ACCOUNTING & AUDITING HIGHLIGHTS WEEK ENDING SEPTEMBER 15, 2017


ACCOUNTING HIGHLIGHTS:

INSURANCE

September 11:   Some of the nation's biggest property and casualty insurers could see their earnings hit materially from losses incurred by hurricanes Harvey and Irma, given the unprecedented magnitude of those storms. Reinsurance coverage might not be enough. Click here to see the full story (Subscription required).

LEASING

September 11: Some of the nation's largest banks expect to record large amounts for their leases on their balance sheets under new accounting rules, largely from leases of bank branches. However, the ultimate effect might not be significant. Click here to see the full story (Subscription required).

September 14: New lease accounting standards will have an impact on business operations beyond the accounting department. All segments of the business need to be involved with the implementation of ASC Topic 842, including accounting, tax, information technology, sales, and operations. Click here to see the full story (Subscription required).

September 14: Some vehicle leases won't automatically qualify for a short-term exemption provided under a new lease accounting standard. There appears to be some confusion in the marketplace over whether terminal rental adjustment clauses (TRACs) qualify for the exemption under ASC Topic 842, in which many leases of 12 months or less needn't be recorded on a lessee's balance sheet. Click here to see the full story (Subscription required).

NOT-FOR-PROFIT

September 11: The catastrophic losses from hurricane Harvey and the potential fallout from hurricane Irma have brought new financial reporting and accounting relief funding issues to the forefront for not-for-profit organizations. Some not-for-profits are unclear about when a donation is truly a restricted gift. Click here to see the full story (Subscription required).

September 11: Not-for-profit organizations would welcome donor contributions in bitcoin or other digital currencies if accounting rules were developed for such items, nonprofits told the main U.S. accounting standard setters. Some not-for-profits have been asked by donors whether contributions can come in the form of bitcoin. Click here to see the full story (Subscription required).

September 12: Museums might get new accounting rules that define collections—an extensive portion of their assets that often includes irreplaceable specimens and artifacts—more relevantly for their operations. The Financial Accounting Standards Board (FASB) will consider aligning the definition of “collections” with that established by the American Alliance of Museums (AAM), the accrediting body for about 4,000 museums. Click here to see the full story (Subscription required).    

CLOUD COMPUTING

September 11: Cloud data storage offers the promise of a cybersecurity safe haven and business continuity when companies, like those in Harvey's path, are faced with flooded offices and no power for local servers. Harvey is a stark reminder that companies should consider cloud storage to ensure data security and business continuity. Click here to see the full story (Subscription required).

SECURITIES REGULATOR

September 12: U.S. securities regulators continue to put heat on a new trend in raising capital for startups: issuing virtual coins or tokens that amount to having a stake in an emerging enterprise. Wesley Bricker, chief accountant of the Securities and Exchange Commission told auditors and banking industry accountants that such unincorporated organizations should follow applicable accounting principles, disclosure rules, and other financial reporting guidance to which public companies and other SEC registrants adhere. Click here to see the full story (Subscription required).

CREDIT LOSSES

September 12: Banks shouldn't overstate the impact of adopting the new credit losses rules and should report only information of which they are sure. SEC Chief Accountant Wesley Bricker cautioned bankers and their accountants about the audited disclosures on “the anticipated effect of the adoption” of the new credit losses rules. Click here to see the full story (Subscription required).

September 12: Companies should start preparing now to ensure a smooth transition to new credit losses accounting rules, FASB officials told a banking conference. “The clock is ticking,” Shayne Kuhaneck, FASB assistant director of technical activities, warned an American Institute of CPAs banking conference. He said time is dwindling even if the deadlines seem far away. Click here to see the full story (Subscription required).

September 13: Bank exposure to a possible rise in credit card and other commercial lending losses is worrying a U.S. Treasury Department regulator. ‘Canary in the coal mine’ is how Office of the Comptroller of the Currency's top accountant tends to view credit cards. Banks could suffer significant losses from possible credit card losses if economic conditions worsen. Click here to see the full story (Subscription required).

September 14: Federal bank examiners will check that banks have a reasonable process for forecasting economic conditions that might affect their gauging of loan losses, but the regulators won't penalize the financial institutions if their forecasts are off. Banking regulators indicate that they'll be somewhat restrained as they oversee how banks make estimates of expected loan losses under new accounting rules—provided banks can support their methods as being reasonable and hewing to new accounting rules. Click here to see the full story (Subscription required).

September 14: Banks that issue credit cards will be given some flexibility in how they classify the costs of their reward programs as accounting standards shift. The SEC wouldn't object to the use of either net presentation or expense recognition for such costs, as long as there is sufficient disclosure of the components and their impacts. Click here to see the full story (Subscription required).  

ACCOUNTING STANDARDS

September 14: The accounting standards setters for public companies might want to consider doing a post mortem to determine whether the costs of its rules are worth the benefits, the organization's main advisory body said. Weighing the costs and benefits of the rules bring challenges because there are a number of factors that come into it that might not be directly related to the standard. It's challenging to determine which costs are directly related to the standard, or whether other interrelated costs are involved, council members said. Click here to see the full story (Subscription required).

CLIMATE CHANGE

September 14: Exxon Mobil Corp.’s attempt to use “accountant-client privilege” to avoid handing over audit documents in a politically charged climate-change probe was dealt a final blow by New York's top court. The court’s finding affirms an earlier ruling that Exxon must comply with a subpoena by New York Attorney General Eric Schneiderman, who is investigating whether investors were misled about the possible impact of climate change on the energy company's business. Click here to see the full story (Subscription required).

CYBERSECURITY

September 15: SEC Chairman Jay Clayton is working to raise public awareness of the risks cyberattacks pose. Investors need a better understanding of the systemic risks posed by cyberattacks. The SEC has an obligation to get that across “and we are doing that,” Clayton told reporters. Click here to see the full story (Subscription required).

September 15: Banks and other organizations must recognize that a data breach is inevitable and that their employees must be trained to be alert to phishing and social engineering scams. The best way to limit the unavoidable damage from a successful attack is to have a resilient cyber risk program, and a well-rehearsed cyberattack recovery plan that will shut out the hacker, restore operations, and improve customers’ trust, Deloitte LLP's Nate Prather said. Click here to see the full story (Subscription required).

September 15: A little-known Republican Senate aide is in line to lead the accounting industry's watchdog, setting up an official who lacks experience in the auditing profession for one of the highest-paying jobs in financial regulation. William Duhnke is on track to be selected to become chairman of the Public Company Accounting Oversight Board (PCAOB). An announcement by SEC Chairman Jay Clayton could be made in the coming weeks.

AUDITING HIGHLIGHTS

AUDITING STANDARDS

September 13: Audits of financial companies show deficiencies. Allowance for loan losses remains the largest problem area in audits of financial institutions, involving “many professional judgments,” Glenn Tempro of the PCAOB said. Financial instrument audit deficiencies were the next highest problem area, followed by non-financial assets, revenue, and accounts receivable. Click here to see the full story (Subscription required).    

CYBERSECURITY

September 13: New rules about auditor responsibility for assessing companies’ cybersecurity defenses and use of software audit tools are on the horizon. Software audit tools are enabling auditors to assess increasing volumes of data to better identify risks and to tailor their approaches when conducting an audit. The PCAOB is considering whether to update certain audit standards to provide more specific guidance about these changes in firm's audit methodologies. Click here to see the full story (Subscription required).

INTERNATIONAL ACCOUNTING HIGHLIGHTS:

INTERNATIONAL DEVELOPMENTS

September 11: Companies in Ireland use dozens of measurements in their financial reporting that fall outside commonly accepted accounting standards to highlight their performances amid concern among some investors about the accuracy and consistency of the indicators. “APMs [alternative performance measures] has been an area of particular interest to investors for some time,” the U.K. Financial Reporting Council told Bloomberg BNA. Click here to see the full story (Subscription required).

DIGITAL CURRENCY

September 11: Russia is drawing up rules about how to conduct initial coin offerings (IOC), breaking ranks with China after President Vladimir Putin signaled his approval for digital currencies. While China slapped a blanket ban on ICOs this month, the government in Moscow plans to regulate cryptocurrencies like securities rather than outlawing them. Click here to see the full story (Subscription required).

LEASING

September 13: A company's choices in how it shifts to lease accounting rules offer opportunities to simplify compliance efforts, an International Accounting Standards Board (IASB) member told a lease and finance accounting conference.  He said “I would take every transition election that's available to you or that has any sort of material application for your company.” Use of transition guidance can simplify lease rule adoption. Click here to see the full story (Subscription required).

INTERNATIONAL STANDARDS

September 13: Investors in companies using international financial reporting standards (IFRS) could find it easier to determine when a company has changed an accounting estimate and when it has changed an accounting policy under proposed revisions to IFRS. “The distinction is important because changes in accounting estimates often affect a company's profit or loss, but changes in accounting policies generally do not,” the IASB said in issuing the proposals. Click here to see the full story (Subscription required).

September 15: Companies preparing financial statements under IFRS may have a clearer notion of what information to include and what to exclude in their filings. The IASB published voluntary guidance that's designed to help entities exercise materiality judgments in response to clamor from entities for assistance in applying materiality concepts. Click here to see the full story (Subscription required).

Composed and Compiled by Gery Brownholtz, Accounting Editor, Bloomberg BNA

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