ACCOUNTING & AUDITING HIGHLIGHTS WEEK ENDING OCTOBER 6, 2017


ACCOUNTING HIGHLIGHTS:

REVENUE RECOGNITION

October 2: Almost 90 companies in the S&P 500 say that new revenue accounting rules might leave a deep imprint on their financials, with many companies predicting that they will record revenue earlier than they do today, Morgan Stanley analysts say. Technology, telecom, aerospace and defense, retail, and industrial companies seem to show “the most potential sensitivity” to the revenue accounting prescriptions. Click here to see the full story (Subscription required).

DISCLOSURE

October 2: The Securities and Exchange Commission (SEC) said that it is providing regulatory relief to publicly traded companies, investment companies, accountants, transfer agents, municipal advisors, and others affected by Hurricanes Harvey, Irma, and Maria. Click here to see the full story (Subscription required).

October 6: The SEC will consider proposing rule changes to “modernize and simplify” a disclosure regulation for companies. The SEC will vote on whether to propose updates to Regulation S-K. The regulation governs companies’ non-financial reporting requirements for SEC filings, including annual and quarterly reports and proxy statements. Click here to see the full story (Subscription required).

October 2: SEC Chairman Jay Clayton expressed concern that foreign entities may not report when they work together to buy the shares of a U.S. corporation. The SEC chief made his comments after an audience member at a think-tank event said Chinese companies are taking significant share positions without always being clear about the ownership stake they're developing in U.S. corporations. Click here to see the full story (Subscription required).

FRAUD

October 2: Massachusetts medical device manufacturer Alere Inc. agreed to pay more than $13 million to settle SEC allegations that it committed accounting fraud through several international subsidiaries. The company, which makes diagnostic testing equipment, also paid off officials in two countries in a bid to retain or increase sales, the SEC said. Click here to see the full story (Subscription required).

October 3: A Brooklyn, N.Y., man and his two companies defrauded investors in a pair of so-called initial coin offerings purportedly backed by investments in real estate and diamonds, the SEC alleged. “Maksim Zaslavskiy and his companies have been selling unregistered securities, and the digital tokens or coins being peddled don't really exist,” the agency said. Click here to see the full story (Subscription required).

ACTUARIES

October 4: CBIZ can't escape claims that it miscalculated liabilities of pension plans by nearly $132.5 million. The dispute stems from University of Pittsburgh Medical Center's 2013 acquisition of the Altoona Regional Hospital. CBIZ, a provider of financial, benefits, and insurance, allegedly departed from actuarial standards of practice by undervaluing Altoona Regional Hospital pension plans’ liabilities for funding, compliance, and accounting purposes, according to UPMC. Click here to see the full story (Subscription required).

ORGANIZATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

October 4: Organization for Economic Co-operation and Development (OECD) guidance offers roadmap to auditors for mining multinational's country-by-country reports. Transfer pricing audit risk factors include a multinational company reporting significant profits in a jurisdiction, accompanied by little corresponding activity or with low levels of tax accrued. Multinationals worry that auditors will use reports to make transfer pricing adjustments. Click here to see the full story (Subscription required).

LEASING

October 3: The new guidance on accounting for leases ASC 842 significantly expands the disclosures required by both lessees and lessors in financial statements for annual and interim periods. ASC 842 requires the disclosure of both quantitative and qualitative information about leases. Click here to see the full story (Subscription required).

October 5: Private companies in which public companies own a small stake can still adhere to the private-company deadlines for adopting revenue recognition and lease accounting standards, the SEC clarified. Click here to see the full story (Subscription required).

CYBERSECURITY

October 3: Sen. Elizabeth Warren (D-Mass.) has a new request for the SEC: See if Equifax Inc. misled investors about its massive data breach. Lying at the “heart of the SEC's mission” are securities laws prohibiting companies from deceiving investors about information that could affect stock prices, Warren, a frequent critic of the SEC, said in a letter to agency Chairman Jay Clayton. Click here to see the full story (Subscription required).

DIGITAL CURRENCY

October 3: Grayscale Investments’ Bitcoin Investment Trust, which trades over-the-counter and is the lone vehicle available to institutional investors, is unlikely to list on the NYSE Arca market after the exchange withdrew an application to the SEC for approval amid regulatory uncertainty. Click here to see the full story (Subscription required).

INTERNAL REVENUE SERVICE

October 3: The Internal Revenue Service (IRS) in a private letter ruling (PLR) considered the application of depreciation normalization rules with respect to a taxpayer's tax computations relating to final and interim rates, and interim rate refunds. In other PLRs, the IRS considered a city's proposed agreements that would potentially result in the private business use of bonds, and determined whether a controlled foreign corporation's underwriting, loss, policyholder dividend, and premium paid advance reserves were appropriate means for measuring income. Click here to see the full story (Subscription required).

TAX REFORM

October 3: Elements of this year's tax bill could end up reading much like 2014 tax legislation introduced by former Ways and Means Committee Chairman Dave Camp (R-Mich.) as Republicans search for ways to pay for tax rate cuts. Lawmakers have three months to come up with revenue raisers to offset the cuts that aren't yet paid for. Click here to see the full story (Subscription required).

ACCOUNTING OVERSIGHT

October 4: The Federal Deposit Insurance Corp. is seeking damages against PricewaterhouseCoopers LLP in an ongoing trial for an allegedly negligent audit of a bank that failed during the financial crisis. Depending on the outcome of the trial, the case could affect how auditors can be held accountable in detecting fraud. It also might help clarify a contentious area of audit oversight. Click here to see the full story (Subscription required).

INSURANCE

October 5: Life insurance companies will need to write off deferred acquisition costs (DAC) if the contracts to which they relate are no longer on their books, The Financial Accounting Standards Board (FASB) said. The FASB affirmed its proposed decision that DAC should be written off when the related contract unexpectedly terminates without consideration of contract profitability. Click here to see the full story (Subscription required).

CREDIT LOSSES

October 5: The FASB sought to provide flexibility to banks and other credit cards issuers on when they can factor credit card receivables into the estimation of the allowance for loan losses. Estimated losses from credit card contracts can be a significant part of banks’ total loan and credit loss mixes. How to set an allowance to reserve against future credit losses will change considerably as new rules take effect in January 2020. The FASB hopes to issue the informal guidance during the week of Oct. 9. Click here to see the full story (Subscription required).

DEFINED BENEFIT PLANS

October 5: Employers’ pension costs will be rising as a result of a final IRS rule that changes life expectancy tables employers use to calculate pension funding obligations and lump-sum payouts. The IRS announced that the rule will be implemented on Jan. 1, 2018. Click here to see the full story (Subscription required).

BLOCKCHAIN TECHNOLOGY

October 5: Auctus, a startup company that's aiming to build a platform for blockchain-powered pension funds, is launching the presale for its initial coin offering. It comes at a time when some of the largest retirement service companies are trying to tap blockchain technology because of its potential to increase efficiency in record keeping, document sharing, transaction settlements, contract execution, and business collaboration. Click here to see the full story (Subscription required).

COLLABORATIVE ARRANGEMENTS

October 6: Biotechnology, pharmaceutical and life sciences companies are closely monitoring the FASB’s efforts to bring order to research partnerships and joint product efforts that are “collaborative arrangements,” in which these industries’ participation has grown. The arrangements have become more common in recent years because they can be less legally cumbersome than joint ventures, yet confusion still surrounds exactly what they are. Click here to see the full story (Subscription required).

AUDITING HIGHLIGHTS:

AUDITOR OVERSIGHT

October 6: Auditors have new guidance from the U.S. overseer of public company auditing on how they should inspect the financial statements of companies for new accounting rules on revenue that take effect in January. The Public Company Accounting Oversight Board (PCAOB) aims to help auditors apply relevant auditing requirements in the auditors’ upcoming interim reviews of companies’ reporting and year-end audits, PCAOB Chief Auditor Martin Baumann said. Click here to see the full story (Subscription required).

INTERNATIONAL ACCOUNTING HIGHLIGHTS:

FINANCIAL FRAUD

October 2: Three former Tesco Plc executives bullied their employees to execute a plan of fraud and false accounting that wiped 2 billion pounds ($2.7 billion) from the U.K. grocery store chain's market value, prosecutors said at the start of their trial. Click here to see the full story (Subscription required).

DIGITAL CURRENCY

October 2: Switzerland is investigating a number of initial coin offerings, the SEC said, a day after Wall Street's top regulator warned that the market is vulnerable to scams. It has observed a sharp increase in this digital form of initial public offerings in Switzerland and can't rule out that the transactions may be fraudulent. Click here to see the full story (Subscription required).

INTERNATIONAL DEVELOPMENTS

October 2: The Russian Supreme Court upheld fines against TEACO LLC in a rare ruling affirming the Moscow Customs Department's power to penalize businesses for failure to submit financial reporting of cross-border foreign currency transactions. The decision has repercussions for both local and non-local residents doing business in Russia. Click here to see the full story (Subscription required).

INTERNATIONAL RULES

October 5: The U.K. should continue to follow international financial reporting standards (IFRS) after it leaves the European Union, an accountancy professional group told Bloomberg BNA. Dropping international rules would make the U.K. a less attractive investment destination. Click here to see the full story (Subscription required).

SWEDEN

October 6: The Swedish Tax Agency has expanded its rules on aggregating multiple financial accounts, to better reflect guidelines under the OECD's common reporting standard. Click here to see the full story (Subscription required).

INTERNATIONAL AUDITING HIGHLIGHTS:

AUDITING

October 4: South Africa's auditing regulator said KPMG LLP's local unit hasn't fully cooperated with the body's investigations into work done for the Gupta family, who are alleged to have used political connections to win state contracts. It took a meeting with KPMG's leadership team to prompt them to engage with the probe and, even after that, the auditing firm hasn't released certain documents, Bernard Agulhas, head of the Independent Regulatory Board for Auditors, told lawmakers. Click here to see the full story (Subscription required).

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

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