This week's PwC update on financial reporting developments includes: Introducing “In depth” (formerly Dataline): A look at financial reporting issues... In depth: The standard is final–A comprehensive look at the new revenue model... Upcoming webcasts on the new revenue standard... and more
PwC's weekly alert highlighting current financial reporting developments (including accounting, auditing and regulatory matters).
This week's topics include:
Introducing “In depth” (formerly Dataline): A look at financial reporting issues
A lot has changed since our Dataline publication series was first introduced many years ago. We’ve recently reevaluated its overall purpose, content, and name. We’ve renamed our Dataline publication series to In depth going forward. This article provides further information on the name and other changes.
In depth: The standard is final–A comprehensive look at the new revenue model
On May 28, the FASB and IASB issued their long-awaited converged standard on revenue recognition. Almost all entities will be affected to some extent by the significant increase in required disclosures. But the changes extend beyond disclosures, and the effect on entities will vary depending on industry and current accounting practices. Entities will need to consider changes that might be necessary to information technology systems, processes, and internal controls to capture new data and address changes in financial reporting.
The objective of the revenue standard is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries, and across capital markets. The revenue standard contains principles that an entity will apply to determine the measurement of revenue and timing of when it is recognized.
This In depth summarizes the new revenue recognition model. Accompanying the In depth is an initial release of industry-specific supplements with examples and further insights into ways entities within the industry are likely to be affected by the revenue standard. Additional supplements will be released over the coming weeks.
Upcoming webcasts on the new revenue standard
Be sure to join us on June 19 at 1:00 pm EDT for the second installment in our webcast series on the new Revenue Recognition standard. This webcast will help you understand the pervasive business implications, as well as what companies can do to prepare for implementation of the new standard.
Also, as part of our webcast series on the new Revenue Recognition standard, we invite you to join us for an expanded discussion on the specific impacts the new standard will have on the following industries:
Reminder: Q2-2014 Current Accounting and Reporting Developments webcast —June 18
At 1:00 pm ET on Wednesday, June 18, we will be hosting our second quarter 2014 'Current Accounting and Reporting Developments' webcast. This 90-minute webcast will provide 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. You can register for the webcast through the CFOdirect Network. Participants will be eligible to receive 1.5 CPE credits.
2014 Conflict minerals filing review—Early insights from some of the largest companies
June 2, 2014 was the first filing deadline for SEC registrants to comply with the SEC’s conflict minerals rule. With roughly 1,300 companies submitting conflict minerals filings to the SEC (almost 1,000 of which included a Conflict Minerals Report – a more detailed level of discussion), interested parties will have a lot of reading to do.
We present a snapshot of how 50 of the largest companies approached their conflict minerals filings. We looked at 10 filings for each of the following five industries: (1) aerospace & defense, (2) automotive, (3) industrial products, (4) retail, and (5) technology.
The differences in disclosure approaches within, and across, industries provide interesting insights that could help companies determine how to proceed with their conflict minerals program, and their next annual filing. After all, the next compliance year (calendar 2014) is well underway.
Look for upcoming insights on more companies and more data points on PwC’s conflict minerals website, which also includes information about our conflict minerals services.
M&A snapshot: Cross-border acquisitions—Post-acquisition considerations
Months of hard work have paid off and the deal is closed. The buyer has performed its due diligence, navigated the SEC reporting requirements, and assessed the potential tax effects of the transaction. The rest should be easy, right? Not so fast! Generally, buyers underestimate the other aspects of a transaction that require attention post-acquisition and the amount of effort needed to navigate the accounting and financial reporting considerations.
This edition of Mergers & acquisitions — a snapshot is the fourth and final edition in our series focused on navigating the waters of a cross-border acquisition. The first three editions have looked at various aspects along the deal continuum prior to closing as well as potential tax considerations. This edition focuses on some of the other post-acquisition accounting and reporting issues that need to be considered in relation to cross-border deals, including US and international reporting requirements, foreign currency matters, and impairment testing.
IFRS news — June 2014
This issue of IFRS news looks at (1) the IASB and FASB's new revenue standard, (2) IFRS 11, Joint arrangements, (3) IAS 16 and IAS 38 amendments, (4) leasing redeliberations, (5) conceptual framework discussions, (6) IASB equity accounting research project, (7) uncertain tax positions, and (8) Q&A’s: qualitative disclosures about risk.
FASB issues final standard on development stage entities which eliminates certain financial reporting requirements
On June 10, the FASB issued a final standard on development state entities to eliminate certain financial reporting requirements, including an amendment to variable interest entities guidance. The final standard eliminates the concept of a development stage entity (DSE) from U.S. GAAP and clarifies that the disclosures under risks and uncertainties guidance are also applicable to these entities. Entities that are in their development stage would no longer be required to present and disclose incremental information, such as inception-to-date information.
The standard also amends the current consolidation guidance, impacting all companies that invest in DSEs. In most cases, a different analysis will be required by an investor to determine if it should consolidate one of these entities. This would require entities that have a variable interest in a DSE to spend more time and effort on (1) performing the consolidation analysis under the more complex VIE model, (2) accumulating the information needed to meet the more extensive VIE disclosure requirements, (3) performing the required reassessments each reporting period, and (4) developing, documenting, and testing internal controls over these processes.
Read PwC's In brief article for an overview of the new standard.
FASB launches initiative to simplify accounting standards
As part of its initiative to reduce complexity in accounting standards, the FASB added two short-term projects to its agenda to simplify GAAP: (1) simplifying the measurement of inventory and (2) simplifying income statement presentation by eliminating extraordinary items. The projects included in the initiative are intended to improve or maintain the usefulness of the information reported to investors while reducing costs and complexity in financial reporting.
FASB meetings and project updates
Meeting summary: The FASB met on June 11. The board discussed its projects on (1) disclosure framework, (2) accounting for financial instruments – classification and measurement, and (3) accounting for financial instruments – impairment. See the FASB’s website for the board’s meeting summary.
Next open board meetings: The following meetings will be held next week:
See the FASB’s website for further information on these meetings.
Project update: The FASB has updated the summary of its project on accounting for financial instruments.
SEC issues responses to FAQs on Volcker Rule
The staff of the Divisions of Trading and Markets, Investment Management, and Corporation Finance issued responses to Frequently Asked Questions (FAQs) concerning the Commission’s final rule implementing section 13 of the Bank Holding Company Act of 1956 (“BHC Act”), commonly referred to as the “Volcker Rule.”
PCAOB adopts auditing standard on related parties
On June 10, The PCAOB adopted Auditing Standard No. 18, Related Parties, and amendments to other auditing standards to strengthen auditor performance requirements in three critical areas of the audit: (1) related party transactions, (2) significant unusual transactions, and (3) a company's financial relationships and transactions with its executive officers.
The Related Parties standard requires specific audit procedures for the auditor's evaluation of a company's identification of, accounting for, and disclosure of transactions and relationships between a company and its related parties. The new standard supersedes the board's interim auditing standard, AU sec. 334, Related Parties. The amendments regarding significant unusual transactions include specific audit procedures that are designed to improve the auditor's identification and evaluation of such transactions, and to enhance the auditor's understanding of their business purposes.
If approved by the SEC, the new standard and amendments will be effective for audits of financial statements for fiscal years beginning on or after December 15, 2014, including reviews of interim financial information within these fiscal years.
PCAOB Standing Advisory Group to meet on June 24-25
The PCAOB announced that it will hold a meeting of its Standing Advisory Group (SAG) on June 24-25. The SAG agenda includes a discussion of root cause analysis to improve audit firms' overall systems of quality control; potential uses of audit quality indicators (AQIs); potential improvements to the existing quality control standards; and how these three initiatives may improve audit quality. Additionally, the SAG will discuss: (1) cybersecurity issues and their potential implications for financial reporting and auditing, (2) the FASB's standard on the recognition of revenue from contracts with customers; and related audit considerations, and (3) the FASB's accounting standards update on disclosure of uncertainties about an entity's ability to continue as a going concern and its potential effects on audits.
AICPA issues updated Code of Professional Conduct
The AICPA has published an updated version of its Code of Professional Conduct, which includes all official releases through April 30, 2014. The Code provides guidance and rules to all members in the performance of their professional responsibilities. The updated Code is effective on December 15, 2014 (early implementation permitted).
IASB proposes amendments to IFRS 10 and IAS 28 re: investment entities—applying the consolidation exception
The IASB has published for public comment an exposure draft titled Investment Entities–Applying the Consolidation Exception (Proposed amendments to IFRS 10 and IAS 28). The proposed amendments:
Comments are requested by September 15, 2014.