Accounting and Auditing Highlights: Feb. 24- Mar. 10, 2017


ACCOUNTING HIGHLIGHTS:

The Financial Accounting Standards Board

EMPLOYEE BENEFIT PLANS

Feb.27: Many employee benefit plans are required to disclose the investment interests in master trusts, according to the final standard issued by the Financial Accounting Standards Board,Accounting Standards Update 2017-06; ASC 960, ASC 962 and ASC 965.

Users of financial statements—including federal labor and tax officials—should have better information on the health of employee benefits plans guided by bank-run master trusts under the new rules.

FASB aims for employee plans to clarify better what investment holdings are contained in the plans run by the trusts. FASB also wants to make the accounting easier.

PROPOSAL: COMPENSATION

Mar.7: FASB proposed changes in ASU 2017-220 Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting to expand the scope of Topic 718, Compensa­tion—Stock Compensation, which currently only includes share-based payments to employees, to include share-based payments for goods and services to nonemployees. The goal is to reduce complexity and cost. Comments are requested by June 5, 2017.

COMPENSATION-RETIREMENT BENEFITS

Mar. 10: FASB issued a final ASU 2017-07—Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

Employers, including not-for-profit organizations, that offer defined benefit plans or retiree health plans, would see improvements to their presentation of financial information under new accounting rules FASB issued to change the way they classify pension expense.
The rules intend to provide more useful information to analysts and other financial statement users in relation to pension costs. The changes require employers to bifurcate net period pension cost into two components: service costs and all other components. Currently net periodic cost is included as part of benefits expense.

GAAP FINANCIAL REPORTING TAXONOMY

March 9: The Financial Accounting Standards Board (FASB) announced that the U.S. Securities and Exchange Commission (SEC) has accepted the 2017 GAAP Financial Reporting Taxonomy

The American Institute of CPA’s

Mar.9: The American Institute of CPA’s annual AICPA Economic Outlook Survey found that business executives reported more optimism about the U.S. economy than they had since 2004.

“Optimism about the 12-month outlook for the U.S. economy rose from 62 percent last quarter to 69 percent, the highest it’s been since it stood at 71 percent at the end of 2004, the first year the survey was conducted,” the AICPA said.

The AICPA noted the recent instability the survey has found in the last few years. The current level of optimism has skyrocketed from the  28 percent optimism finding last year—a drastic decline from the 68 percent finding that same financial reporting quarter in 2015. The survey polls chief executive officers, chief financial officers, controllers and other certified public accountants in U.S. public companies.

The Securities and Exchange Commission

BANK HOLDING COMPANIES

Mar.1: TheSecurities and Exchange Commission March 1 agreed to seek comment on whether bank holding companies should be required to disclose more statistical information

“Today, bank holding companies and other registrants in the industry engage in a far broader array of activities than was the case in the mid-1970s,” Acting Chairman Michael Piwowar said at the open meeting. “Despite such significant developments, the last substantive revisions to Guide 3 took place over 30 years ago.”

SUSPENDING DODD- FRANK

Mar. 2: Acting SEC Chairman Michael Piwowar March 2 said the agency now has more freedom to focus on “hyper-technical” matters concerning the asset management industry and other non-Dodd-Frank Act issues. Piwowar told an Investment Adviser Association conference in Washington that he's suspended the SEC's Dodd-Frank rulemaking activities. The pause creates an “opportune time” for the SEC to devote itself to other matters, Piwowar said in a news story by Bloomberg BNA reporter Andrew Ramonas.

SENATE HEARING SCHEDULED

Mar. 7: After the U.S. Office of Government Ethics cleared Clayton's financial disclosure forms for possible conflict of interest, the Senate Banking Committee announced that the confirmation hearing for Jay Clayton, a partner at Sullivan & Cromwell LLP, is set for March 23.

Controversy will likely center on his previous Wall Street clients that include Ally Financial Inc., Barclays PLC, Goldman Sachs Group Inc., Deutsche Bank AG, and Tudor Investment Corp. and conflicts of interest that would require him to recuse himself from numerous SEC proceedings.

Clayton's wife works for Goldman Sachs. In the ethics filing, Clayton said she would resign from the firm and divest her related holdings upon his confirmation.

APPOINTMENTS

Mar. 8: Sagar Teotia, a partner in the Chicago office of Deloitte & Touche LLP, is to join the staff of the SEC Commission as one of three deputy chief accountants to Wesley Bricker, the SEC's chief accountant, in the agency's Office of Chief Accountant, as early as April 2017,  sources told Bloomberg BNA reporter Steve Burkholder.   

INTERNATIONAL ACCOUNTING HIGHLIGHTS

INTERNATIONAL STANDARDS: INSURANCE

March 6: The International Accounting Standards Board’s Accounting Standards Advisory Forum presented a staff paper saying that the new insurance standard will require a “fundamental change to existing insurance accounting practices for some entities” and will have “significant operational implications,” such as the need to develop or revamp administrative systems.

IASB and other standard setters have prepared plans and formed groups to assist with the implementation of IFRS 17: Insurance Contracts that will become effective Jan. 1, 2021.

LOAN LOSS RULES

March 6: Banks in both the U.S. and in Europe must try harder to prepare for the new loan-loss rules, Benjamin Cohen, head of financial markets at The Bank for International Settlements, and Gerald Edwards Jr., wrote in a special feature for the BIS Quarterly Review. The report was reported on by Bloomberg reporter John Glover in London. Under the new rules, IFRS 9 requires European banks to reserve for losses expected over 12 months. In its parallel framework, the FASB requires lenders to provide immediately for lifetime losses, a move European banks have to make only when the credit becomes stressed.

March 9: The IFRS Foundation on March 9 published the IFRS Taxonomy 2017-a system of electronic tags for digital filings that covers reporting standards that the IASB, which the foundation oversees, has issued through Jan. 1, 2017. It includes standards published but not yet effective at that date, the foundation said.

AUDITING HIGHLIGHTS:

Internal Revenue Service

RISE IN AUDITS

Feb. 24: Taxpayers may see examination rates for all businesses rise in the coming years as the IRS begins using more efficient procedures even during auditor shortages. The unit is shifting away from comprehensive exams that cover a company's entire return to looking at specific topics the agency views as the highest risks for noncompliance. This recent IRS focus on large-business exams, streamlined partnership audits may result in a rise in audits.

INTERNATIONAL AUDITING HIGHLIGHTS

INVESTIGATION

Feb. 27:  The U.K.’s Financial Reporting Council started an investigation into PricewaterhouseCoopers LLP's auditing of a London-based IT consulting firm, Redcentric PLC's financial statements for the years that ended March 31, 2015 and March 31, 2016.

Separately, FRC has an ongoing investigation into PwC's preparation, approval and audit of the financial statements of U.K. department store chain BHS Ltd., which ceased trading last year.

The council also is investigating PwC in connection with Barclay Bank's compliance with rules of the Financial Services Authority.

   

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

 

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