PwC's weekly alert highlighting current financial reporting developments (including accounting, auditing and regulatory matters).
This week's topics include:
Dataline: Responses are in on the FASB and IASB financial instruments credit loss proposals
The comment periods for the FASB and IASB’s credit loss exposure drafts ended on May 31, 2013 and July 5, 2013, respectively. The FASB and IASB issued summaries of the feedback received from respondents and held a joint meeting on July 23, 2013 to discuss that feedback.
The FASB received mixed feedback on their proposed model. While the majority of users supported a full lifetime loss model, preparers generally did not support the FASB's model and instead preferred a model that only requires the recognition of some expected credit losses, and/or establishes a threshold to be reached prior to recognition of all expected credit losses.
A majority of the respondents to the IASB's proposal, including the majority of users and preparers, were supportive of the IASB's model, which recognizes credit losses based on deterioration in credit risk.
This Dataline provides a high level summary of the feedback received by each of the boards on their respective credit loss proposals.
In brief: Boards re-deliberate aspects of joint revenue project
The FASB and IASB met in July to discuss several additional areas of the joint revenue recognition project, including the constraint on variable consideration, customer credit risk, and accounting for arrangements that do not meet the definition of a contract with a customer. This In brief article provides a summary of the decisions reached by the boards.
BoardroomDirect: July edition
The July 2013 edition of BoardroomDirect features what non-financial public companies need to know about the Dodd-Frank Act derivatives reform regulations. It explains the new recordkeeping and disclosure requirements those companies must comply with, as well as how to determine if a company is eligible for an end-user exemption. The newsletter also highlights other relevant topics for boards, including (1) Federal court decisions on the SEC’s conflict minerals and resource extraction payments disclosure rules, (2) a Delaware court decision to uphold exclusive forum bylaws, (3) how changes to the auditor’s reporting model are progressing worldwide, (4) U.S. House passage of a bill banning mandatory audit firm rotation, and (5) the PCAOB’s release of its standard-setting agenda.
PwC issues comments on the Sustainability Accounting Standards Board (SASB) conceptual framework exposure draft
PwC submitted a comment letter expressing support of the SASB’s conceptual framework exposure draft. We believe the SASB’s conceptual framework represents an important addition to the debate on the future of corporate reporting. Good corporate reporting is central to the effective functioning of the capital markets and we support voluntary initiatives that meaningfully contribute to this discussion. From our initial review, we believe that the SASB’s guidance will provide valuable insight to companies as they assess the materiality of information for inclusion in their corporate reporting.
While we are optimistic about the SASB’s contribution, we encourage the SASB to consider the following:
FASB and IASB to form joint transition resource group for revenue recognition
The FASB and IASB announced plans to create a joint transition resource group focused on the upcoming final converged standard on revenue recognition. The group will be responsible for informing the IASB and the FASB about diversity in practice or interpretive issues that could arise when companies, institutions, and other organizations implement the revenue recognition standard. They will also provide information that will help the boards determine what, if any, action will be needed to resolve the issues.
The resource group will convene following the final issuance of the revenue recognition standard later this year. The group itself will not issue guidance.
FAF appoints James Kroeker as vice chairman of the FASB
The Financial Accounting Foundation (FAF) announced the appointment of James L. Kroeker, former SEC chief accountant, as a member and vice chairman of the FASB beginning September 1. He fills a vacancy created by the retirement on June 30 of former FASB Chairman Leslie F. Seidman.
The position of vice chairman was created early in the FASB’s history, but was later retired. In response to increasing demands on the time of the FASB chairman, the FAF
Materials for the September 13 EITF meeting
The FASB staff has published the following materials for the September 13 EITF meeting:
FASB meetings and project updates
Meeting summary: The FASB did not hold any board meetings this week.
Next open board meeting: The FASB’s next board meeting will be held on August 7. The FASB will discuss (1) whether to endorse a Private Company Council (PCC) proposal relating to “Applying Variable Interest Entity Guidance to Common Control Leasing Arrangements,” and (2) its project on Disclosure framework—Board’s decision process. See the FASB’s website for more information on the meeting.
Project updates: The FASB has updated the summaries of its projects on:
SEC adopts final rules on broker-dealer reports
On July 31, the SEC announced that it is amending certain broker-dealer annual reporting, audit, and notification requirements. The new rules are intended to provide additional safeguards, strengthen audit requirements, and enhance oversight in the way broker-dealers maintain custody of their customers’ assets. Broker-dealers are required to begin filing new quarterly reports with the SEC and annual reports with SIPC by the end of 2013.
The requirement for broker-dealers to file annual reports with the SEC is effective June 1, 2014.
IASB Update—July 2013
This edition of IASB Update, issued by the IASB staff, provides a summary of the IASB’s July 23-25 meetings. The FASB joined the IASB in a joint session to discuss their projects on revenue recognition and accounting for financial instruments: classification & measurement and impairment.
Some of the topics discussed at the IASB-only sessions included: (1) comprehensive review of the IFRS for SMEs, (2) rate-regulated activities, (3) post-implementation reviews, (4) macro hedging, and (5) going concern.
IFRIC Update — July 2013
The July 2013 edition of IFRIC Update provides a summary of the IFRS Interpretations Committee's July 16-17 meeting. The meeting included discussions of the Committee's current agenda item on IAS 19, Employee Benefits, specifically focused on employee benefit plans with a guaranteed return on contributions or notional contributions. Also covered were agenda decisions, issues considered for annual improvements, and discussion of other work in progress.
IAASB proposes standards to fundamentally transform the auditor's report
The International Auditing and Assurance Standards Board (IAASB) issued an exposure draft (ED), Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing, intended to enhance the future auditor’s report.
The exposure draft would require auditors of financial statements of listed entities to communicate in a separate section of their report those matters that, in the auditor’s professional judgment, were of most significance in the audit of the financial statements of the current period. Key audit matters (KAM) are selected from matters communicated with those charged with governance. In determining which of the matters communicated to those charged with governance are KAM, the auditor should take into account areas of significant auditor attention in performing the audit, including certain areas and circumstances identified in the ED.
A new “going concern” section of the auditor’s report would also be required in all audits. The going concern section would address the auditor’s conclusions related to whether management’s use of the going concern basis of accounting in the preparation of the financial statements is appropriate. It would also address whether a material uncertainty exists related to events or conditions that, individually or collectively, may cast significant doubt on the entity’s ability to continue as a going concern.
Comments on the exposure draft are requested by November 22, 2013.
Also, PwC issued an In brief article that provides a high-level summary of the proposal.
The table in the attachment lists meetings of standard-setting bodies, PwC webcasts and other events occurring in August 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.