Accounting & Auditing Highlights for the Week Ending March 2, 2018


Accounting & Auditing Highlights for the Week Ending March 2, 2018

 

Accounting Highlights:   

 

Not-for-Profits

 

February 26: Donors that provide grants to not-for-profit organizations will have more insight into nonprofits’ funding streams under guidance U.S. accounting rulemakers will soon issue. The rules seek to provide a consistent way to record funding from grants or contracts offered by the federal government, foundations and others. Click here to see the full story (Subscription required). 

 

Tax Reform

 

February 26: U.S. capital markets predict a substantial boost to net income among S&P 500 companies from the recent tax overhaul, though such a collective view by analysts might be too optimistic, Morgan Stanley & Co. LLC researchers said. What seems to be a too-rosy earnings picture from the 2017 tax law stems from analysts not fully factoring in apparent plans by companies to reinvest tax savings from the law and the costs of such reinvestment, according to a Morgan Stanley report. Click here to see the full story (Subscription required). 

 

February 27: U.S. companies are seizing an opportunity to borrow money and top up their pensions, before a tax benefit shrinks. Tax laws passed in December and a quirk in accounting rules are giving corporations an unusual incentive to take care of the massive pension obligations that have weighed on balance sheets for at least a decade. Click here to see the full story (Subscription required). 

 

March 1: Companies are taking advantage of SEC guidance to report estimates on the effect of the tax reform law and are including provisional numbers on year-end financial reports. The year-end filings offer the first glimpse into how businesses are accounting for the enormous changes in the new tax law that was enacted in December. Click here to see the full story (Subscription required). 

 

Unrealized

 

February 27: Warren Buffett warned Berkshire Hathaway Inc. shareholders in a letter that accounting rules on booking unrealized changes in values of stock holdings will “severely distort” the company's future reported earnings and could mislead investors. The accounting rules at issue, ASU 2016-01, prescribe a change in a long-held generally accepted accounting principle on investments in equity securities. Click here to see the full story (Subscription required). 

 

Digital Currency

 

February 27: Initial coin offerings remain a regulatory focus for the SEC, current and former officials said at a securities conference in Washington. The ICO space is “‘The Wolf of Wall Street’ on steroids,” said former SEC Commissioner Daniel Gallagher. Click here to see the full story (Subscription required).

Cybersecurity

 

February 27: New SEC guidance demonstrates the publicly traded company regulator will continue to focus on cybersecurity and provides insights on the seriousness of cyberthreats, the safeguards policies and procedures a company should have in place, and potential insider trading issues in the wake of data breaches. Click here to see the full story (Subscription required). 

 

Securities and Exchange Commission

 

February 28: The SEC's newest Democrat pushed back against the Trump administration's pro-business agenda by arguing it would be akin to “handcuffing” investors if regulators restricted shareholders from suing companies. The risk of having to pay out steep legal damages discourages companies from committing fraud, Robert Jackson Jr. said during a speech. Click here to see the full story (Subscription required). 

 

DOJ Enforcement

 

February 28: Biotech firm MiMedx Group, which jolted investors recently by delaying its year-end earnings announcement, is under U.S. Justice Department scrutiny related to a pair of business practices, according to people familiar with the matter. Click here to see the full story (Subscription required). 

 

Repatriation

 

February 28: Treasury is studying the interplay of foreign income taxes and bonuses with the repatriation tax under the new law, a Treasury official said. Click here to see the full story (Subscription required). 

 

Property taxes

 

March 1: A recommendation that states and local governments shouldn't be required to disclose certain property tax reductions to businesses is drawing scrutiny from watchdog groups and pension funds. New proposed guidance from GASB would exempt from public disclosure tax abatements on property owned by local and state governments. Click here to see the full story (Subscription required). 

 

Sustainability

 

March 2: The nation's largest companies are increasingly assigning oversight for climate change, diversity, and other sustainability issues to top executives, according to an analysis by the sustainability nonprofit Ceres. Click here to see the full story (Subscription required). 

 

Corporate America

 

March 2: In the weeks since the Parkland school shooting, big U.S. companies have found themselves in a familiar position: pressured to act on controversial social and political issues where government won't. Click here to see the full story (Subscription required). 

 

Auditing Highlights:

 

Auditor Independence

 

February 27: The one-year cooling-off period for auditors who go to work for their former clients isn't long enough to ensure independent audits, new research suggests. Auditors were more likely to side with a client's position if a colleague from their firm was now the client's chief financial officer even after two years had passed—twice what is required by the Sarbanes-Oxley Act. Click here to see the full story (Subscription required). 

 

Auditing

 

March 1: Steinhoff International Holdings NV said a review by auditors at PricewaterhouseCoopers LLP into its accounts is focused on certain off-balance sheet structures and deals with related parties and is likely to find that some assets and profit figures have been overstated. As a result, it may need to take additional impairments to those related to 6 billion euros ($7.3 billion) worth of assets it highlighted in December. Click here to see the full story (Subscription required). 

 

Cloud Software

 

March 2: In a move to remove confusion and broad differences about how companies report the upfront costs they are charged to move their systems to cloud software, the FASB proposed rules to help analysts and investors more easily compare companies—important for them in evaluating business operations. Click here to see the full story (Subscription required). 

 

Revenue Recognition

 

March 2: The SEC's chief accountant, Wes Bricker, is emphasizing the importance of disclosures as companies begin to apply the new standard for revenue recognition. “It's a particular focus of ours this period,” Bricker said. “Our expectation is that for most companies, on a calendar year basis they would essentially be in the final stages of their implementation and would be in a position to provide the greatest insights into the anticipated effect of revenue this period.” Click here to see the full story (Subscription required). 

 

International Accounting Highlights:

 

Russia

 

February 26: The Russian Finance Ministry has approved the use of international financial accounting rules so investors can assess the effects of insurance contracts on the financial performance and cash flows of a businesses. Russia also approved use of international accounting rules governing the reporting of financial instruments with prepayment options and the reporting of long-term interests in joint ventures. Click here to see the full story (Subscription required). 

 

Ukraine

 

February 26: The Ukrainian National Bank will require banks to use fair value measurement beginning March 1 to report transactions involving financial instruments. Click here to see the full story (Subscription required). 

 

Saudi Arabia

 

February 28: Saudi lenders have challenged retroactive re-assessments of their Islamic tax liabilities after the kingdom's tax authority revised its accounting methods for banks’ long-term investments and demanded hundreds of millions of riyals in religious tax bills. Click here to see the full story (Subscription required). 

 

Australia

 

March 1: Large companies need to get used to the Australian government publicly disclosing their financial data, according to the senior commissioner of the country's tax authority. Global businesses “need to get that transparency is here to say,” Chris Jordan said to a parliament committee on the Australian Taxation Office's performance in targeting abusive tax planning among multinational companies. Click here to see the full story (Subscription required). 

 

Japan

 

March 2: MetLife Inc. discovered a material weakness in internal controls tied to a block of Japanese variable annuities, a little over a month after disclosing another issue with financial reporting at a pension business. Click here to see the full story (Subscription required).

 

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

 

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