This week's PwC update on financial reporting developments includes: The quarter close—A look at this quarter’s financial reporting issues—Q1 2014 ... 10Minutes on revenue recognition ... COSO 2013: ICFR Transition (video)... FASB meetings and project updates... and more
PwC's weekly alert highlighting current financial reporting developments (including accounting, auditing and regulatory matters).
This week's topics include:
The quarter close—A look at this quarter’s financial reporting issues—Q1 2014
This edition of The quarter close and related video perspectives covers the latest developments in financial reporting that are top-of-mind for companies in 2014. Here’s a preview:
In this quarter’s video perspectives, we highlight the recent private company goodwill standard and its impact on companies. We also discuss key accounting considerations to weigh when concluding on gross versus net in revenue reporting. And, we take a look at what companies should consider when determining functional currency for foreign entities.
10Minutes on revenue recognition
Revenue, or the “top line”, is one of the most closely-monitored measures of an entity's growth and market share.
The FASB and IASB are expected to issue their new global accounting standard, Revenue from Contracts with Customers, that will apply to all revenue transactions, regardless of industry. Understanding the effect of this change on your business will help you inform your key stakeholders, prepare internally, and limit surprises down the road.
This 10Minutes provides information about the impending standard and insight into ways in which some companies are preparing for the broader impact.
Regulatory and standard-setting developments – March 14
This issue of Regulatory and standard-setting developments provides a summary of the activities of the PCAOB, SEC, and FASB, and describes related international developments that are of interest to audit committees, companies, and their stakeholders. It includes some of the relevant regulations, standards, and guidance recently issued or on the horizon.
Some of the topics covered in this edition include: (1)commentary received on PCAOB proposed standards on auditor transparency and auditor reporting model, (2) audit work papers of US accounting firm affiliates in China, (3) recent cybersecurity activity, (4) update on the status of FASB/IASB priority convergence projects, (5) update on the Private Company Council standard setting initiatives, and (6) update on EU Audit Reform focusing on mandatory firm rotation.
In brief: Leasing project deliberations settle some issues, but differences remain
On March 18 and 19, 2014, the FASB and IASB (the boards) re-deliberated the lessee and lessor accounting models, lease term, exemptions and simplifications. The boards voted on a number of items but were unable to reach consensus on certain key issues.
The FASB and IASB both support lessees bringing leases on the balance sheet. However, they are split on income statement treatment for lessees. FASB members support a dual model with income statement treatment determined in a manner similar to current leasing literature, absent current bright lines. IASB members support an approach resulting in a financial reporting model similar to finance leases today.
While the boards agree that lessor accounting should produce results similar to current standards, the FASB supports permitting a lessor to recognize profit and revenue at lease commencement only if control of the underlying asset is transferred to the lessee. This model would look to the concept of control as established in the forthcoming revenue recognition standard.
Deliberations are expected to continue in the coming months. Changes to the lease accounting guidance will affect almost every company and the impact of the proposed changes may be significant.
This In brief article provides an overview of the key decisions reached by the boards.
COSO 2013: ICFR Transition (video)
On May 14, 2013, the Committee of Sponsoring Organizations (COSO) published the updated Internal Control–Integrated Framework (2013 Framework) and related illustrative documents. The release of the 2013 Framework was previously addressed in Dataline 2013-09 and 10 Minutes on why the COSO Update deserves your attention.
Our COSO 2013—ICFR Transition video highlights key transition considerations related to the 2013 Framework. It highlights our four phased approach to transition and explains how SEC registrants can effectively use PwC's mapping template to conduct a preliminary assessment to transition their system of internal control over financial reporting to the 2013 Framework.
EITF observer — March 2014
At its March 13, 2014 meeting, the FASB’s Emerging Issues Task Force (EITF) reached final consensus on one issue affecting share-based payments when the terms of an award include a performance target that could be achieved after the requisite service period. A consensus-for-exposure was reached on an issue pertaining to the recognition of new accounting basis (pushdown) in certain circumstances. Discussions also continued on two other issues. One issue relates to determining whether a host contract in a hybrid instrument issued in the form of a share is more akin to debt or equity, and the other issue relates to the measurement of financial assets and financial liabilities of a consolidated collateralized financing entity (CFE). The final consensus and consensus-for-exposure must first be ratified by the FASB at its March 26 meeting before becoming a final accounting standards update (ASU) or being exposed for public comment.
This edition of EITF observer provides a synopsis of the discussions and decisions reached at the March 13 EITF meeting.
PwC’s Center for Board Governance quarterly webcast series - March 27
At 2:00pm ET on Thursday, March 27, PwC's Center for Board Governance will be hosting its quarterly webcast designed to help board and audit committee members more effectively meet the challenges of their critical roles. On the webcast, PwC partner Mary Ann Cloyd will engage in a discussion on the increasing demands of cybersecurity.
We invite you to pre-register for the webcast through the CFOdirect Network.
Participants will be eligible to receive 1.0 CPE credit.
PwC's quarterly tax accounting webcast – April 3
At 2:00pm ET on Thursday, April 3, we will be hosting our quarterly tax accounting webcast. On the webcast you’ll hear from a panel of our Tax Accounting Services specialists on relevant tax accounting matters, including recent regulatory and legislative developments and a topical discussion of the uncertain tax position model.
We invite you to pre-register for the webcast through the CFOdirect Network. Participants will be eligible to receive 1.0 CPE credit.
FASB issues Technical Corrections and Improvements Related to Glossary Terms
The FASB has published Accounting Standards Update (ASU) No. 2014-06, Technical Corrections and Improvements Related to Glossary Terms. This ASU is limited to amendments to the Master Glossary, including technical corrections related to glossary links, glossary term deletions, and glossary term name changes. In addition, it includes limited-scope improvements to reduce instances of the same term appearing multiple times in the Master Glossary with similar, but not entirely identical, definitions. These are items that represent narrow and incremental improvements to U.S. GAAP and are not purely technical corrections. The amendments are mostly nonsubstantive in nature and the board does not anticipate that they will result in pervasive changes to current practice. However, certain amendments may result in a change. For those amendments which the board deemed to be more substantive, transition guidance and a delayed effective date accompany them.
For public entities, the amendments that are subject to the transition guidance are effective for fiscal periods beginning after December 15, 2012. For nonpublic entities, the amendments that are subject to the transition guidance are effective for fiscal periods beginning after December 15, 2013.
FASB meetings and project updates
Meeting summary: The FASB and IASB met on March 18 and 19 and discussed its projects on (1) leases and (2) insurance contracts. See the FASB’s website for the board’s meeting summary. Also, see PwC’s In brief above for summary of the joint leases meeting.
Next open board meeting: The FASB will meet on March 26. The board plans to discuss its projects on (1) going concern, (2) FASB ratification of an EITF consensus and a tentative conclusion, (3) accounting for identifiable intangible assets in a business combination, and (4) accounting for goodwill for public business entities and not-for-profits. See the FASB’s website for further information on the meeting.
Project updates: The FASB has updated the summaries of its projects on:
SEC staff issues revised statement on well-known seasoned issuer waivers
In 2005’s Securities Offering Reform release, the Commission adopted various modifications to the registration, communications and offering processes under the Securities Act, including creating a new category of issuer — the “well-known seasoned issuer” (WKSI) — for the most widely followed issuers representing the most significant amount of capital raised and traded in the United States.
In order to qualify as a WKSI, an issuer may not be an “ineligible issuer.” Rule 405 of the Securities Act defines an “ineligible issuer” to be, among other things, an issuer that has (or whose subsidiary has) been convicted of a felony or an issuer that has violated (or whose subsidiary has violated) the anti-fraud provisions of the federal securities laws.
Under Securities Act Rule 405, the Commission may grant waivers of ineligible issuer status “upon a showing of good cause, that it is not necessary under the circumstances that the issuer be considered an ineligible issuer.” The Director of the Division of Corporation Finance has published a statement that outlines the framework the Division generally will follow in considering whether to grant a waiver of ineligible issuer status.