most impacted your conclusion that the errors were immaterial.
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