PwC's weekly alert highlighting current financial reporting developments (including accounting, auditing and regulatory matters).
This week's topics include:
Point of view: Integrated Reporting—Going beyond the financial results
This Point of view highlights how companies may benefit from integrated reporting in response to stakeholders’ calls for enhanced disclosure of environmental, social, governance, and other nonfinancial information. It also outlines the benefits some companies are realizing as they explore integrated reporting.
Integrated reporting seeks to provide stakeholders with additional information to help them make more informed assessments of companies and their long-term prospects. The International Integrated Reporting Council is developing an integrated reporting framework to guide companies in communicating the information expected by stakeholders. Companies that use the integrated reporting concepts may produce more transparent reporting and could also improve their access to capital.
Adding integrated reporting to the agenda of management and board strategy sessions may help companies meet the evolving expectations of stakeholders. The integrated reporting concepts may provide companies a useful framework when considering how to best disclose environmental, social, governance, and other matters that they have decided to report. Companies may also achieve strategic business benefits from integrated thinking.
Now available - 2013 editions of PwC Guides to Accounting
We’ve issued the 2013 editions of four of our popular Guides to Accounting, including: (1) variable interest entities, (2) income taxes, (3) stockbased compensation, and (4) financing transactions. The Guides describe, in detail, PwC's guidance and insight with respect to accounting for specific topical areas under U.S. GAAP, primarily by interpreting and supplementing the FASB Accounting Standards Codification and SEC guidance.
Save the date: Q3-2013 Current Accounting and Reporting Developments webcast – September 23rd
Please mark your calendars and plan to attend our third quarter 2013 'Current Accounting and Reporting Developments' webcast at 1:00 pm ET on Monday, September 23. This 90-minute webcast provides insights and information about key emerging accounting, regulatory, and market developments impacting financial reporting. On the webcast, you’ll hear from a broad range of PwC specialists who will update you on matters that may impact your business. The webcast will provide 1.5 CPE credits to participants.
We invite you to pre-register for the webcast through the CFOdirect Network.
Dataline: FASB and IASB exposure drafts would significantly change accounting for insurance contracts
The FASB and IASB published their exposure drafts in late June on the insurance contracts project. The boards have been working together for several years to develop a comprehensive, converged standard on accounting for insurance contracts that would address recognition, measurement, presentation, and disclosure. “Insurance contracts” would be broadly defined, and the proposed guidance would apply to contracts that are written as opposed to a class of entities that write them, unlike current U.S. GAAP. Thus, the guidance could have implications for entities that are not insurers, for example, banks that write financial guarantee products or certain indemnities.
Key aspects of the proposals include the requirement to use a “current value” discounted cash flow measurement for the insurance contract liability. Any excess of expected premiums over expected claims and expenses would be deferred as “margin" and amortized into income over future periods. Expected losses would be recognized immediately. A modified approach would apply for short duration contracts (e.g., property/casualty contracts) meeting specified criteria, similar to today’s unearned premium approach.
Given the potential implications of the changes being considered, entities should be engaged in assessing the impact to their products, systems, and investor reporting and consider commenting on the proposals. Comments on the proposals are due October 25.
Our Dataline summarizes the key aspects of the exposure drafts.
Private company reporter – August 2013
Definition of a Public Business Entity
The FASB issued an exposure draft on the definition of a public business entity, which would create a de facto definition of a nonpublic entity. The proposed definition does not replace the definitions of a public entity currently existing in GAAP. Instead, the definition will be used in determining the scope for which entities are eligible for the accounting alternatives approved by the FASB and the Private Company Council (PCC).
The proposed definition will result in more companies being considered “public business entities” than under the definitions used in U.S. GAAP today. Accordingly, companies should pay careful attention to determine if they are eligible for the alternatives.
Comments on the proposed definition are due by September 20.
FASB endorsement of PCC Proposal
The FASB endorsed the PCC proposal that would provide a nonpublic entity the option to not apply the VIE model to certain common control leasing arrangements.
The August 15 edition of our Private company reporter provides further information on the above, as well as highlights of other recent developments related to private company reporting.
PwC comments on proposed ASU: Reporting Discontinued Operations
In our comment letter on the FASB’s proposed ASU, Presentation of Financial Statements—Reporting Discontinued Operations, we support the board’s efforts to develop an improved definition of a discontinued operation. Certain stakeholders have expressed concerns that the current guidance results in financial statements that are not decision-useful and are more costly to prepare because too many disposals qualify for discontinued operations presentation.
We agree with the board that only disposals representing major strategic shifts in operations should be reported as discontinued operations. We also believe that dispositions of a major line of business or major geographical area of operations should serve as indicators of a major strategic shift but not as independent criteria. While we agree that the existence of significant continuing involvement with a disposed component should not preclude presentation as a discontinued operation in all cases, we believe that an assessment of the nature and extent of continuing involvement should remain a consideration when evaluating whether a major strategic shift in operations has occurred.
We do not agree, however, with certain of the proposed disclosure requirements, particularly those relating to disposals of individually material components of an entity.
PCAOB proposes significant changes to auditor's report
On August 13, the PCAOB issued for public comment a proposal on the auditor's reporting model.
On August 13, the PCAOB issued for public comment a related proposal on the auditor's responsibilities for other information in an annual report.
Comments on both the proposals are requested by December 11, 2013.
PCAOB publishes 2012 annual report
The PCAOB has published its 2012 annual report which summarizes the activities of the board in 2012 regarding (1) registration, (2) inspections, (3) standards, and (4) enforcement. It also includes the PCAOB’s audited financial statements.
AICPA publishes three new audit data standards
The AICPA's Assurance Services Executive Committee's (ASEC's) Emerging Assurance Technologies Task Force published three voluntary, recommended data standards on the extraction of information to help develop new technologies that will contribute to the effectiveness, timeliness, and efficiency of the audit process.
One of the main projects that this task force has been working on is developing a standardized data model that management, internal auditors, and external auditors could utilize for enhanced analytics that would further improve the timeliness and effectiveness of the audit process.
AICPA releases Q&As on third-party verification letters
In response to frequently asked questions, the AICPA has developed several Q&As on third-party verification letters. Increasingly, CPAs are receiving requests from clients, lenders, loan brokers, health insurance providers, adoption agencies, regulators, and various other agencies to confirm client information. In turn, the AICPA has received several inquiries from CPAs on what they often refer to as "comfort letters."
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 September 4. The topics for this meeting will be announced shortly before the meeting.
Project update: The FASB has updated the summary of its project on Disclosure framework.
PAIB eNews — August 2013
This issue of IFAC's PAIB Committee eNews includes various articles, including the following:
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.