This week's PwC update on financial reporting developments includes:The quarter close — Second quarter 2014... Revenue recognition standard – New industry-specific supplements and upcoming webcasts... FASB amends accounting for repurchase agreements and enhances disclosures... FAF President discusses comparability of FASB and GASB standards... 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 — Second quarter 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 recent hot topics including discontinued operations, tax function effectiveness, the accounting impact of Venezuelan exchange rates, and the top five considerations for IPOs.
Revenue recognition standard – New industry-specific supplements and upcoming webcasts
Last week we released In depth US2014-01, which summarizes the FASB and IASB's converged final standard on revenue recognition. The initial release of the In depth included industry-specific supplements containing examples and insight on the revenue standard for (1) engineering & construction, (2) industrial products/manufacturing, and (3) pharmaceuticals. This week, we are pleased to share three additional industry-specific supplements, covering (1) automotive, (2) communications, and (3) retail and consumer. These additional supplements provide examples and further insights into ways entities within the industry are likely to be affected by the revenue standard.
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:
In brief: PCAOB adopts final standard on related parties and related amendments to other auditing standards
Last week, the PCAOB adopted Auditing Standard No. 18, Related Parties (the standard) and related amendments to other auditing standards (the amendments). The standard and amendments are intended to strengthen auditor performance requirements regarding related parties, significant unusual transactions, and financial relationships and transactions with executive officers. The PCAOB adopted the standard and amendments substantially as they were re-proposed in May 2013.
The board believes that the standard and amendments, which are aligned with the risk assessment standards, represent a cohesive audit approach that will contribute to audit effectiveness and provide opportunities for an efficient implementation.
The standard and amendments will be effective, subject to SEC approval, 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.
This In brief article provides an overview of the standard and amendments.
EITF observer — June 2014
At its June 12, 2014 meeting, the FASB’s Emerging Issues Task Force (EITF) reached final consensuses on two issues affecting consolidated collateralized financing entities, and government-guaranteed real estate mortgage loans. Discussions also continued on an issue related to determining whether a host contract in a hybrid instrument issued in the form of a share is more akin to debt or equity. The final consensuses must first be ratified by the FASB at its meeting in early July 2014 before becoming final accounting standards updates (ASUs).
This edition of EITF observer provides a synopsis of the discussions and decisions reached at the June 12 EITF meeting.
Regulatory and standard setting developments – June 18
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 that were recently issued or are on the horizon.
Some of the topics covered in this edition include: (1) update on the status of FASB/IASB priority convergence projects, (2) update on the new PCAOB Auditing Standard No. 18, Related Parties, (3) audit work papers of US accounting firm affiliates in China, (4) Dodd Frank update (conflict minerals and extraction), and (5) update on EU Audit Reform focusing on mandatory firm rotation.
FASB issues final guidance on accounting for share-based payments with performance targets
The FASB issued Accounting Standard Update No. 2014-12, Compensation – stock compensation (the ASU) to codify a final consensus reached by the Emerging Issues Task Force (EITF) at its March 2014 meeting. This ASU requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition.
For all entities, the amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The effective date is the same for both public business entities and all other entities.
Also see the March 2014 edition of PwC’s EITF observer for a high-level overview of the new guidance.
FASB amends accounting for repurchase agreements and enhances disclosures
The FASB issued Accounting Standards Update No. 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. Under the new standard:
New disclosures will be required for:
Also, see PwC’s In brief article which provides an overview of the new standard.
FAF President discusses comparability of FASB and GASB standards
In her June/July 2014 President’s Desk column, the Financial Accounting Foundation (FAF) President and CEO Teresa Polley discusses the comparability of standards set by the FASB and GASB for accounting issues that are not unique to governments. She cites a related PwC Point of view article issued earlier this year exploring the issue in the context of achieving greater transparency and comparability of financial information in the muni- market. In her column, Polley shares background on the FASB and GASB jurisdiction debate, explores how the two boards have worked together in certain areas, and highlights some of the remaining differences between their standards. Her column concludes with a look ahead, and seeks input from FASB and GASB stakeholders on how problematic—and widespread—their concerns are with the differences in accounting standards.
FASB meetings and project updates
Meeting summaries: The following meetings were held in the past week:
Next open board meetings: The FASB will meet on June 25. The board plans to discuss its research project on financial statement presentation. See the FASB’s website for further information on these meetings.
Project updates: The FASB has updated the summary of its projects on:
SEC approves 2014 U.S. GAAP Financial Reporting Taxonomy
The SEC has adopted the 2014 U.S. GAAP Financial Reporting Taxonomy effective June 16, 2014. The U.S. GAAP Financial Reporting Taxonomy contains updates for accounting standards and other improvements to the official taxonomy previously in use by SEC issuers.
PEEC seeks comments on proposed interpretation concerning breach of independence
The AICPA's Professional Ethics Executive Committee (PEEC) has issued an exposure draft which provides guidance to members in public practice concerning a breach of an independence interpretation. The proposed guidance would assist members in evaluating the impact of an independence breach (violation) and determining whether the firm should resign from the attest engagement or whether actions could be taken to satisfactorily address the consequences of the breach.
Comments are requested by September 16, 2014.
PEEC issues final guidance on conflict of interests
PEEC has published revised and new interpretations under Revised Interpretation No. 102-2, “Conflicts of Interest for Members in Public Practice,” under Rule 102, Integrity and Objectivity. The revisions (1) clarify what would be considered a conflict of interest, (2) contain a description of a conflict of interest, and (3) require members to disclose the conflict of interest to the client (for members in public practice) or to appropriate levels within the employing organization (for members in business) as well as any other appropriate parties, and obtain their consent to perform the professional services.
GASB publishes proposals to improve reporting of health insurance and other retiree benefits
The GASB published two proposed Statements intended to significantly improve financial reporting by state and local governments of other postemployment benefits (OPEB), such as retiree health insurance. The GASB also published a third Exposure Draft that would establish requirements for pensions and pension plans that are outside the scope of the pension standards the GASB released in 2012.
Comments are requested by August 29, 2014.
IAASB publishes 2013 annual report
IFAC’s International Auditing and Assurance Standards Board (IAASB) published its 2013 Annual Report—Shaping New Solutions to Global Issues. The report summarizes the IAASB’s work to develop high-quality international auditing, review, other assurance, quality control, and related services standards. The report also spotlights the board’s 2013 outreach initiatives aimed at keeping its stakeholders informed of the board’s standard-setting activities, and promoting the adoption and effective implementation of its international standards.