PwC's weekly alert highlighting current financial reporting developments (including accounting, auditing and regulatory matters).
This week's topics include:
10Minutes on shaping the boardroom agenda
Boards are adapting to an ever-changing governance environment, from continued Dodd-Frank rule making to risks and opportunities associated with emerging technologies. Strategy, risk management, and data security rank as top priorities for boards. Directors recognize that new perspectives and continued adjustments may be necessary to fulfill their oversight obligations. This 10Minutes outlines key points from PwC’s 2012 Annual Corporate Directors Survey that illustrate how boards are working to improve their oversight.
FAF approves new FASB/GASB agenda-setting process and accepts post-implementation review report
On February 26, the Board of Trustees of the Financial Accounting Foundation (FAF), the oversight body of the FASB and GASB, approved a key change to the agenda-setting process of the two boards. Decisions regarding project plans, agenda setting, and priority of projects will be approved by a majority vote of the respective boards, rather than by the board chair alone. Going forward, all agenda decisions will be voted on by the boards in public meetings.
The Trustees also accepted the post-implementation review (PIR) report on GASB Statements No. 3, Deposits with Financial Institutions, Investments (including Repurchase Agreements), and Reverse Repurchase Agreements, and No. 40, Deposit and Investment Risk Disclosures. Both Statements require note disclosures about deposits and investments, including related credit risks. The PIR report concluded that the standards are largely functioning as intended.
Lastly, the FAF also announced that the PIR team will begin its review of GASB Statements No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, and No. 30, Risk Financing Omnibus—an amendment of GASB Statement No. 10, which establish accounting and financial reporting standards for risk financing and insurance-related activities of state and local governments, including public risk pools.
FASB meetings and project updates
Meeting summary: The FASB met on February 27 and discussed its project on insurance contracts. See the FASB’s website for a summary of decisions reached at the meeting.
Next open board meeting: The next scheduled FASB meeting is on March 6, 2013. The FASB will discuss its project on insurance contracts. See the FASB’s website for further information on the meeting.
Project update: The FASB has updated the following project summary:
FAF seeks input on proposed changes to GASB agenda-setting process
In addition to the GASB standard-setting changes highlighted in the FASB/GASB section above, the FAF has published for public comment a proposal to further revise the agenda-setting process for the GASB to assist the Trustees in assessing the scope of the GASB’s standard-setting activity. Specifically, the Trustees are proposing to get stakeholder input earlier in the process when it’s not clear whether an item is within the GASB’s standard setting authority.
The proposal is the result of discussions between the Trustees and GASB leaders following completion of an independent academic study that documented GASB stakeholders’ views on the scope of the GASB’s standard-setting activities and authority. The study revealed a lack of consensus about the appropriate scope of the GASB’s activities and involvement in government accountability reporting.
Comments are requested by April 30, 2013.
IASB proposes scope exception for hedge accounting
The IASB published for public comment an exposure draft proposing amendments to IAS 39, Financial Instruments: Recognition and Measurement, and IFRS 9, Financial Instruments. The objective of the proposed amendments is to introduce a narrow scope exception to the requirement for the discontinuation of hedge accounting in IAS 39. Specifically, the exposure draft proposes an exception when a derivative that has been designated as a hedging instrument, is novated from one counterparty to a central counterparty (CCP), as a consequence of new laws or regulations if specific conditions are met (in this context, novation of the derivative contract is the substitution of the original counterparty to the contract for a new counterparty, being a CCP).
Comments are requested by April 2, 2013.
IASB Update — February 2013
This issue of IASB Update, issued by the IASB staff, provides a summary of the IASB’s February 18-22 meeting. The FASB joined the IASB for some of the sessions. The IASB and FASB continued discussions on their projects on (1) revenue recognition and (2) leases.
The topics discussed at the IASB-only sessions were (1) conceptual framework, (2) fair value measurement: unit of account, (3) IFRIC update, (4) annual improvements 2010-2012, (5) financial instruments: hedge accounting, (6) leases, (7) insurance contracts, (8) revenue recognition, (9) matters arising from the IFRS Interpretations Committee, (10) IAS 41, Agriculture: Bearer Biological Assets, (11) guide for micro-sized entities in applying the IFRS for SMEs, and (12) rate-regulated activities.
IFRS for SMEs Update — February 2013
The February 2013 edition of the IASB's IFRS for SMEs Update covers, among other things, (1) SMEIG meeting February 2013— recording of the meeting available, (2) IFRS transition plan in Saudi Arabia, (3) a status report on IFRS for SMEs translations, and (4) where to obtain IFRS for SMEs materials.
SEC staff issues updated FAQs on interactive data disclosure
The SEC staff recently issued an updated version of its FAQ publication, Staff Interpretations and FAQs Related to Interactive Data Disclosure. The update includes revisions to existing questions and the addition of new questions on various topics.
PCAOB issues inspection report on 2007-2010 audits conducted by small domestic firms
The PCAOB has released a report titled Report on 2007-2010 Inspections of Domestic Firms that Audit 100 or Fewer Public Companies that summarizes inspection observations identified in the 2007 through 2010 inspections of U.S. firms that audited 100 or fewer public companies. Overall, the results show a reduced rate of reported significant audit performance deficiencies when compared to a 2007 report the board issued addressing observations from inspections of triennially inspected firms from 2004 through 2006. Despite the decrease, the PCAOB believes deficiency rates are still too high. The PCAOB encourages firms to use the report to continue to enhance the quality of their audits.
AICPA issues reports on frequent violations of employee benefit plan and governmental and not-for-profit audits
The AICPA’s Professional Ethics Division has compiled reports of most frequent violations of Professional Standards found in its investigations of employee benefit plan and governmental and not-for-profit audits during the last two years. Most often, the reporting, disclosure, and auditing errors have occurred as a result of a lack of experience and lack of specific continuing professional education in these areas. Typically, the deficiencies could have been detected by a quality control review of the financial statements and risk areas.
The table in the attachment lists meetings of standard-setting bodies, PwC webcasts and other events occurring in March 2013 that may be of interest to you. Click on the name of the meeting, webcast or event for more information. For additional events, see the events calendar on PwC's CFOdirect Network.
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.