Flashline - Week ending March 21, 2013 (No. 2013-12)

Flashline 03/21/2013 by Assurance services

PwC's weekly alert highlighting current financial reporting developments (including accounting, auditing and regulatory matters).

This week's topics include:

  • The quarter close — A look at this quarter's financial reporting issues — Q1 2013
  • Regulatory and standard setting developments
  • Shareholder questions: considerations for 2013 annual meetings
  • Save the date: PwC's quarterly tax accounting webcast – April 4
  • FASB to join IFRS Foundation’s Accounting Standards Advisory Forum
  • FASB meetings and project updates
  • EITF observer — March 2013
  • NASDAQ proposes listed companies have an internal audit function
  • COSO to issue updated Framework in May
  • PCAOB to consider proposal for the reorganization of auditing standards
  • IAASB further strengthens standard on using work of internal auditors; addresses use of direct assistance
  • IESBA strengthens key sections of Code of Ethics for Professional Accountants

PwC

The quarter close — A look at this quarter's financial reporting issues — Q1 2013

This edition of The quarter close and related video perspectives highlight current developments in financial reporting, including key standard-setting developments in revenue, financial instruments, and other hot topics, as well as SEC and PCAOB regulatory updates. Here’s a preview of what you need to know now, and what’s coming in the year ahead:

  • Leadership changes at the SEC and FASB
  • Key decisions on the revenue recognition project
  • The FASB’s latest proposals on financial instruments
  • Accounting hot topics including accounting changes, share repurchase programs, acquisition reminders, developments in Venezuela, interim tax accounting, and January’s “fiscal cliff” legislation
  • Key implications of Dodd-Frank rulemaking for non-financial services companies
  • And more

Regulatory and standard setting developments

This issue of Regulatory and Standard-Setting Developments provides a high-level summary of activities of the Securities and Exchange Commission, the Financial Accounting Standards Board, the Public Company Accounting Oversight Board, and others that may be of interest to audit committees, companies, and their stakeholders. It includes some of the relevant regulations, standards, and guidance that were recently issued or are on the horizon, both inside and outside of the U.S.

Shareholder questions: considerations for 2013 annual meetings

PwC released Shareholder questions: considerations for 2013 annual meetings to assist management and the board of directors of public companies prepare for the annual meeting of shareholders. It contains example questions on topics that may be top-of-mind for shareholders, along with background information and suggested actions for management’s consideration. 

Save the date: PwC's quarterly tax accounting webcast – April 4

At 2:00 pm ET on Thursday, April 4, we will be hosting our first quarter 2013 Tax Accounting webcast. On the webcast you’ll hear from a panel of our Tax Accounting Services specialists on relevant tax accounting matters, including recent regulatory and legislative developments and a topical discussion of the uncertain tax position model.

We invite you to pre-register for the webcast through the CFOdirect Network. Participants will be eligible to receive 1.0 CPE credit.

Financial Accounting Standards Board (FASB)

FASB to join IFRS Foundation’s Accounting Standards Advisory Forum

The Financial Accounting Foundation (FAF), the oversight body of the FASB, announced that the FASB will join the Accounting Standards Advisory Forum (ASAF) — the new advisory group for the International Accounting Standards Board (IASB). The ASAF was established earlier this year by the IFRS Foundation to improve cooperation among worldwide standard setters and advise the IASB as it develops International Financial Reporting Standards (IFRS).

FASB meetings and project updates

Meeting summary: The FASB met on March 20 and discussed its project on revenue recognition. See the FASB’s website for a summary of decisions reached at the meeting.

Next open board meetings: The FASB has the following meetings scheduled for next week:

  • March 28: FASB meeting
    The board plans to discuss: (1) its project on accounting for financial instruments: impairment, (2) whether to add a project on fair value measurement disclosures of private company employer securities held by employee benefit plans to its technical agenda, and (3) whether to ratify the EITF consensuses and tentative conclusions reached at the March 14 EITF meeting.
  • March 29: FASB meeting
    The board plans to discuss whether to add a project to its technical agenda to consider the application of asset-or entity-based guidance to an entity that substantially consists of nonfinancial assets.

See the FASB’s website for further information on the meetings.

Project updates: The FASB has updated the following project summaries:

Emerging Issues Task Force (EITF)

EITF observer — March 2013

At the EITF's March 14 meeting, the Task Force discussed four Issues. It reached final consensuses on the following two issues:

  • Issue 12-B—Not-for-Profit Entities: Services Received from Personnel of an Affiliate for Which the Affiliate Does Not Charge the Recipient Not-for-Profit
  • Issue 12-G—Accounting for the Difference between the Fair Value of the Assets and the Fair Value of the Liabilities of a Consolidated Collateralized Financing Entity

The Task Force reached a consensuses-for-exposure on Issue 13-B, "Accounting for Investments in Affordable Housing Tax Credits.” Further discussion is expected on Issue 12-F, "Recognition of New Accounting Basis (Pushdown) in Certain Circumstances."

The FASB will discuss the consensuses and consensuses-for-exposure at its March 29 board meeting and decide whether to ratify them.

Read PwC's EITF observer for a synopsis of the discussions and decisions reached at the March 14 EITF meeting.

Securities and Exchange Commission (SEC)

NASDAQ proposes listed companies have an internal audit function

Nasdaq has filed a proposed rule change to require all listed companies to establish and maintain an internal audit function. The purpose of the rule is to ensure that listed companies have a mechanism in place to regularly review and assess their system of internal control and, thereby, to identify any weaknesses and develop appropriate remedial measures. The rule is also intended to make sure that the listed company’s management and audit committee are provided with ongoing information about risk management processes and the system of internal control.

If approved by the SEC, a Company listed on Nasdaq on or before June 30, 2013, would need to establish an internal audit function by no later than December 31, 2013. A Company listed after June 30, 2013, would have to establish an internal audit function prior to listing.

Comments on the proposed rule are due by March 29, 2013.

Committee of Sponsoring Organizations (COSO)

COSO to issue updated Framework in May

On March 20, the Committee of Sponsoring Organizations (COSO) announced that its board has approved its updated Internal Control – Integrated Framework: 2013 (Framework) and expects to issue it on May 14, 2013. The issuance will also include a volume of Illustrative Tools for Assessing Effectiveness of a System of Internal Control.

COSO also expects to issue simultaneously Internal Control over External Financial Reporting: A Compendium of Approaches and Examples, which has been developed to assist users when applying the Framework to external financial reporting objectives.

Public Company Accounting Oversight Board (PCAOB)

PCAOB to consider proposal for the reorganization of auditing standards

The PCAOB has scheduled an open meeting for Tuesday, March 26, to consider issuing for public comment a proposal for the reorganization of PCAOB auditing standards. Under consideration is a potential framework for reorganizing the board’s existing interim and PCAOB-issued auditing standards into a topical structure with a single integrated numbering system, along with certain implementing amendments to its rules and standards. 

The proposed reorganization is intended to present the standards in a logical order that generally follows the flow of how one conducts an audit and to help users navigate the standards more easily.

International Federation of Accountants (IFAC)

IAASB further strengthens standard on using work of internal auditors; addresses use of direct assistance

In follow-up to its 2012 release of stronger standards dealing with the external auditor’s use of an internal audit function’s work, the International Auditing and Assurance Standards Board (IAASB) issued new requirements and guidance that address the auditor’s responsibilities if using internal auditors to provide direct assistance under the direction, supervision, and review of the external auditor for purposes of the audit (“direct assistance”).

The guidance in ISA 610 (Revised 2013), Using the Work of Internal Auditors, pertaining to direct assistance is effective for audits of financial statements for periods ending on or after December 15, 2014.

IESBA strengthens key sections of Code of Ethics for Professional Accountants

IFAC's International Ethics Standards Board for Accountants (IESBA) released strengthened provisions in its Code of Ethics for Professional Accountants (the Code) to address conflicts of interest and a breach of a requirement of the Code. It also released amendments to the definition of the term “engagement team” in the Code. The amendments clarify the relationship between internal auditors providing direct assistance and the meaning of an engagement team under the IESBA Code.

The changes will be effective in 2014. Early adoption is permitted. The revised pronouncements will be printed in the 2013 Handbook of the Code of Ethics for Professional Accountants due out in the second quarter.

Edited by:

Brad Mescher
Director
Phone: 1-973-236-7261
Email: brad.mescher@us.pwc.com

Saira Gilani
Senior Manager
Phone: 1-973-236-5811
Email: saira.s.gilani@us.pwc.com

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.