Accounting and Auditing Highlights: Jan. 20-Jan. 27, 2017


 ACCOUNTING HIGHLIGHTS:

The Financial Accounting Standards Board

INCOME TAX DISCLOSURES

Jan. 25:The Financial Accounting Standards Board heard from staff that it is receiving a mixed response about its July 26 proposal to bring greater transparency in the area of indefinitely reinvested foreign earnings. “Income Taxes (Topic 740), Disclosure Framework—Changes to the Disclosure Requirements for Income Taxes.”

Banks, pharmaceutical, energy and health-care companies, among others, have told FASB that some of the disclosures could be misinterpreted or wouldn't be useful to investors and other financial statement users.

FASB Chairman Russell Golden told companies to keep an eye on corporate tax overhaul under the new Trump administration. Depending on how current tax rules change, FASB's proposed income tax accounting disclosures might not be relevant, he said.

GOODWILL IMPAIRMENT TEST

Jan. 26: FASB issued Accounting Standards Update No. 2017-04: Intangibles- Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new rules mean that companies that carry billions of dollars of intangible assets referred to as “goodwill “ on their books—including some companies in the energy sector—now have a simpler, cheaper way to determine if the value of those assets diminished. Under the new rules, companies would follow a one-step test. The goodwill impairment test would compare the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount exceeds the reporting unit’s fair value, an impairment charge would be recognized for the difference. However, that amount shouldn’t exceed the carrying amount of goodwill allocated to that reporting unit.  

INTERNATIONAL ACCOUNTING HIGHLIGHTS

BREXIT

Jan. 24: The U.K. Financial Reporting Council’s plans for post-Brexit standard setting remain uncertain as the U.K. Supreme Court—the nation's highest court—ruled that the Conservative-led government couldn't proceed with its Brexit plans unless parliament gave consent.

The court said in a landmark 8-3 ruling that government ministers must win approval from parliament for legislation to trigger Article 50 of the 2009 Treaty of Lisbon, which would begin the process of ending the U.K.’s membership in the European Union.

Investors in the U.K. want the U.K. FRC to continue to follow international financial reporting standards once the nation leaves the EU, FRC spokesman Peter Timberlake told Bloomberg BNA correspondent David Jones.

AUDITING HIGHLIGHTS

TRANSPARENCY

Jan. 26: The Public Company Accounting Standards Board updated its guidance on Form AP, Auditor Reporting of Certain Audit Participants and Related Voluntary Audit Report Disclosure. Audit firms must be ready to file this new document with the PCAOB disclosing the name and partner identification numbers of the engagement partner for all public company audits issued on or after Jan. 31, 2017.

Firms have until June 30, 2017, before they need to submit Information concerning other audit firms and the amount of hours they participated in audit work. Upon filing, the public will be able to access the forms in a searchable database on the PCAOB website.

Form AP is due 35 days after the date the audit report is first included in a document filed with the Securities and Exchange Commission, such as a Form 10-K.

This web-based form is the compromise solution the PCAOB reached in December 2015 in an effort to balance the auditors concerns about liability, securities litigation potential with investors’ demands for more accountability, transparency, and to bring the U.S. into alignment with international standards. Only the principal audit firm is required to fill out form AP.

INTERNATIONAL AUDITING HIGHLIGHTS

AUDIT COMMITTEE , AUDITORS MISLED

Jan. 27:  Chief Executive Officer Gavin Patterson of British Telecommunications plc, a British multinational telecommunications services company with head offices in London and operations around the world said the problems in Italy—a 530 million-pound ($666 million) write- down over an accounting scandal—were under control. Bloomberg News reported Jan. 26 that Andrea Giovanni Bono, the head of BT's businesses in Switzerland, the Nordics, central and eastern Europe and Russia, will take over the Italy role on Feb. 1.

Jan. 27: “It's fair to say the audit committee have looked at Italy a number of times in the last few years, but the audit committee were misled in the same way that the management was misled,” Patterson said on a conference call to Bloomberg’s Rebecca Penty in London. “It can be very challenging to find out unless you've got forensic accountants and that's what we've done in the last quarter, we've really got underneath this issue, we've scaled it, we've sized it and now we've acted.”

 

Composed and Compiled by Laura Tieger Salisbury, Accounting Policy and Practice reporter and editor

Continue the discussion at Bloomberg BNA Accounting LinkedIn.        

 

Rely on expert practitioners for practical guidance and real-world approaches to complex accounting issues with Bloomberg BNA’s Financial Accounting Resource CenterTake a free trial today.