This week's PwC update on financial reporting developments includes: BoardroomDirect: March 2014 edition... The quarter close – Directors edition... PwC comments on proposed SEC rule to increase access to capital for smaller companies... and more
PwC's weekly alert highlighting current financial reporting developments (including accounting, auditing and regulatory matters).
This week's topics include:
BoardroomDirect: March 2014 edition
The March 2014 edition of BoardroomDirect announces the launch of the PwC Audit Committee Excellence Series, a new publication series that provides practical and actionable insights, perspectives, and ideas to help audit committees maximize their performance. The first edition focuses on audit committee practices around forward-looking guidance and the potential risks of analysts’ consensus estimates.
Other items in this month’s newsletter include: (1) SEC no-action letters for the 2014 proxy season, (2) synopses of a succession planning report and a director-shareholder engagement task force report, (3) the SEC chief accountant’s advice to audit committees on audit quality, (4) the PCAOB’s plan to hold a roundtable on the auditor’s reporting model, and (5) the FASB’s decision to narrow the insurance contracts project scope.
The quarter close – Directors edition
The quarter close — Directors edition is designed to keep directors informed about the latest accounting and financial reporting issues. We create this version specifically for audit committee members and financial experts, basing it upon The quarter close, which is intended primarily for CFOs and Controllers.
The Q1-2014 edition discusses the following items: (1) new standards for private companies being adopted, (2) assessing whether profit-sharing arrangements are accounted for as equity or a bonus, (3) two class method of calculating earnings per share, (4) accounting for new transaction types using old methods – gross versus net revenue analysis, (5) allocating income taxes to separate company and carve-out financials, (6) new FASB developments relating to financial instruments, consolidations, and insurance projects, (7) regulatory matters, (8) corporate governance – cybersecurity, and more.
PwC comments on proposed SEC rule to increase access to capital for smaller companies
PwC submitted comments on the SEC's Proposed Rule Amendments for Small and Additional Issues Exemptions Under Section 3(b) of the Securities Act which is intended to increase access to capital for smaller companies. We support the SEC’s continuing efforts to facilitate capital raising by smaller businesses while at the same time providing appropriate levels of investor protection. We are supportive of the Commission's efforts to leverage existing disclosure requirements (rather than developing new standards) wherever practical. We believe this will promote consistency and reduce uncertainty for investors and preparers.
FASB issues guidance for private companies on consolidation of variable interest entities
The FASB issued guidance intended to improve private company financial reporting regarding consolidation of lessors in certain common control leasing arrangements. The final guidance is based on a consensus reached by the Private Company Council (PCC).
Under current U.S. GAAP, a company is required to consolidate the financial reporting from an entity in which it has a controlling financial interest. The assessment of controlling financial interest is performed under either a voting interest model or a variable interest entity (VIE) model.
The new guidance allows a private company to elect—when certain conditions exist—not to apply VIE guidance to a lessor under common control. Instead, the private company would make certain disclosures about the lessor and the leasing arrangement. The alternative should be applied retrospectively to all periods presented, and is effective for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015. Early application is permitted for all financial statements that have not yet been made available for issuance.
Also, read PwC’s Private company reporter for a high-level summary of the key aspects of the new guidance.
Meeting summary: The FASB met on March 26 and discussed its projects on (1) going concern, (2) accounting for identifiable intangible assets in a business combination, and (3) accounting for goodwill for public business entities and not-for-profits. It also considered whether to ratify a consensus and a tentative decision reached by the EITF in March. See the FASB’s website for the board’s meeting summary.
Next open board meeting: The FASB will meet on April 4. The board plans to discuss its projects on (1) accounting for financial instruments – classification and measurement, (2) investment companies: disclosures about investments in another investment company, and (3) disclosure framework: entity’s decision process. See the FASB’s website for further information on the meetings.
IASB proposes amendments to presentation of financial statements
The IASB issued for public comment an exposure draft outlining proposed amendments to IAS 1, Presentation of Financial Statements. The proposal results from one of several short-term projects under the IASB’s Disclosure Initiative. The ED proposes narrow-focus clarifying amendments to IAS 1 to address some of the concerns expressed about existing presentation and disclosure requirements and to ensure entities are able to use judgment when preparing their financial statements. The amendments address: (1) materiality requirements, (2) disaggregation of certain items and presenting subtotals in the financial statements, (3) the ordering of footnotes, and (4) identifying significant accounting policies. Comments are requested by July 23, 2014.
IASB Update — March 2014
The IASB update, issued by the IASB staff, provides a summary of the IASB’s March 13-21 meetings. Some of the topics discussed were: (1) leases, (2) conceptual framework, (3) insurance contracts, (4) IAS 1, Presentation of Financial Statements, (5) Equity method: Share of other net asset changes, and (6) Disclosure Initiative.
AICPA issues whitepapers on best practices for governmental cost-sharing pensions and participating employers
The AICPA's State and Local Government Expert Panel (SLGEP) recently released two whitepapers that include information for implementation of the new GASB pension standards for cost-sharing multiple-employer plans and the employers that participate in those plans.
The Governmental Audit Quality Center (GAQC) issued GAQC Alert #244 that discusses the release of the above mentioned whitepapers, status of future whitepapers and several related auditing interpretations that are being developed by the SLGEP.
AICPA issues Q&As on conflict minerals reports
The AICPA Conflict Minerals Task Force has published three new questions and answers (Q&As .10 - .12) that provide nonauthoritative guidance on (1) reporting directly on the subject-matter or on management’s assertion, (2) form of Practitioner’s Report for Independent Private Sector Audit (IPSA) of a conflict mineral report, and (3) communicating findings required to be communicated by Generally Accepted Governmental Auditing Standards in an IPSA. Accompanying the Q&As are illustrative examples of practitioner's reports. See the AICPA’s website for the new Q&As and other conflict minerals resources.
CAQ issues alert on cybersecurity
The Center for Audit Quality (CAQ) published an Alert intended to summarize the responsibilities of the independent external auditor with respect to cybersecurity matters. Cybersecurity is an important business issue and, given the rise in high profile data breaches, it is receiving an increasing amount of attention by those in the business community. When companies suffer security breaches and confidential customer information or proprietary business data is stolen or lost, they may face reputational damage, diminished investor confidence, lost business, and potential regulatory fines.
GASB declines to delay pension standards implementation date
The GASB announced its unanimous decision not to delay the implementation date of GASB Statement No. 68, Accounting and Financial Reporting for Pensions. The requirements of Statement 68 are effective for periods beginning after June 15, 2014. The request to the board for an indefinite delay in implementation date came from stakeholder groups that asserted that such a delay is necessary until related auditing procedures have been implemented for a sufficient period. The concern was expressed that governments in multiple-employer pension plans will receive a modified audit opinion on their financial statements in the interim. Other individuals, organizations, and stakeholder groups wrote to the board requesting that the implementation date of Statement 68 not be changed. See the GASB’s website for the key factors the board considered in making its decision.
The table below lists meetings of standard-setting bodies, PwC webcasts and other events occurring in April 2014 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.