Accounting and Auditing Highlights Nov. 2- Nov. 22, 2016

 The Financial Accounting Standards Board


Nov. 2: The Financial Accounting Standards Board voted to issue the final standard, Compensation: Retirement Benefits (Topic 715); Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. Public companies would begin to apply the standard in January 2018. The rule will change presentation in the statements, but not how items are recognized or measured. Employers will have to report defined benefit pension costs more clearly; FASB said it aims to provide a less costly, simpler way for companies to determine whether to classify debt as “current” or “noncurrent” in a classified balance sheet.

Nov. 4: A government that hires a private-sector entity to operate its facilities would be clearly designated as the customer of the entity under a FASB proposed rule.

 FASB said in its Nov. 4 proposal Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services that current accounting for such relationships—called service concession arrangements (Topic 853)—doesn't make sufficiently clear that the government is the customer of the service entity it hires.  


Nov. 7: FASB said it recently proposed four taxonomy implementation guides related to the proposed 2017 U.S. GAAP Financial Reporting Taxonomy aimed at demonstrating the modeling for disclosures of four accounting standards:

 • Leases;

 • Revenue from Contracts with Customers;

 • Dimensional Modeling for Disclosures of consolidated and Nonconsolidated Entities; and   

• Retirement Benefits.


Nov. 7: Companies that adopt the revenue recognition accounting rule in 2017—a year earlier than required—shouldn't worry about subsequent FASB's transition resource group (TRG) discussions and decisions, FASB Vice Chairman James Kroeker said.

Early embracers of the rules can confidently move ahead with any reasoned and thoughtful position they've come to in accordance with the new revenue rules, Kroeker said. Unless the board takes on a project to amend the standard, “the standard is the standard,” he said.


Nov. 9: FASB voted to finalize a narrowly drawn proposal that would prevent inconsistencies in how not-for-profits apply partnership consolidation rules.

The guidance, relevant to investments in qualified affordable housing projects established as limited partnerships, will maintain current practice for nonprofit general partners.

The proposal maintains how nonprofits currently apply consolidation guidance in Subtopic 810-20, Consolidation—Control of Partnerships and Similar Entities.


Nov. 9: FASB voted to advance the business combinations standard planned for issuance by year-end. Companies should be able to distinguish better between a business that is being bought or sold versus a bundle of assets that are transferred. Currently, the definition of a business in ASC 805, on business combinations, is applied too broadly, leading to transfers of assets being labeled combinations, companies say,

A FASB staff update on the project on defining a business is available at

Nov.16: In its meeting discussions FASB:

 •decided it will set up a working group to help determine whether more guidance is needed for cloud computing     arrangements;

 •tentatively decided footnote disclosures about the inventories companies hold must also provide information about the retail inventory method—a method of valuation some companies use; and 

 •added a project to its agenda to tackle accounting for collaborative arrangements, designed to eliminate differences in how companies account for joint developments.


Nov.17: FASB issued a final Accounting Standards Update No. 2016-18, Statement of Cash Flows (ASC 230), Restricted Cash, which will require the statement of cash flows to explain the changes in cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents for each quarter.


Nov. 17: FASB issued a proposal with updates on stock compensation and modification accounting. FASB asked that comments be submitted on the planned changes to ASC 718 by Jan. 6.

Accounting for stock compensation such that a modification of a compensation award is judged to have taken place often has a marked effect on how much expense a company must book to reflect the change.


Nov. 17: FASB’s Emerging Issues Task Force approved rules to provide investors and other users of financial statements with better information on employee benefit plans’ holdings in investments guided by bank-run master trusts.

The Securities and Exchange Commission


Nov. 3:TheSecurities and Exchange Commission’s Corporation Finance Chief Accountant Mark Kronforst said that companies should expect to hear from the SEC if they don’t disclose the likely effects of new accounting rules on revenue, credit losses and leases in their 10-Ks. The specific standards are: Revenue from Contracts with Customers (ASC 606); Leases (ASC 842); and Financial Instruments—Credit Losses (ASC 326).

Nov. 3: Wells Fargo & Co. said its sales scandal is being investigated by the SEC. The San Francisco-based bank disclosed the SEC probe in a regulatory filing. The SEC review adds to regulatory headaches for the bank, which has faced a barrage of criticism and calls for closer scrutiny since agreeing in September to pay $185 million over claims that employees opened as many as two million unauthorized accounts.


Nov.7: SEC Acting Chief Accountant Wesley Bricker said at the FASB’s revenue transition resource group (TRG) meeting that it is reviewing its own revenue guidance. Staff Accounting Bulletin 13, Revenue Recognition, and other SEC revenue releases, within the context of the new revenue standard.

The SEC staff at FASB's March 3 Emerging Issues Task Force meeting already updated its historical SEC observer comments to clarify that the commission's prior comments of the staff accounting bulletin wouldn't be applicable after the effective date of the new standard.


Nov. 7: Kyle Moffatt, an associate director in the SEC's Division of Corporation Finance, said companies should expect “a flurry” of comment letters on their use of non-GAAP measures “over the coming months.”

In May, the SEC staff issued guidance to remind companies of the proper use of non-GAAP performance measures that are presented as an alternative to reporting anchored in rules of the FASB. Such non-GAAP numbers are supposed to complement GAAP amounts, not “mislead” investors, and not be reported more prominently than the audited amounts.


Nov.14: SEC chair Mary Jo White, political independent appointed by President Barack Obama, announced she will step down in January 2017.

Nov. 22: The SEC announced that Wesley R. Bricker will become the Chief Accountant, succeeding James Schnurr, who plans to retire from the agency.



Nov. 3: Brexit may significantly increase U.K. companies' exposure to cybercrime, cybersecurity practitioners told Bloomberg BNA.

British companies must keep their focus on their own cybersecurity defense strategies and not be distracted by the hubbub surrounding the country's pending departure from the European Union.


Nov. 7: The International Accounting Standards Board said its staff is proposing to give insurance providers three to four years to implement a forthcoming international financial reporting standard on insurance contracts.    


Nov 7 U.K. Financial Reporting Council chief executive Stephen Haddrill said—in a speech to an EY conference in London—that financial report preparers should disclose in the coming year the impact that the U.K.’s decision to leave the European Union might have on their businesses.


Nov. 15: Saudi Arabia will sign a license agreement to adopt international financial reporting standards by 2017, the International Financial Reporting Standards Foundation said. The agreement allows the Saudi Organization for Certified Public Accountants (SOCPA) to publish the official Arabic translation of IFRS,  to integrate the standards into Saudi law. A Saudi accountants group is reviewing IFRS to ensure its compliance with Sharia law.

Nov. 15: The International Accounting Standards Board decided against incorporating a new definition of a liability into its revised conceptual framework. 

Nov.16: IASB unanimously approved a series of staff recommendations to shape an insurance contracts standard,

Nov. 17: Hungary moved to cut the corporate income tax to the lowest level in the European Union and to smooth the transition of bringing tax calculations into accordance with international financial reporting standards.

The proposed tax changes include clarifications of transitional rules to IFRS, which become mandatory for publicly listed companies as of Jan. 1, 2017.



Nov. 9: The Public Company Accounting Oversight Board released 33 new inspections reports and three expanded reports.

One of the inspections of Ernst & Young LLP from Oct. 25, 2016 found an audit deficiency based on the firm's failure to consider that different information technology systems were used in different locations. Ernst & Young LLP's procedures to test certain controls over revenue and accounts receivable were insufficient because the firm didn't conduct enough “walkthroughs” to test the different IT systems, according to the report.


Nov. 17: The PCAOB approved its 2017 fiscal-year budget of approximately $268.5 million and its 2016-2020 strategic plan. Chairman Doty and board member Steven Harris expressed full support for the budget and strategic plan. “This is not a growth budget,” Doty said. Board member Jay Hanson voted against approving the budget. Lewis Ferguson and Jeannette Franzel “reluctantly” approved the budget but expressed misgivings based on the lack of analysis to justify the additional resources requested.    



Nov. 15: Auditors shouldn't manage company efforts to apply new revenue recognition rules, a senior SEC staff accountant said, to avoid violating auditor-independence rules. Auditors and companies, therefore, should guard against outside accountants aiding companies in shifting to the new standard.

 “Auditors can still be helpful as long as they're mindful of independence rules” that bar auditors from making management decisions to the point that auditors end up signing off on their own work, said Kevin Stout, a senior associate chief accountant in the SEC's Office of Chief Accountant.



Nov.10:  The U.K. Financial Reporting Council fined Deloitte LLP 4 million pounds ($4.98 million)—the council's highest recorded penalty:  for misconduct—for its auditing work over three years for a U.K. aircraft-parts supplier, Aero. FRC also penalized Deloitte partner John Clennett 150,000 pounds for misconduct.


Nov.10: Russian authorities adopted 18 more International Standards on Auditing, completing its annual program to recognize more international standards on auditing.


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

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