The Financial Accounting Standards Board
Sept. 8: FASB issued a proposal that would revise ASC 815, Derivatives and Hedging, in targeted areas that FASB said are costly and complex. Investors and other financial statement readers would have better insight into companies' hedging strategies—and their effectiveness—under the proposed changes. The proposed revisions would permit more flexibility in hedging interest rate risk for both variable-rate and fixed-rate financial instruments.
Sept. 15: FASB discussed a poll taken among 1,500 participants during a FASB webcast. More than 49 percent of the participants identified themselves as preparers of financial statements—that is, accountants or financial executives at companies.
Twenty four percent of respondents said they had not begun any implementation for the revenue recognition standards. Almost 25 percent said that they had recently started implementation and 18 percent answered that they had made significant progress, according to polling results FASB provided to Bloomberg BNA.
Sept.19: FASB proposed four minor amendments to clarify ambiguities in applying the 2014 revenue recognition standard—which takes effect for most entities after Dec. 15, 2017. The clarifications would:
• state that loan guarantee fees are governed by the accounting standard on guarantees and not revenue recognition;
• clarify when some receivables can be recorded before their due date;
• explain that a refund liability isn't a contract liability; and
• reinstate guidance on the accrual of advertising costs.
Comments are requested by Oct. 31, 2016.
Sept. 19: FASB voted to propose, for public comment, additional, robust disclosure requirements for inventory that the board said would enable better assessment of companies’ inventory changes and cash flow prospects. Currently, very few disclosures are required for inventory under generally accepted accounting principles.
The rules will be especially welcomed by analysts and creditors because inventory is one of the most integral assets on a company's balance sheet. Analysts look to determine, among other information, inventory turnover and trends. Creditors are interested in inventory value as collateral assets.
The Securities and Exchange Commission
Sept. 12: The Financial Accountability and Corporate Transparency (FACT) Coalition issued a report Sept. 12 calling on the SEC to increase tax disclosures. Its chief recommendation was for country-by-country reporting, which would require multinational companies to submit detailed information about each country in which they operate.
Sept. 20: The SEC has begun investigating Exxon Mobil Corp.'s accounting practices concerning whether the energy giant should have written down assets as a result of the oil slump, according to a person with knowledge of the matter, as reported by Bloomberg reporters Matt Robinson and Joe Carroll.
The SEC asked Exxon in September 2013 why the company hadn't conducted an asset-impairment review, despite a senior executive's comment that it was making “no money” amid low gas prices. Exxon responded the following month by saying that, based on the strength of its future cash flow projections, it didn't believe an assessment was necessary. The SEC didn't take any further action, correspondence posted on the agency's website showed.
INTERNATIONAL ACCOUNTING HIGHLIGHTS
INTERNATIONAL STANDARDS: INSURANCE
Sept. 12:The International Accounting Standards Board issued amendments to IFRS 4: Insurance Contracts, which intend to reconcile the requirements of IFRS 4 with those of the board's new financial-instruments standard, IFRS 9.
New amendments to international insurance contract accounting standards can help ease the temporary volatility in financial reporting that companies can encounter when applying two separate international financial reporting standards.
Sept. 14: No specific climate-change project will be part of IASB’s upcoming agenda, an IASB staff paper said. The board instead will address the issue through its current initiatives and research projects, such as work on pollutant pricing mechanism.
“In the Board's view, climate change has no other financial reporting implications that are likely to require standard-setting over the next five years,” staff said in the paper summarizing responses to IASB's 2015 agenda consultation.
FINANCIAL INSTRUMENTS: EQUITY
Sept. 20: IASB voted unanimously to include in a planned discussion paper a new disclosure requirement under international financial reporting standards about the priority of claims on liquidation. The measure was one of a series of staff recommendations the board approved during its meeting in London that will be included in the discussion paper on financial instruments with characteristics of equity.
American Institute of CPAs
Sept. 15: According to the AICPA’s Enhancing Audit Quality Initiative, Highlights and Progress 2016 report, the AICPA has demonstrated progress in its goal of increasing audit quality by providing both new and experienced auditors with tools and training to assist them to become more knowledgeable and competent in different subject practice areas. For example the 2017 CPA exam will include a test of auditors’ critical thinking.
AICPA’s Center for Audit Quality
Sept. 15: Auditing industry strengths could be a prototype for a cybersecurity framework, wrote Cindy Fornelli, Executive director for the Center for Audit Quality.
“Auditors can expand their role in accordance with time-tested assurance frameworks, thus bringing the profession's many strengths to bear on today's cyber security challenges,” said Formelli.
Auditors use critical thinking skills independent of management's assertions, and are used to evaluating internal controls. CAQ made these comments in a chapter written for the Internet Security Alliance's (ISA) Social Contract 3.0: Implementing a Market-Based Model for Cybersecurity conference in D.C. The conference particularly targeted the leadership of the incoming U.S. administration.
Sept.19: The AICPA's Assurance Services Executive Committee issued two exposure drafts proposing uniform criteria on organization's cybersecurity risks. (ASEC) with the assistance of the Center for Audit Quality proposed that this evaluation of the cybersecurity risk assessment program, also described as a cybersecurity examination, would be voluntary.
The Public Company Accounting Oversight Board
Sept.13: The PCAOB revoked the registration to practice of Goldman Kurland and Mohidin, LLP and barred one of its accountants, Ahmed Mohidin, from being associated with a registered public accounting firm. The PCAOB, in the settled disciplinary order, said that the firm and Mohidin provided prohibited bookkeeping services, served as their own audit reviewers, and performed actions that they knew violated federal securities laws. PCAOB also fined Mohidin $15,000.
The Securities and Exchange Commission
ENFORCEMENT: INDEPENDENCE VIOLATION
Sept. 19: Ernst & Young agreed to pay $9.3 million to settle claims by the SEC that two former partners in the audit division had personal relationships with clients, violating independence rules. This is the first time the SEC has sued an auditor over failing to maintain independence because of personal relationships.
“Ernst & Young did not do enough to detect or prevent these partners from getting too close to their clients and compromising their roles as independent auditors,” Andrew Ceresney, head of SEC enforcement, said in the statement.
Ernst & Young didn't admit or deny the findings.
INTERNATIONAL AUDITING HIGHLIGHTS
Sept. 16: The U.K. Financial Reporting Council released a report saying that the U.K.’s top auditing firms should do a better job of laying the groundwork for assessing the root causes of audit problems and successes.
The FRC—which establishes accounting, auditing and actuarial standards for the U.K. and Ireland—said in its thematic review of root cause analysis conducted by the U.K.’s six largest audit firms that “most firms did not prepare a formal plan or timetable at the start of the process.”
Though the six firms weren't identified, the top four auditing firms in the U.K. are generally considered to encompass PwC, Deloitte, EY and KPMG.
Continue the discussion at Bloomberg BNA Accounting LinkedIn.
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