This week's PwC update on financial reporting developments includes: FASB endorses variable interest entity alternative for private companies... FASB meetings and project updates... ASB proposes amendments to clarified auditing standard on letters for underwriters... and IAASB releases new Framework for Audit Quality.
PwC's weekly alert highlighting current financial reporting developments (including accounting, auditing and regulatory matters).
This week's topics include:
FASB endorses variable interest entity alternative for private companies
On February 19, the FASB endorsed an accounting alternative within U.S. GAAP proposed by the Private Company Council that provides private companies an alternative not to apply Variable Interest Entity (VIE) guidance for common control leasing arrangements when certain conditions are met. The FASB expects to issue the final standard in late March. The alternative would be available for early adoption for any financial statements that have not yet been made available for issuance.
(Also see PwC’s Private company reporter for more information on the new alternative.)
FASB meetings and project updates
Meeting summary: The FASB met on February 19 and discussed its projects on (1) insurance contracts, (2) accounting for financial instruments—impairment, and (3) consolidation—principle versus agent analysis. Also, as noted above, the FASB endorsed a VIE alternative for private companies. See the FASB’s website for the board’s meeting summary.
Next open board meeting: The FASB will meet on February 26. The board plans to discuss its projects on (1) accounting for financial instruments—classification and measurement, (2) development stage entities, and (3) not-for-profit financial reporting—financial statements. See the FASB’s website for further information on the meeting.
Project updates: The FASB has updated the summaries of its projects on:
ASB proposes amendments to clarified auditing standard on letters for underwriters
The ASB has published for public comment a proposed Statement on Auditing Standards (SAS) titled Amendment to SAS No. 122, Statement on Auditing Standards: Clarification and Recodification, section 920, Letters for Underwriters and Certain Other Requesting parties, as amended.
AU-C section 920, Letters for Underwriters and Certain Other Requesting Parties, was issued as part of the ASB’s clarity project and is a redrafting of AU section 634 of the same title. When the clarified standard was issued, the ASB did not intend to change or expand AU section 634 in any significant respect. However, the ASB became aware of practice issues as a result of implementing AU-C section 920 and, accordingly, is proposing amendments to that section to address those issues and avoid unintended changes to previous practice. The ASB is also proposing additional amendments to further clarify AU-C section 920.
Comments on the exposure draft are requested by April 15, 2014.
IAASB releases new Framework for Audit Quality
IFAC's International Auditing and Assurance Standards Board (IAASB) released a new publication titled A Framework for Audit Quality: Key Elements that Create an Environment for Audit Quality. Through this Framework, the IAASB aims to raise awareness of the key elements of audit quality, encourage key stakeholders to challenge themselves to do more to increase audit quality in their particular environments, and facilitate greater dialogue between key stakeholders on the topic.
The Framework describes in a holistic manner the different input, process, and output factors relevant to audit quality at the engagement, firm, and national levels. It also demonstrates the importance of appropriate interactions among stakeholders, and how they may facilitate improvement to audit quality, as well as perceptions of audit quality. Further, the Framework demonstrates the importance of various contextual factors, such as laws and regulations, the litigation environment, corporate governance, and the financial reporting framework—collectively, factors that have the potential to impact the nature and quality of financial reporting and, directly or indirectly, audit quality.
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, visit CFOdirect Network (www.cfodirect.pwc.com), PwC’s online resource for financial executives.