The Governmental Accounting Standards Board
Mar. 20: The Governmental Accounting Standards Board issued GASB Statement No. 85, Omnibus 2017, which addressed some minor, technical financial situations including miscellaneous pension and benefits issues, goodwill and real estate owned by insurers. The reporting requirements are effective for reporting periods starting after June 15, 2017.
The Securities and Exchange Commission
Mar. 10: The SEC's administrative law judges are unconstitutionally hired, an investment adviser told the D.C. Circuit March 10 for the second time (Lucia v. SEC, D.C. Cir., No. 15-1345, and 3/10/17). A U.S. Court of Appeals for the District of Columbia Circuit panel initially rejected the argument, but the full circuit agreed to reconsider Raymond J. Lucia's challenge May 24.
Mar. 21: The Securities and Exchange Commission’s Chief Accountant Wes Bricker yet again spoke of the need for U.S. corporations to prepare for the upcoming implementation of the revenue recognition. He acknowledged some progress but said there has not been nearly enough. If companies don’t get their revenue reporting right, they would face unwelcome scrutiny from securities regulators. Investors could also become unsettled, Bricker said.
Mar. 23: The Senate Banking Committee held its confirmation hearing for SEC Chairman nominee Jay Clayton. Clayton said that he was “one hundred percent committed to rooting out fraud and shady practices in our financial systems.
"I recognize that bad actors undermine the hard-earned confidence that is essential to the efficient operation of our capital markets,” he said in his opening statement.
When Senator Sherrod Brown (D- Ohio) asked Clayton how he would ensure the SEC’s independence from any potential conflicts of interests with his former Wall Street clients, a list that included Ally Financial Inc., Barclays PLC, Goldman Sachs Group Inc., Deutsche Bank AG, and Tudor Investment Corp. , Clayton repeated, “I am committed to showing no favoritism to anyone.”
“If I am recused, my fellow commissioners will be able to handle the matters ably and with good effect,” Clayton said.
Brown then asked which parts of the Dodd- Frank Act he planned to “attack.” “I don’t have any specific plans for attack, Senator," Clayton responded. He said that he believed the Dodd-Frank Act should be looked at to see if it is achieving its objective, but that he had no plans for attacking any specific provision. Nor had he discussed Dodd- Frank with anyone in the Trump administration, although he knew the President’s previously stated position on it, he told the committee.
INTERNATIONAL ACCOUNTING HIGHLIGHTS
Mar. 15: The IFRS Foundation said it reappointed four members of its committee for interpreting international financial reporting standards.
The foundation, which oversees the activities of the International Accounting Standards Board, said the following members had been named to second, three-year terms on the IFRS Interpretations Committee:
• Carl Douglas of the Brazilian CCR Group;
• Mikael Hagstrom of Chinese company Dongfeng Commercial Vehicles;
• Bruce Mackenzie of W Consulting International in South Africa; and
• Bonnie Van Etten of the U.S.-based FCA US LLC.
CHALLENGES TO SMALL, MEDIUM- SIZED PRACTICES
CHALLENGES FOR SMEs
The International Federation of Accountants’ 2016 IFAC Global SMP Survey found that keeping up with new rules and standards ranks was among the toughest problems small- and medium-sized accounting practices face.
The study found that of more than 5,000 respondents across 164 countries, 41 percent cited “keeping up with new standards and regulations” as a “high” or “very high” challenge.
“Small- and medium-sized practices (SMPs) constitute the vast majority of accounting practices worldwide and, in many jurisdictions, are believed to employ the majority of professional accountants working in practice,” according to IFAC.
March 21: The International Accounting Standards Board decided against moving forward quickly on a research project to examine extractive industries, following a staff recommendation to keep the extractive-industries initiative inactive as part of its longer-term research pipeline of projects that IASB intends to address by 2021.
IASB also decided not to speed research on pollutant-pricing or uncertain liabilities.
Instead, the IASB will consider if it should take a wider approach to financial reporting.
March 21: All 12 board members voted during the IASB meeting in London to direct staff to begin balloting, or drafting, revisions and updates to the board’s conceptual framework that aims to provide greater clarity to financial preparers.
The Public Company Accounting Oversight Board
March 13: Senator Jack Reed (D-RI) introduced Senate Bill 610—PCAOB Enforcement Transparency Act of 2017—in at least the third attempt by Sens. Jack Reed (D-R.I.) and Chuck Grassley (R-Iowa) to introduce such legislation.
The legislation would end the secrecy surrounding Public Company Accounting Oversight Board disciplinary proceedings that are nonpublic, giving the public and investors timely, critical information, and bring the PCAOB into alignment with other regulators such as the SEC.
Reed said in a Mar. 21 release,“Investors and companies alike should be aware when the auditors and accountants they rely on have been charged or sanctioned for violating professional auditing standards.”
Chip Unruh from Reed's office, responding to a question as to why this version of a bill would succeed, where others from 2015, 2013 and 2011 have failed, told Bloomberg BNA Mar. 21 that there is “a new Chairman of the Banking Committee and he has expressed an interest in moving bipartisan, effective legislation.” Mike Crapo (R-Idaho) is the new chairman.
CROSS- BORDER AUDIT ENFORCEMENT
March 20: The PCAOB sanctioned Wander Rodrigues Teles, former partner of PwC Brazil-based PricewaterhouseCoopers Auditores Independentes, for repeated audit violations, including ignoring obvious red flags of financial information that was materially misstated because of error or fraud.
Teles was lead partner of PwC-Brazil's audit client Sara Lee Corporation. The sanctions derived from the 2010 and 2011 audit work of the Brazilian subsidiaries of Sara Lee. According to the disciplinary order, Teles had:
• indications from customers that a material amount of accounts receivable was overdue and disputed by customers;
• indications that Sara Lee's revenues may have been materially overstated and trade promotion accounts materially understated;
• known that Sara Lee's internal audit division found problems with internal controls, including findings indicating fraud, that had resulted in restatements by Sara Lee of its FY 2010 and FY 2011 financial statements; and
• known of Sara Lee’s conclusion that a material weakness existed in internal control over financial reporting as of June 30, 2012.
PCAOB fined him $10,000 and barred him for two years from associating with a registered public accounting firm for two years.
Composed and Compiled by Laura Tieger Salisbury, Accounting Policy and Practice reporter and editor
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