ACCOUNTING AND AUDITING HIGHLIGHTS; AUG. 15- AUG.26

ACCOUNTING HIGHLIGHTS:

The Financial Accounting Standards Board

REVENUE RECOGNITION:  

Aug. 15: The Financial Accounting Standards Board and the International Accounting Standards Board announced they are holding a joint webcast Sept. 15 on how to apply the new revenue reporting rules FASB Accounting Standards Codification 606 and IFRS 15 that become effective for public companies in January 2018.

NOT- FOR- PROFITS TRANSPARENCY

Aug 18: The FASB issued accounting standard update 2016-14—Not-For-Profit Entities (Topic 958): Presentation of Financial Statements of Not-For-Profit Entities.”

 “It gives greater information about the availability of resources, particularly the liquidity position of an entity,” FASB member Lawrence Smith told Bloomberg BNA. “It provides greater uniformity in terms of how entities are treating investment related expenses,” he said.

BUSINESS COMBINATIONS

Aug. 24:  FASB’s Nov. 2015 proposal—Business Combinations (Topic 805): Clarifying the Definition of a Business passed board scrutiny. Next meeting will address transition, effective dates and other issues.

The rules would revise the way companies evaluate whether transactions should be accounted for as an acquired asset, a disposal of an asset or the acquisition of a business.

The possible revisions are expected to result in more acquisitions being accounted for as assets across industries, especially in real estate, pharmaceutical and oil and gas industries.

CONSOLIDATIONS

Aug. 24:  FASB voted to direct its staff to draw up an accounting standards update that would prevent a company from having to consolidate on its books the entirety of indirect interests held through related parties under common control.

Instead, the enterprise would include those interests on a proportionate basis, consistent with indirect interests held through other related parties, according to FASB's staff.

CASH FLOW STATEMENT 

Aug. 26: FASB issued Accounting Standards Update 2016-15—Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.  This ASU targets eight areas of cash receipts and payments in the cash flows statement.

FASB intends for the rules to clear up confusion and eliminate diversity in practice surrounding classifying items in the cash flows statement, such as payments to settle zero-coupon bonds. Zero-coupon bonds are a type of debt security that generally are issued or traded at significant discounts from their face amounts.

GOVERNMENTAL ACCOUNTING

Aug. 23: The “post implementation review” of the 2006 standard—Accounting and Financial Reporting for Pollution Remediation Obligations found that the Governmental Accounting Standards Board's Statement 49 on accounting for environmental remediation costs generally help communities and the users of financial statements understand the nature and extent of clean-up liabilities that governments face, GASB said in releasing the report.

The review found that the standard hasn't introduced any unintended or any unexpected consequences into accounting clean-up cost accounting.

However, the PIR team found that some local governments “sometimes struggle with the determination of whether they have met any of the obligating events and that application of the expected cash flow technique can be challenging for projects that span long periods.”     

The Internal Revenue Service

ENFORCEMENT

Aug. 15: In a chief counsel advice memorandum (AM 2016-003) released Aug. 15, the Internal Revenue Service said that a service provider can't take an accounting method adjustment into account when including certain vested deferred compensation in its income attributable to services before January 2009.

 

INTERNATIONAL ACCOUNTING HIGHLIGHTS

ENFORCEMENT

Aug. 16: The U.K. government plans to crack down on accountants and advisers who under existing laws run few risks if they assist their clients in tax-avoidance schemes. In future, these tax advisers could incur fines for as much as 100 percent of the tax their client underpaid under proposals in a consultation document by Her Majesty's Treasury in London

INTERNATIONAL STANDARDS

Aug. 24: International Accounting Standards Board Chairman Hans Hoogervorst said African countries, particularly in French-speaking Africa, need to accelerate their changeover from their own national standards to international financial reporting standards. Taking into account that a large segment of economies in most African countries are agricultural based, IASB announced it has made significant changes to the accounting treatment of biological assets in IAS 41 Agriculture.

Aug. 26: The Group of 20 nations should support adoption of international financial reporting standards and global auditing standards at their upcoming meeting Sept. 4-5 in Hangzhou, China, the International Federation of Accountants said.

The New York-based IFAC called on participants at the G-20 Leaders' Summit to “issue a clear call for the adoption and implementation, across all jurisdictions” of IFRS and international standards on auditing. 

 

AUDITING HIGHLIGHTS:

AUDITOR’S REPORTING MODEL

Aug. 17: Investors and preparers of financial statements continue to differ on how the Public Company Accounting Oversight Board should proceed with its reproposal of the agency's auditor's reporting model, according to comment letters sent to the PCAOB.

Investors mainly approve of the changes requiring more insight from auditors into critical audit matters. They adopt the position that investors are the “key customer of audited financial reports,” and their needs should be at the forefront in deciding what and where disclosures should go in the audit report, according to the Council of Institutional Investors.

Preparers of audit reports were more concerned that the board didn't follow through on its promise that auditors wouldn't be responsible for disclosing original information in the Critical Audit Matters (CAMs) section of the audit report. The international regulators want more international alignment with the IASB’s model and its definition of key audit matters (KAM).

BROKER-DEALER AUDITS

Aug. 18: The PCAOB released the results of its 2015 report on the auditors of brokers and dealers. The inspectors found, as in previous years, that the auditors were still not in compliance with PCAOB's auditing and attestation standards. 96 percent of audits of broker-dealers were problematic and there had been little improvement since 201 when the interim inspection program began.

AUDITOR LIABILITY

Aug. 26: Three weeks into the trial in Miami, PricewaterhouseCoopers LLP and the trustee for bankrupt Taylor Bean & Whitaker Mortgage Corp (Taylor, Bean & Whitaker Plan Trust v. PricewaterhouseCoopers LLP, Fla. Cir. Ct., No. 13-033964, announced a settlement. Parties did not disclose details of the settlement.

Taylor Bean's trustee claimed PwC failed to spot a $3 billion scheme involving fake mortgage assets that PwC certified as “true sales” when it audited the books of Colonial's parent, Colonial BancGroup Inc.

INTERNATIONAL AUDITING HIGHLIGHTS:

FINANCIAL DISCLOSURES: EXTERNAL REPORTING

Aug. 18: A working group of the International Auditing and Assurance Standards Board said that new or revised international standards or guidance might increase the credibility of emerging forms of external reporting that go beyond financial statements.

Aug. 24: The Russian Finance Ministry adopted new requirements revising its procedures to issue certificates of attestation of auditors' professional qualifications that will become effective Aug. 29.

Aug. 24: The Public Company Accounting Oversight Board announced a joint audit inspections and data protection agreement with the German Auditor Oversight Body (AOB). In 2016 The AOB replaced the German Auditor Oversight Commission that had previously had a joint agreement with the PCAOB (08 APPR 384, 4/27/12).

   

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

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