PwC's weekly alert highlighting current financial reporting developments (including accounting, auditing and regulatory matters). This week's topics include:
Dataline: Credit losses on financial assets — An overview of the FASB's current expected credit loss model
Impairment is a major component of the FASB and IASB's (the boards’) joint project to revisit most aspects of financial instruments accounting. In the aftermath of the recent financial crisis, the current incurred loss approach has been criticized for delaying the recognition of credit losses. As a result, many constituents believe revisions to the current impairment model are necessary.
The FASB has completed redeliberations on its proposed impairment model, referred to as the "current expected credit loss" (CECL) model. In December 2012, the FASB issued for public comment its proposed Accounting Standards Update (ASU), Financial Instruments—Credit Losses (Subtopic 825-15). The comment period ends on April 30, 2013.
The IASB has completed redeliberations on its proposed model, previously referred to as the "three bucket" model and now known as the "credit deterioration" model. The IASB's model differs from the FASB’s model in several key areas. The IASB is expected to issue its exposure draft in the first quarter of 2013.
Dataline 2013-01 looks at the FASB's CECL model, and draws comparisons to the IASB's credit deterioration model throughout.
New PwC Guide to Accounting for Utilities and Power Companies — 2013 Edition
We’ve developed a new Guide to Accounting for Utilities and Power Companies that provides accounting guidance for reporting entities in the utility and power industry to consider when preparing financial statements in accordance with accounting principles generally accepted in the United States of America (US GAAP). It addresses a variety of areas such as commodity contracts, power-related investments, inventory, plant, asset retirement obligations, regulated operations, and more. The guide is designed to be used as a supplement to general accounting guidance provided by U.S. GAAP and our other PwC accounting guides.
FASB requests comments on proposed improvements to accounting for repurchase agreements
The FASB published for public comment an exposure draft of proposed amendments to the accounting for repurchase agreements (aka “repos”) in an effort to identify those transactions that should be accounted for as a secured borrowing and to improve the associated accounting and disclosure requirements. The proposed amendments will likely affect some companies that engage in certain types of repurchase agreements, including repos-to-maturity. It will also affect companies that engage in repurchase financing agreements and currently account for the components as a linked transaction.
Comments on the exposure draft are requested by March 29, 2013.
Also, PwC issued an In brief article that provides an overview of the proposal.
FAF releases post-implementation review report on segment reporting
The Financial Accounting Foundation (FAF), the oversight body of the FASB, published a post-implementation review report on FASB Statement No. 131, Disclosures about Segments of an Enterprise and Related Information (now part of Accounting Standards Codification Topic 280). Overall the report finds that FAS 131—the 1997 accounting standard established to improve the way public companies report financial information about their business segments—generally achieves its purpose. However, some stakeholders suggest improvements—for example, some believe preparers could benefit from additional guidance on areas that regulators often question, such as the application of the aggregation criteria and determination of operating segments.
FASB meetings and project updates
Meeting summary: The FASB did not hold any board meetings this week.
Next open board meeting: The next board meeting is scheduled for January 23. The FASB will discuss its project on investment companies. See the FASB’s website for further information on the meeting.
Project updates: The FASB has updated the following project summaries:
IAASB seeks comments on consultation paper on audit quality framework
IFAC's International Auditing and Assurance Standards Board (IAASB) released for public comment a new consultation paper titled, A Framework for Audit Quality. Through the proposed framework, the IAASB aims to raise awareness of the key elements of audit quality, encourage stakeholders to explore ways to improve audit quality, and facilitate greater dialogue between key stakeholders on the topic.
The Framework for Audit Quality describes the input and output factors that contribute to audit quality at the engagement, audit firm and national levels. It also demonstrates the importance of appropriate interactions among stakeholders and the importance of various contextual factors.
Comments on the consultation paper are requested by May 15, 2013.
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.