Clarifying and Protecting Materiality Standards in Financial Statements: A Review of SEC Staff Accounting Bulletin 99

2016 
* B.S., University of Michigan at Ann Arbor; J.D. Candidate, University of Maryland School of Law. Mr. Fang was a legal analyst at the National Association of Securities Dealers Regulation, Inc. and will begin working at the Securities and Exchange Commission in the fall. Mr. Fang will also be attending Georgetown University Law Center beginning Fall 2000 to pursue an LL.M. in Securities and Financial Regulation. B.S., University of California, Riverside; J.D. Candidate, University of Maryland School of Law. Mr. Jacobs most recently interned with the Securities and Exchange Commission (SEC) and has also worked for the National Association of Securities Dealers Regulation, Inc. (NASDR). Mr. Jacobs will take the Massachusetts Bar in July 2000. The views presented herein are the authors and do not necessarily reflect those of the NASDR or SEC. The authors would like to especially thank Professor Richard A. Booth of the University of Maryland School of Law for his insightful comments, suggestions, and contributions and Thomas L. Ambro, ABA editor of The Business Lawyer. 1 . See John Fedders, Qualitative Materiality: The Birth, Struggles, and Demise of an Unworkable Standard, 48 Cath. U. L. Rev. 41,41 (1998). Quantitative standards use benchmarks relating to "assets, earnings, and liabilities, and [are] measured by amount, number or percentage." Id.) see also Financial Accounting Standards Board, Statement of Financial Accounting Concepts No. 2 Qualitative Characteristics of Accounting Information, in II FASB ORIGINAL PRONOUNCEMENTS (1980) [hereinafter FAC No. 2]. In accounting, these standards determine whether an item is "large enough for users of the information to be influenced by it ... ?" FAC No. 2, supra, K 123; see also infra notes 27-42 and accompanying text. 2. Staff Accounting Bulletin No. 99, 64 Fed. Reg. 45,150 (1999) (to be codified at 17 C.F.R. pt. 21 1) [hereinafter SAB 99]. While the SEC does not officially adopt staff accounting bulletins, these bulletins represent the accounting approach, interpretation, and practices of the SEC staff in administering disclosure requirements. See id. Though these bulletins are not "official," the staff uses these broad standards in their enforcement program to "deter[ ] shoddy performance by the increased risk of a Commission injunctive action and private actions for money damages." John C. Burton, SEC Enforcement and Professional Accountants: Philosophy, Objectives and Approach, 28 Vand. L. Rev. 19, 20 (1975).
    • Correction
    • Cite
    • Save
    • Machine Reading By IdeaReader
    0
    References
    6
    Citations
    NaN
    KQI
    []