PwC's weekly alert highlighting current financial reporting developments (including accounting, auditing and regulatory matters). This week's topics include:
US lawmakers reach fiscal cliff agreement; deal includes business "tax extenders"
This week the US Senate and House of Representatives reached a “fiscal cliff” agreement with the Obama Administration that extends certain tax rates for individuals with incomes below $450,000 and includes several business "tax extenders." Read our WNTS Insight for more details, including the financial reporting considerations.
Tax accounting insights: Around the world — When is a tax law enacted or substantively enacted?
Keeping track of tax law changes around the world has become an increasing challenge for businesses. Companies are rapidly expanding their geographic footprint at a time when the evolution and developments in jurisdictional tax laws are undergoing nearly constant change. Naturally, changes in tax law have an impact on tax planning, tax return preparation and ultimately tax cash flows. Those consequences, however, are often preceded by the impact of such changes on company financial reporting.
Companies reporting under US Generally Accepted Accounting Principles (US GAAP) or International Financial Reporting Standards (IFRS) need to understand when a change in tax law impacts the measurement of current and deferred income taxes. To assist companies in monitoring global legislative proposals and processes, PwC’s Global Tax Accounting Services team has compiled a summary of the points of enactment and substantial enactment in the legislative process of selected countries. The summary is intended to provide a starting point in determining when a change in local country tax law should be reflected in current and deferred income taxes and may be a helpful platform for the development or refinement of an effective controls process.
In brief: FASB proposes new model for accounting for credit losses on debt instruments
On December 20, 2012, the FASB issued a proposal that introduces a new model for accounting for credit losses on debt instruments. The proposal calls for an entity to recognize an allowance for credit losses based on its current estimate of contractual cash flows not expected to be collected. The FASB’s proposed model eliminates any threshold required to record a credit loss and allows entities to consider a broader information set when establishing their allowance for loan losses. In addition, the model aims to simplify current practice by replacing today’s multiple impairment models with one model that applies to all debt instruments. This In brief article provides an overview of the proposal.
FASB publishes 2013 U.S. GAAP Financial Reporting Taxonomy
The FASB announced the availability of the 2013 U.S. GAAP Financial Reporting Taxonomy pending final acceptance by the U.S. Securities and Exchange Commission (SEC). The 2013 U.S. GAAP Financial Reporting Taxonomy contains updates for accounting standards and other improvements to the 2012 taxonomy currently used by SEC issuers.
FAF Trustees provide input on IFRS Foundation proposal to establish an accounting standards advisory forum
The Trustees of the Financial Accounting Foundation (FAF)1 submitted comments on the IFRS Foundation's proposal to establish an Accounting Standards Advisory Forum (ASAF). Overall, the FAF Trustees support the IFRS Foundation’s2 proposal to establish an ASAF comprising standard setters from around the world to advise the IASB on its proposals.
The FAF Trustees acknowledge the challenges of balancing the size of ASAF membership with making the group as inclusive and representative as possible. In order to ensure that the ASAF achieves its goals, the FAF Trustees believe that membership needs to include jurisdictions representing the world’s major capital markets. It also believes that the proposed membership requirement of a written commitment to a single set of standards written by the IASB, in full and without modification, would exclude many jurisdictions from membership. Instead, the FAF Trustees encourage changes to the commitment that would allow the broadest possible participation in the ASAF process.
FASB meetings and project updates
Meeting summary: The FASB did not hold any board meetings over the past week.
Next open board meetings:The FASB has the following meetings scheduled:
See the FASB’s website for further information on the meetings.
Project updates: The FASB has updated the following project summaries:
IFRS Foundation releases additional IFRS for SMEs training material
To assist companies in applying the IASB's stand-alone standard on IFRS for SMEs, the IFRS Foundation has an ongoing project to develop a set of free training materials. It recently released Module 9—Consolidated and Separate Financial Statements. Module 9 covers Section 9 of the IFRS for SMEs, which defines the circumstances in which an entity presents consolidated financial statements and the procedures for preparing those statements. It also includes guidance on separate financial statements and combined financial statements.
In total, the IFRS Foundation is developing 35 separate training modules — one for each section of the IFRS for SMEs. To date, the IFRS Foundation has released 32 modules. The remaining modules will be released as they are completed.
IFRS for SMEs Update — December 2012
The December 2012 edition of the IASB’s IFRS for SMEs Update covers, among other things, (1) the new IFRS for SMEs training module: Module 9—Consolidated and Separate Financial Statements and (2) a status report on IFRS for SMEs translations.
AICPA issues technical Q&A on effective date of AU-C Section 905 in a compliance audit
The AICPA has published a technical question and answer (Q&A) to provide nonauthoritative guidance about which effective date applies in a compliance audit performed pursuant to AU-C section 935, Compliance Audits, and Office of Management and Budget Circular A-133, Audits of States, Local Governments and Non-Profit Organizations (Circular A-133), in which the financial statements of an entity are for a period prior to December 15, 2012 (for example, as of and for the year ended September 30, 2012), but the opinion on compliance and reporting on internal control over compliance (the Circular A-133 report) relating to that same period is issued after December 15, 2012 (for example, the Circular A-133 report is issued on January 15, 2013). The Q&A concludes that the effective date used depends on the auditor’s professional judgment of the circumstances. See the Q&A for further details.
1FAF is the independent, US private-sector organization with responsibility for the oversight, administration, and finances of the FASB.
2The IFRS Foundation is an independent, not-for-profit private sector organization committed to the development of a single set of high quality, understandable, enforceable and globally accepted international financial reporting standards (IFRSs) through its standard-setting body, the IASB.
Flashline is a weekly alert highlighting current financial-reporting developments (including accounting, auditing and regulatory matters) and is produced by the National Professional Services Group of PwC. It is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. To access additional content on financial reporting issues, register for CFOdirect Network (www.cfodirect.pwc.com), PwC’s online resource for financial executives.