Flashline - Week ending May 15, 2014

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Flashline 05/15/2014 by Assurance services
Flashline - Week ending May 15, 2014

At a glance

This week's PwC update on financial reporting developments includes: In brief: Consolidation — changes may affect all industries... M&A snapshot... Save the date: Q2-2014 Current Accounting and Reporting Developments webcast - June 18... Reminder: Mergers & Acquisitions webcast - May 20... and more

PwC's weekly alert highlighting current financial reporting developments (including accounting, auditing and regulatory matters).

This week's topics include:

  • In brief: Consolidation — changes may affect all industries
  • M&A snapshot: Cross-border acquisitions — accounting considerations relating to income taxes
  • Save the date: Q2-2014 Current Accounting and Reporting Developments webcast — Wednesday, June 18
  • Reminder: Mergers & Acquisitions webcast - May 20
  • FASB meetings and project updates
  • IASB clarifies acceptable methods of depreciation and amortization
  • IASB updates IFRS Taxonomy 2014 for IFRS 14 on rate-regulated activities
  • AICPA and CAQ issue joint Alert on regulatory changes for brokers-dealers and futures commission merchants
  • IAASB proposes enhancements to auditing standards focused on financial statement disclosures

PwC

In brief: Consolidation — changes may affect all industries

The FASB's consolidation project nears completion with more decisions made at last week’s board meeting. Significant changes have been made to the principal versus agent proposal that was exposed in 2011, making the potential impacts broader than initially anticipated.

The FASB's initial goal was to make a surgical fix to one aspect of the consolidation guidance (adding a new principal versus agent step in the VIE model) to avoid asset managers needing to consolidate the funds they manage. Since then, the board has made decisions that will affect several aspects of the consolidation guidance for all companies. In fact, both the VIE model and voting model for consolidation are expected to change. The result? Your company’s previous consolidation conclusions and disclosures could change, which will likely impact its systems, processes and controls.

Read our In brief article for an overview of the FASB’s tentative decisions on its consolidation project.

M&A snapshot: Cross-border acquisitions — accounting considerations relating to income taxes

Lower foreign tax rates and accumulated offshore cash have contributed to the growing appetite for international expansion through cross-border M&A transactions. The acquisition of a foreign business by a U.S. multinational can introduce complex financial reporting issues when accounting for income taxes.

A thorough understanding of the foreign target’s operations and tax structure is needed to understand the legal entity in which the acquired assets reside, the relevant taxing jurisdictions, and applicable tax rates that may impact the recognition of deferred taxes. In addition, buyer-specific plans related to existing or acquired unremitted foreign earnings may trigger a tax liability. Further, evaluating whether post-acquisition transactions or elections are included in acquisition accounting or reported in earnings can require a significant amount of judgment.

This edition of Mergers & acquisitions — a snapshot is the third in our series focused on cross-border acquisitions and provides insight into the complexities and judgments in accounting for income taxes in cross-border M&A deals.

Save the date: Q2-2014 Current Accounting and Reporting Developments webcast — Wednesday, June 18

We invite you to join us for this quarter's 'Current Accounting and Reporting Developments' webcast at 1:00 p.m. EDT on Wednesday, June 18. The 90-minute webcast features insights from a broad range of PwC specialists who will update you on the current state of technical topics and emerging issues 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.

Reminder: Mergers & Acquisitions webcast — May 20

Join us for our upcoming Mergers & Acquisitions webcast on Tuesday, May 20th from 1:00 – 2:00 EDT. This is our first webcast in our upcoming "Accessing the Capital Markets” webcast series.

This webcast will feature Beth Paul, PwC Strategic Thought Leader, Ravi Rao, National Office SEC Services Partner, and Dimitri Drone and Matt Sabatini, both Partners in our Transaction Services group. It will cover accounting, financial reporting and valuation considerations in connection with the acquisition of a business. The webcast will qualify for 1.0 CPE credit.

We invite you to pre-register for the webcast through the CFOdirect Network.

Financial Accounting Standards Board (FASB)

FASB meetings and project updates

Meeting summary: The FASB met on May 14. The board discussed its projects on (1) accounting for financial instruments—classification and measurement and (2) financial statements of not-for-profit entities. See the FASB’s website for the board’s meeting summary.

Next open board meeting: The FASB and IASB will hold a joint board meeting on May 22 and discuss their project on leases. See the FASB’s website for further information on the meeting.

Project update: The FASB has updated the summary of its project on going concern.

International Accounting Standards Board (IASB)

IASB clarifies acceptable methods of depreciation and amortization

The IASB published amendments to IAS 16, Property, Plant and Equipment, and IAS 38, Intangible Assets, to clarify the acceptable methods of depreciation and amortization. IAS 16 and IAS 38 both establish the principle for the basis of depreciation and amortization as being the expected pattern of consumption of the future economic benefits of an asset.

The IASB has clarified that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The IASB also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption, however, can be rebutted in certain limited circumstances.

The amendments are effective for annual periods beginning on or after 1 January 2016 with early application permitted.

IASB updates IFRS Taxonomy 2014 for IFRS 14 on rate-regulated activities

The IFRS Foundation published Interim Release 1 to the IFRS Taxonomy 2014 for IFRS 14, Regulatory Deferral Account, which was issued by the IASB on January 30, 2014. IFRS Taxonomy Interim Releases support consistent adoption and implementation of IFRS by providing taxonomy items for electronic reporting using the latest Standards published by the IASB.

The IFRS Taxonomy 2014 is the XBRL representation of the IFRSs, including International Accounting Standards (IASs), Interpretations, and the IFRS for SME's, as issued by the IASB.

American Institute of Certified Public Accountants (AICPA)

AICPA and CAQ issue joint Alert on regulatory changes for brokers-dealers and futures commission merchants

The Center for Audit Quality (CAQ) and the AICPA issued a joint Alert to remind audit firms of certain auditing considerations in response to upcoming regulatory changes set forth by the SEC and the Commodity Futures Trading Commission (CFTC). The new rules addressed in the Alert are generally effective for audits and attestation engagements of broker-dealers and futures commission merchants (FCMs) with fiscal years ending on or after June 1, 2014.

International Federation of Accountants (IFAC)

IAASB proposes enhancements to auditing standards focused on financial statement disclosures

IFAC's International Auditing and Assurance Standards Board (IAASB) released for public comment proposed changes to the International Standards on Auditing (ISAs) to clarify expectations of auditors when auditing financial statement disclosures.

The proposals include new guidance on considerations relevant to disclosures—from when the auditor plans the audit and assesses the risks of material misstatement, to when the auditor evaluates misstatements and forms an opinion on the financial statements.

Comments are requested by September 11, 2014.

Edited by:

Brad Mescher
Director
Phone: 1-973-236-7261
Email: brad.mescher@us.pwc.com

Saira Gilani
Senior Manager
Phone: 1-973-236-5811
Email: saira.s.gilani@us.pwc.com