Accounting & Auditing Highlights Week Ending December 15, 2017


Accounting Highlights:  

Internal Revenue Service

December 11: The Internal Revenue Service is working “very actively” to get out new tax accounting guidance on the treatment of deferred revenue in stock acquisitions, an agency official said. “Although you never know until it's done, I would anticipate seeing, on this topic, a revenue ruling clarifying that, yes, in fact, there is no disappearing income,” John P. Moriarty said. “I would also anticipate a new revenue procedure accompanying that ruling.”  Click here to see the full story (Subscription required). 

December 12: The IRS is making collection of delinquent employment tax more efficient through the use of data analytics to decide where best to deploy its diminished enforcement resources, an agency official said. A pilot program testing ways to use predictive analytics to better detect employers that fall behind in their payroll tax payments showed improved compliance, said Darren Guillot, IRS field collection operations director. Click here to see the full story (Subscription required). 

Securities and Exchange Commission

December 11: Foreign private issuers should pay close attention to Securities and Exchange Commission comment letter trends dealing with disclosure compliance, according to Mark Bergman, a Paul, Weiss, Rifkind, Wharton & Garrison LLP partner. Knowing the common disclosure deficiencies and where SEC inspection is focusing would help foreign issuers improve their disclosures and resolve any issues with the SEC. Click here to see the full story (Subscription required). 

December 13: The SEC named a Republican Senate aide William Duhnke III to chair the five-member Public Company Accounting Oversight Board in a complete overhaul of its membership. Duhnke, who replaces James Doty as PCAOB chairman, is an assistant to former Senate Banking Committee Chairman Richard Shelby (R-Ala.). Click here to see the full story (Subscription required). 

December 14: Provectus Biopharmaceuticals Inc. settled SEC allegations it failed to properly report as compensation millions of dollars in perks provided to its then-top executives. Provectus didn't have adequate controls over the reporting and disclosure of travel and entertainment expenses submitted by its executives, the SEC said. Click here to see the full story (Subscription required). 

Whistle Blowers

December 11: The SEC, which rewards whistleblowers who report securities law violations, won't be paying any bounties to ex-employee Rory Flynn, who claimed he was terminated for complaining the agency was violating its own rules governing the handling of administrative appeals. Click here to see the full story (Subscription required).   

Government Construction Costs

December 11: State and local governments would need to provide a clearer picture of their financing costs incurred during construction of a building or other capital project under proposed rules. The proposal of the Governmental Accounting Standards Board would boost the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period. Click here to see the full story (Subscription required). 

Tax Reform

December 12: Employers paying executive compensation, retirement benefits, and other fringe benefits have a few things to keep on their radar as Congress moves forward on its tax overhaul. Click here to see the full story (Subscription required). 

December 15: Some large multinational companies, expecting tax reform to be enacted this year, suggest the SEC provide more time for filing financial reports. “We're anticipating that the tax reform will get signed this year and we'll have to do the accounting,” said Marie Gallagher, PepsiCo Inc.’s senior vice president and controller. Click here to see the full story (Subscription required). 

December 15: The financial sector is concerned about the tax treatment of derivatives in the Senate reform bill's anti-base erosion provision. The provision, which aims to prevent companies from shifting profits to other countries to avoid taxes, sets new rules on derivatives payments, subjecting some of these payments to an excise tax. Click here to see the full story (Subscription required). 

Climate Change

December 13: Exxon Mobil Corp. will start to disclose the effects of climate change on its business, reversing its earlier opposition after the company split with investors over the issue. A shareholder vote in May urged the oil and gas giant to publish a detailed analysis of how curbs on emissions of carbon could affect the value of its fields, refineries and pipelines. Click here to see the full story (Subscription required). 

December 14:  After Exxon Mobil Corp. bowed to investor pressure to disclose the effect of climate change on its business, U.S. rival Chevron Corp. is left as the only major oil company yet to commit to such a review, according to an academic at the Council for Foreign Relations. Click here to see the full story (Subscription required). 

December 15:  Occidental Petroleum Corp. plans to report early next year on risks to its business from climate change, a step sought by more than 60 percent of its investors. The company joins oil giant Exxon Mobil Corp. and electric utility PPL Corp. in yielding to a shareholder push for more disclosure on how carbon curbs could affect them in the long term. Click here to see the full story (Subscription required). 

December 15: Chevron Corp. will get some breathing space on climate issues at its 2018 annual meeting from the United Methodist Church, the activist investor that pushed Exxon Mobil Corp. to reverse course and reveal more data on environmental impacts. The church earlier this year withdrew a request for Chevron to publish an annual study into the effect of climate change on its business. Click here to see the full story (Subscription required). 

Dodd-Frank Act

December 15:  The House Financial Services Committee approved three securities bills and a banking measure, including legislation that would repeal Dodd-Frank Act disclosure requirements for oil and gas companies. The bill (H.R. 4519) targets requirements that companies reveal the payments they make to governments to try to extract oil, gas, and minerals. Click here to see the full story (Subscription required). 

Initial Coin Offerings

December 13: The boom in initial coin offerings is showing few signs of abating even as U.S. regulators crack down on fraudulent digital-token sales and issue new warnings about risks to investors. With three weeks left in the fourth quarter, startups issuing tokens have already garnered $1.38 billion from investors, and are on pace to surpass the $1.74 billion raised in the third quarter, according to industry researcher Token Report. Click here to see the full story (Subscription required). 

Antifraud

December 13: A medical device company and its chief executive officer were found liable for making material misstatements about the commercial viability of a key product, the SEC said. The verdict against Revolutions Medical Corp. and its CEO “affirms that corporate executives must be completely truthful when they speak about their companies in press releases,” co-Enforcement Directors Stephanie Avakian and Steven Peikin said. Click here to see the full story (Subscription required).

International Accounting Highlights:

International Developments

December 11: U.K. company directors with premium-listed shares would assume responsibility for addressing concerns arising from whistleblowing under a new U.K. regulatory proposal. The proposed revisions to its reporting guidance on corporate governance would shift responsibility for responding to whistleblowing from audit committees of companies with premium-listed securities. “The revised Code makes this a board responsibility, with a remit that encompasses all concerns,” the U.K. Financial Reporting Council (FRC) said. Click here to see the full story (Subscription required). 

Financial Technology

December 12: France, seeking to bolster Paris's standing as a financial center, is providing safe legal footing for money managers and investors that use blockchain as record-keeping and transfer of assets including corporate debt. President Emmanuel Macron's cabinet approved an executive order clarifying secure legal conditions for using distributed ledger technology to track transactions on some unlisted stocks, bonds and commercial paper. Click here to see the full story (Subscription required). 

International Banking

December 12: As it prepares to welcome a bank that will dwarf its $256 billion economy, Finland is eager to end a two-year logjam in talks over a common deposit-insurance system in the euro zone. The Nordic country — a staunch opponent of asset pooling during Europe's debt crisis — is now actively pushing to share deposit safeguards with its fellow Europeans. Click here to see the full story (Subscription required). 

Defined Benefit Plans

December 12: There's a new possibility for funding pension plans, and it uses an old recipe, tontines, but with a twist. Tontine is a financial product that combines features of an annuity and a lottery. Tontine allows people to share investments and divide up the money based on survival—as participants pass away, their share is redistributed to the surviving members. Click here to see the full story (Subscription required). 

Merger Reporting Rules

December 12: Russia clarified how businesses should file consolidated financial statements in accordance with the international financial reporting standards (IFRS). The clarifications say that if a new parent company was formed for the purposes of consolidation of members of a group of companies, consolidated financial statements must comply with IFRS 3, Business Combinations. Click here to see the full story (Subscription required). 

Australia

December 13: The Australian Tax Office has issued guidelines clarifying that digital currency used as consideration to buy or sell goods and services is to be treated the same way as money. The guidance sets out how digital currency is to be treated under a recently-enacted exemption from GST for sales and purchases of digital currency and subsequent regulations registered by the government, which support the amendments. Click here to see the full story (Subscription required).    

Business Acquisitions

December 14: Companies that adhere to international financial reporting standards will have more distinct accounting procedures to follow when they acquire a business. The International Accounting Standards Board issued tightly-drawn amendments to several international accounting standards, including standards governing business acquisitions as part of its annual exercise to perfect the rules. Click here to see the full story (Subscription required).   

Climate Change

December 14: Bank of England Governor Mark Carney said the number of companies pledging to increase financial reporting standards to fend off risk from climate change has doubled in five months. Click here to see the full story (Subscription required).   

Digital Reporting

December 15: Government and business in the U.K. need to team up to promote digital reporting and guide its development. The FRC urged listed companies to join with the government, technology companies, and investors to ensure that businesses fully realize the advantages that XBRL and other technologies offer. Click here to see the full story (Subscription required).   

Asset Impairment

December 15: Norway's Financial Supervisory Authority expects transitional rules to the new accounting standards on loan loss reserves to be in place on Jan. 1. Click here to see the full story (Subscription required).   

International Auditing Highlights:

Materiality

December 14: Major U.K. audit firms are improving their disclosures about what information they consider material in assessing financial reports, but investors and company audit committees want more extensive explanations. The U.K. FRC published an in-depth analysis that found audit firms are doing a better job of setting out how they've applied the concept of materiality since the council's last review of materiality use in audit practice. Click here to see the full story (Subscription required).   

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

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