It has been beaten into our heads as accountants... document,
document, document. This is easy to remember when you are dealing
with an unfamiliar type of transaction or a new accounting standard
because you have to figure out what you are doing at the front end
and since the auditors will be testing your determination. However,
documentation diligence can lapse for ongoing judgments for
contingencies like bad debt and litigation. In the moment, company
decision makers become comfortable with the facts and analyses
behind critical judgments, and those involved become satisfied that
the accounting determination is solid. In the flurry of the
end-of-period activity and with the relief of the hard judgments
made, there can be a tendency for the documentation of these
critical judgments to wait. Unfortunately, the clarity of the
support for the judgment fades with time, and the absence of
contemporaneous supporting documentation provides leverage for
regulators and others
