Jeremy summarized nicely some of the discussion points that Jim raised during his discussion with Jeffrey Hales.  I won’t repeat his summary.  However, I found Jim’s comments to be particularly insightful today.  I came away with some very good clarification of a few issues.

Here’s one that I found particularly interesting:

Regarding his objection to the “management view” as a basis for financial reporting guidance, he said that he objected somewhat less to the use of the management view when the context was disclosure and possibly presentation, as compared with recognition and measurement.  When I asked him if that was because he thought the latter were more important, he clarified that despite the theory that predicts that information geography should be irrelevant to financial statement users, there was anecdotal evidence that preparers appear to provide lesser quality information in disclosures than in recognized amounts.  An illustrative example he offered was when firms were required to retroactively present their share-based compensation expenses under SFAS No. 123R, some firms reported that the previously-disclosed numbers (under SFAS No. 123) were of insufficient quality to use for such reporting.

This is an interesting and testable proposition.  I know that there have been some attempts to empirically assess investors’ reliance on and reactions to disclosed versus recognized amounts (such as in the share-based payments context), but I wonder to what extent this might be something that could be documented further.  The recognition vs. disclosure issue is certainly one that leads to a lot of discussion among academics and practitioners, and thus additional evidence in this regard might prove useful to standard setters.  In particular, this may have relevance for the FASB’s project on a disclosure framework.

* UPDATE: Click here to view the archived video of this Round Table session.