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If journal entries are the diary pages, policies are the grammar. This walkthrough is External Reporting’s job: make sure the company uses US GAAP, notices new standards, and that the published statements + footnotes match those rules.
Two halves: (1) update and monitor policies, (2) line the financial statements up with standards and disclosures.
Catching new accounting rules
External Reporting sits on the FASB action-alert email list. New ASUs go into an Excel tracker with effective dates. Someone does a first-pass “does this even apply to us?” Significant ones get a working group. Every year: an ASU memo + the tracker is compared to everything FASB released.
FG07 is the key control that they did not miss a new standard (LSPM-FG01). VP & Corporate Controller also reads the tracker against what they heard in working groups. Evidence = approval email.
Working groups
If a standard is big (revenue, leases, CECL), controllers of the affected units staff a group: timeline, which bits of the rule matter, which policy elections to take. Small / almost-due changes: one External Reporting memo plus “what did similar companies do?” No elections were taken this period, the narrative says.
Significant / unusual items
Definition here: outside normal business, or something management almost never accounts for. Corporate Controller hears via CFO, because they sign the deal, or in biweekly senior-finance 1:1s. Risk LSPM-FG04: a big unusual thing never makes it into the statements. Later, the 10-K Review Group + FG07 is what they rely on to catch that.
The recurring “are we still doing this right?” memos
Hard / confidential topics go to more senior people. Most memos are reviewed by VP & Corporate Controller (investments-without-fair-value memo can stay with Treasurer/Senior Director unless it changed).
| Code | Cadence | What the memo is asking |
|---|---|---|
| TEN11 | Quarterly | What are our operating segments? (ASC 280) |
| TEN06 | Yearly | Each subsidiary: local currency or USD? Translation (ASC 830) |
| RB03 | Yearly | Investments: equity method? fair value? a VIE? (ASC 321 / 323) |
| TJN01 | Quarterly | Related parties and deals that must be disclosed (ASC 850) |
| NBN01 | Quarterly | Any sign a long-lived asset is impaired? recoverability test? |
| NBN06 | Yearly | Are reporting units still right? (ASC 350) |
| NBN10 | Yearly | Is goodwill still worth what we say? |
| UA12 | Quarterly | Can the company keep operating? going-concern disclosure? (ASC 205) |
| MB02 | Quarterly | Stock-based pay: options, RSUs, DSUs (ASC 718) |
| HJN01 | Policy guide | Plain-English revenue recognition (ASC 606) |
Estimates (LSPM-FG02)
Big numbers that are guesses (litigation accruals, valuations). High-value ones get more signatures. Ugly ones hire a third-party valuator (example in the doc: KPMG on convertible debentures). Litigation: quarterly sit-down with legal. ARM committee hears the key estimates each quarter.
Draft financial statements and footnotes
- Accounting Operations consolidates numbers.
- External Reporting fills the external-filing template and writes notes. They use DisclosureNet to spy on peer footnotes and new rules.
- New standard → draft the footnote early, show Controller + CFO, put it in Note 1 plus its own note if needed.
- Quarterly disclosure checklist TEN02.
- Treasurer / Senior Director of Financial Reporting reviews notes vs required disclosures.
- 10-K Review Group (CFO, Controller, IR, internal + external counsel) gets a draft before ARM. Then a “page flip” call: screen-share, page by page, focus on what changed. Canadian + US securities lawyers check filing rules.
- ARM comments → blackline back to the Review Group.
- CFO email is the final “file this” (FG07). That same FG07 is the key control for “statements presented properly” (LSPM-FG03) and “unusual items not omitted” (LSPM-FG04).
Other pages: journal entries · reconciliations · Session 1 close
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