PwC's weekly alert highlighting current financial reporting developments (including accounting, auditing and regulatory matters).
This week's topics include:
Conflict minerals survey: How companies are preparing
PwC recently surveyed companies to determine their level of understanding of the conflict minerals rule, as well as their progress toward compliance. PwC’s report includes results from nearly 900 individual respondents and sheds light on some of the more significant hurdles companies are encountering. Some key findings: almost half of companies are still in the initial stages of their compliance efforts; and the single most challenging task is getting accurate information from suppliers.
PwC expresses support for PCAOB's reproposed auditing standard on related parties
PwC submitted a comment letter expressing its support of the PCAOB’s reproposed auditing standard, Related Parties, and reproposed amendments relating to significant unusual and financial relationships and transactions with executive officers. PwC believes the reproposal has been improved by better aligning it with the board’s risk assessment standards, but offers suggestions to further improve it prior to adoption.
PwC comments on IASB's proposal re: financial instruments—credit losses
The PwC global network of firms submitted a comment letter in response to the IASB's exposure draft, Financial Instruments—Credit Losses. The PwC network continues to support the development of a single converged model for credit impairment under both IFRS and US GAAP, and urges the IASB and FASB to resume collaboration during the re-deliberation process to achieve this goal.
Consistent with prior comment letters on this topic, we continue to support an expected loss approach to accounting for the credit impairment of financial assets. We believe the IASB’s exposure draft, together with certain modifications described in our letter, would provide an appropriate balance between the faithful representation of the underlying economics of credit impairment losses and the cost of implementation. It would also achieve the principles established by the G20 subsequent to the financial crisis.
FASB defers certain disclosures for nonpublic employee benefit plans
On July 8, the FASB issued Accounting Standards Update No. 2013-09, Fair Value Measurement (Topic 820), Deferral of the Effective Date of Certain Disclosures for Nonpublic Employee Benefit Plans in Update No. 2011-04. This final standard provides an indefinite deferral for certain quantitative fair value disclosures for nonpublic employee benefit plans. In issuing the deferral, it gives the FASB additional time to weigh stakeholder concerns regarding the cost/benefit of potentially providing proprietary information about nonpublic entities through the dissemination of their employee benefit plans’ financial statements on a regulator’s website.
Also, see PwC’s In brief article for an overview of the final standard.
FASB meetings and project updates
Next open board meeting: The FASB will meet on July 17 to decide whether to add the following topics to the Emerging Issues Task Force’s (EITF) agenda: (1) determining whether the host contract in a hybrid financial instrument is more akin to debt or equity and (2) deferred tax accounting for an asset retirement obligation when there is a limitation on the deductibility of asset retirement expenditures. See the FASB’s website for further information on the meeting.
Project updates: The FASB has updated the summaries of its projects on:
US judge vacates SEC rules re: disclosure of payments by resource extraction issuers
On July 2, a US judge granted a motion vacating the SEC’s August 2012 rule, “Disclosure of Payments by Resource Extraction Issuers,” and remanding it to the Commission for further proceedings. The motion was brought by various trade groups, including the American Petroleum Institute and U.S. Chamber of Commerce.
The judge found the SEC made two substantial errors, stating that: “the Commission misread the [Dodd-Frank Act] to mandate public disclosure of the reports, and its decision to deny any exemption was, given the limited explanation provided, arbitrary and capricious.”
GAO recommends SEC consider requiring companies to disclose whether they obtained auditor attestation on internal controls
The GAO issued a report to two congressional committees as required by the Dodd-Frank Act. The report recommends that the SEC consider requiring public companies to disclose whether they obtained an auditor attestation of their internal controls over financial reporting. Many public companies are required to obtain such attestation, but the GAO wants public companies that are exempt from the requirement to be required to disclose whether they voluntarily obtained an auditor attestation.
The GAO report also discusses (1) how the number of financial statement restatements compares between exempt and nonexempt companies (i.e., those with $75 million or more in public float), (2) the costs and benefits of complying with the attestation requirement, and (3) what is known about the extent to which investor confidence is affected by compliance with the auditor attestation requirement.
OMB releases final "Circular A-133 Compliance Supplement 2013"
The OMB has issued the 2013 version of OMB Circular A-133: Compliance Supplement. The supplement, which is published annually, is intended to assist auditors in planning and performing audits in accordance with the Single Audit Act and Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. It provides information for auditors to aid in understanding federal program objectives, procedures and compliance requirements, as well as audit objectives and suggested audit procedures for determining compliance with the requirements.
The 2013 version of the OMB Circular A-133: Compliance Supplement contains an appendix (Appendix 5) that includes a list of changes from the 2012 OMB Circular A-133 Compliance Supplement, dated June 2012.
PCAOB updates standard-setting agenda
The PCAOB issued an updated standard-setting agenda, which provides a brief project overview of the board's current standard-setting agenda and outlines key milestones on various standard-setting projects.
GASB issues proposal addressing transition issue in pension standards
The GASB issued for public comment a proposal regarding the transition provisions of its new pension standards for state and local governments. The proposal would eliminate a potential understatement of restated beginning net position and expense in a government’s first year of implementing GASB Statement No. 68, Accounting and Financial Reporting for Pensions.
The proposal would require a state or local government to recognize a beginning deferred outflow of resources for its pension contributions made during the time between the measurement date of the beginning net pension liability and the beginning of the initial fiscal year of implementation. This amount would be recognized regardless of whether it is practical to determine the beginning amounts of all other deferred outflows of resources and deferred inflows of resources related to pensions.
The provisions would be effective simultaneously with the provisions of Statement 68, which is required to be applied in fiscal years beginning after June 15, 2014.
Comments on the proposal are requested by August 26, 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.