PwC's weekly alert highlighting current financial reporting developments (including accounting, auditing and regulatory matters).
This week's topics include:
PwC comments on proposed amendments to FASB Codification glossary terms
We submitted a comment letter on the FASB's proposed Accounting Standards Update (ASU): Technical Corrections and Improvements to Glossary of Terms. Except for the two matters described below, we agree with the changes included in the proposal and believe they meet the board’s objective to improve the FASB Accounting Standards Codification.
We do not agree with the proposal to replace the term “fair value” in ASC 718, Compensation-Stock Compensation, and in ASC 505, Equity, with the term “share-based payment value” without also modifying the related definition. As the guidance in ASC 718 and ASC 505 predates the broader fair value measurement guidance now codified in ASC 820, Fair Value Measurement, the term “share-based payment value” was never intended to have the same general meaning as the term “fair value” used in ASC 820.
Rather than rename the term “fair value” in ASC 718 and ASC 505, we recommend the board delete the term “fair value” from the Master Glossary that originates from the issuance of FASB Statement No. 123 (revised 2004), Share-Based Payment (FAS 123R). Alternatively, the board could replace the term “fair value” in ASC 718 and ASC 505 with the term “share-based payment value,” include that new term in the Master Glossary, and modify the definition of share-based payment value to describe what this term is intended to represent for purposes of measuring the compensation cost of share-based awards.
In addition, we recommend the board provide transition guidance for the proposed changes to Master Glossary terms “plan assets” and “actual return on plan assets.”
FASB proposes definition of a public business entity
On August 7, the FASB issued for public comment a proposal that defines a public business entity. The purpose of the proposal is to (1) amend the Master Glossary of the FASB Accounting Standards Codification to include one definition of a public business entity for use in U.S. GAAP; and (2) identify the types of organizations that would be excluded from the scope of the draft Private Company-Decision Making Framework: A Guide for Evaluating Financial Accounting and Reporting for Private Companies once it is finalized.
The proposal would not affect existing requirements. The definition of a public business entity would be used by the FASB, the Private Company Council (PCC), and the Emerging Issues Task Force (EITF) in specifying the scope of future accounting and reporting guidance.
Comments on the exposure draft are requested by September 20.
FASB meetings and project updates
Meeting summary: The FASB met on August 7 and decided to endorse the Private Company Council proposal for PCC Issue 13-02, “Applying Variable Interest Entity Guidance to Common Control Leasing Arrangements.” An exposure draft will be issued for public comment in the near future. The board also discussed its project on disclosure framework—Board’s decision process. See the FASB’s website for the board’s meeting summary.
Next open board meeting: The FASB does not have any meetings scheduled for next week. The next board meeting is scheduled for August 21.
Project updates: The FASB has updated the summaries of its projects on:
SEC issues updated frequently asked questions about Form 13F
The SEC Division of Investment Management staff has updated its FAQs document regarding Form 13F. Form 13F is a quarterly report of equity holdings by filed institutional investment managers with at least $100 million in equity assets under management. The updated FAQs reflect the transition from the text-based Form 13F to the new online form and to provide additional clarification about the availability of confidential treatment.
PCAOB to consider a new auditing standard to enhance the auditor's reporting model
The PCAOB has scheduled an open meeting for Tuesday, August 13, to consider proposing for public comment a new auditing standard and related amendments to enhance the auditor's reporting model. In addition, the PCAOB will consider proposing a new auditing standard and related amendments to enhance the auditor’s responsibilities (including reporting responsibilities) for other information in an annual report that contains audited financial statements and the auditor’s report.
PEEC issues new and revised ethics interpretations
The AICPA Professional Ethics Executive Committee (PEEC) has issued the following:
Revised Interpretation No. 102-4, “Subordination of Judgment by a Member,” under Rule 102, Integrity and Objectivity: The revisions (1) broaden the scope of the Interpretation to cover differences of opinion with a supervisor related to the application of accounting principles, auditing or other relevant professional standards, laws or regulations; and (2) clarify that the Interpretation applies when performing professional services for a client, an employer, or on a volunteer basis. The revisions are effective on August 31, 2013.
Changes to Rule 101 and Other Revisions to the AICPA Code of Conduct: This release includes a number of revisions to the AICPA Code of Professional Conduct, including:
- add a new provision that concludes that financial statement preparation, cash-to-accrual conversions, and reconciliations are considered outside the scope of the attest engagement and, therefore, constitute nonattest services subject to the management responsibilities requirements of Interpretation No. 101-3
- describe the impact on independence of performing ongoing and separate evaluations
- Ethics Ruling No. 65, “Use of CPA Designation by Member Not in Public Practice,” of ET section 191, Ethics Rulings on Independence, Integrity, and Objectivity
- Ethics Ruling No. 38, “CPA Title, Controller of Bank,” of ET section 591, Ethics Rulings on Other Responsibilities and Practices
- Ethics Ruling No. 78, “Letterhead: Lawyer-CPA,” of ET section 591
The revisions became effective on May 31, 2013, unless otherwise stated in the official release.
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.