ACCOUNTING AND AUDITING HIGHLIGHTS WEEK ENDING SEPTEMBER 1, 2017


ACCOUNTING HIGHLIGHTS:

EQUITY ACCOUNTING

August 28: A financial reporting change for minority equity investments could create short-term profit and loss swings for companies with significant equity investments. Any company in any sector that is a minority investor in other companies could see swings in their periodic net earnings that don't stem from their core operations. Click here to see the full story (Subscription required).

DERIVATIVES

August 29: Banks and industrial companies are welcoming new rules on derivatives and hedge accounting that could help prevent swings in earnings and are likely to provide significant new business for banks. “I am really happy to see the FASB make some much-needed changes to the hedge accounting model,” said Muneera Carr, chief accounting officer and controller of Comerica Bank. “I think it is great that companies will be able to manage the risk on their balance sheet without accounting being an impediment or a challenge.” Click here to see the full story (Subscription required).

REVENUE RECOGNITION

August 30: Companies are on the cusp of a new era of top line reporting as revised revenue recognition requirements start to become effective at the beginning of 2018. The changes are crucial for investors, as revenue is an important performance measure, a valuation input, and an indicator of management quality and integrity. Click here to see the full story (Subscription required).

DISCLOSURE

August 31: Gold is one of four conflict minerals that U.S.-listed companies must trace and report on each year to the Securities Exchange Commission (SEC). These minerals have been linked to direct or indirect financing of conflict and human rights abuses in the region. Armed groups frequently exploit gold from artisanal and small-scale mining in the Democratic Republic of the Congo. Almost all of that gold is produced and traded unofficially and smuggled from the country, according to the U.S. Government Accountability Office. Click here to see the full story (Subscription required).

DISCLOSURE

August 31: Democrats want the SEC to reverse its relaxed stance toward conflict minerals reporting. U.S.-listed companies must report to the SEC each year on their use of certain minerals that have been linked to conflict in Africa. The commission told companies earlier this year that they wouldn't get into trouble if they only provided basic disclosures on where they think the minerals in their products come from. “This non-enforcement position is misguided and irresponsible,” Reps. Maxine Waters (Calif.), the top Democrat on the House Financial Services Committee, and Gwen Moore (D-Wis.) wrote in a letter to the SEC Chairman Jay Clayton. Click here to see the full story (Subscription required).

FINANCIAL REPORTING

September 1: The SEC is evaluating the possibility of granting relief from filing deadlines and other regulatory requirements for companies impacted by tropical storm Harvey. “Agency officials have been and will remain in close communication with market participants and key market infrastructure providers, as well as the Financial Industry Regulatory Authority and other regulators concerning the storm and its aftermath,” Chairman Jay Clayton said in a statement. “We are also actively working with firms in affected areas to ensure that investors continue to have access to their securities accounts.” Harvey slammed into Houston as a Category 4 hurricane, bringing massive rainfall and widespread flooding. Click here to see the full story (Subscription required).

MUNICIPAL SECURITIES

September 1: Banks and other players in the $3.8 trillion U.S. municipal securities market should now be able to better curb volatility in earnings by using a newly sanctioned benchmark rate as part of their risk management toolbox. The use of that benchmark could also cause an increase in banks’ dealing in municipal securities. Click here to see the full story (Subscription required).

AUDITING HIGHLIGHTS:

AUDITOR OVERSIGHT

August 25: Companies and commercial groups oppose a planned audit rule that would make auditors go beyond the current auditor’s opinion on financial statements. The proposed standard would require auditors to identify areas that presented the most problems in their reviews of financial statements. The proposal has been approved by the Public Company Accounting Oversight Board (PCAOB), but awaits a vote by the Securities and Exchange Commission (SEC), before it can take effect. Click here to see the full story (Subscription required).

INTERNATIONAL ACCOUNTING HIGHLIGHTS:

INTERNATIONAL DEVELOPMENTS

August 30: Large private companies in the U.K. would be required under a proposed law to explain in corporate reports how their directors fulfill legal obligations to take employee interests into account. The Department of Business and Industrial Strategy (BIS) said that the government would introduce legislation requiring all companies with 2,000 or more employees to explain how their directors consider “employee and other interests” in promoting a company's financial success. Click here to see the full story (Subscription required).

CAPITAL FORMATION

August 30: The SEC likely will wait to see how a new market approved by the U.S. futures regulator for bitcoin options fares before moving forward with an application for an exchange-traded fund that would trade shares based on the cryptocurrency. “The success or failure of the bitcoin option would drive the SEC's analysis,” said John Servidio, a partner with Winston & Strawn, New York. Click here to see the full story (Subscription required).  

UNITED KINGDOM

August 31: The U.K. Treasury has rejected its advisor's call to change the way companies calculate their corporate tax payments, saying it would burden businesses with uncertainty. In their report, the Office for Tax Simplification (OTS) cited the disjointed way in which companies calculate their tax bills as a key issue for the Treasury. Click here to see the full story (Subscription required).

INTERNATIONAL AUDITING HIGHLIGHTS:

AUDITING OVERSIGHT

August 29: Large U.K. accounting firms are divided over whether the country's standard setter should require greater auditor oversight of preliminary annual performance announcements from companies. Many accounting firms oppose adding auditor guidance on materiality for preliminary announcements. Click here to see the full story (Subscription required).

August 29: Several business associations in the U.K. blasted initial proposals from the U.K. Financial Reporting Council (FOC) to require greater auditor oversight of company preliminary performance announcements. Organizations criticized FRC's suggestions on changing the role that auditors play in preliminary announcements. Preliminary announcements play an important role in U.K. corporate financial reporting, FRC said. Click here to see the full story (Subscription required).

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

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