This week's PwC update on financial reporting developments includes: In the loop: EU audit reform – the impact beyond Europe... Save the date: Revenue recognition industry webcasts... Save the date: ProxyPulse webcast — July 17... PwC comments on PCAOB's proposed framework to reorganize audit standards... and more
PwC's weekly alert highlighting current financial reporting developments (including accounting, auditing and regulatory matters).
This week's topics include:
In the loop: EU audit reform – the impact beyond Europe
This issue of In the loop discusses how audit reform in the European Union (EU) doesn’t directly apply to US companies—but certain European subsidiaries could be scoped in. The new requirements apply to subsidiaries that meet the definition of an EU public interest entity, including EU banks and insurers. The rules become effective in 2016, except for mandatory firm rotation, which is subject to a transition period. However, US multinationals should take steps now to understand if and how the legislation affects their EU subsidiaries. Complying with the requirements could be challenging and require advance planning, especially if EU statutory audits are performed by the same audit firm performing the US company consolidated audit.
Save the date: Revenue recognition industry webcasts
As part of our webcast series on the new FASB and IASB revenue recognition standards, we invite you to pre-register and join us for an expanded discussion on the specific impacts the new standard will have on the following industries:
Each webcast will provide participants 1.0 CPE credit.
Save the date: ProxyPulse webcast — July 17
PwC's Center for Board Governance invites you to attend a special ProxyPulse webcast, presented in conjunction with Broadridge, looking at developments in the 2014 proxy season. The webcast will be held on July 17 at 2-3:00pm EDT, and it will provide participants 1.0 CPE credit. You can pre-register for the webcast through the CFOdirect Network.
PwC comments on PCAOB's proposed framework to reorganize audit standards
We continue to support the PCAOB’s proposal to reorganize its existing interim and PCAOB-issued auditing standards into a framework that presents the standards in a logical order that generally follows the flow of the audit process. We believe the proposed reorganization will help users navigate the board’s standards more easily.
Consistent with our comment letter on the PCAOB’s initial release, we do not support the proposal to rescind AU 532, Restricting the Use of an Auditor’s Report, and the related proposed amendment to delete footnote 41 to paragraph 25 in Auditing Standard No. 16, Communications with Audit Committees, which could be interpreted to indicate that communications with audit committees should no longer be restricted.
Our comment letter offers suggestions to clarify some of the proposed amendments and to enhance the online demonstration version of the proposed reorganized auditing standards. We also offer our thoughts on the project’s next steps.
FASB meetings and project updates
Meeting summary: The FASB did not hold any board meetings this week.
Next open board and PCC meetings: The FASB will meet on July 16 to discuss its projects on (1) consolidation—principal versus agent analysis and (2) insurance—disclosures about short-duration contracts. The board will decide whether to ratify the consensuses reached at the June 12 Emerging Issues Task Force meeting.
Members of the FASB and the Private Company Council (PCC) will meet on July 15 to discuss PCC Issue No. 13-01A, “Accounting for Identifiable Intangible Assets in a Business Combination,” and other selected FASB projects.
See the FASB’s website for further information on these meetings.
Project updates: The FASB has updated the summaries of its projects on:
SEC staff issues guidance on proxy voting responsibilities of investment advisers
The SEC Division of Investment Management and the Division of Corporation Finance issued Staff Legal Bulletin No. 20 to provide guidance (1) about investment advisers’ responsibilities in voting client proxies and retaining proxy advisory firms and (2) on the availability and requirements of two exemptions to the federal proxy rules that are often relied upon by proxy advisory firms.
SEC staff issues updated Compliance and Disclosure Interpretations on Securities Act Rules
The SEC's Division of Corporation Finance (Corp Fin) published new questions to its C&DI publication on Securities Act Rules. Questions 255.48 and .49 were added under Section 255, Rule 501 — Definitions and Terms Used in Regulation D. Questions 260.35 through 260.38 were added under Section 260, Rule 506 — Exemption for Limited Offers and Sales Without Regard to Dollar Amount of Offering.
SEC staff issues observations on use of custom XBRL tags
The staff in the SEC’s Division of Economic and Risk Analysis issued a report on the use of custom tags to describe elements in financial statements. The report is based on a recent assessment of the quality of XBRL exhibits submitted by issuers complying with the 2009 rule requirements to file financial statement information in an XBRL format. The scope of the assessment included XBRL exhibits submitted from 2009 through October 2013, with one particular aspect of the assessment focusing on the use of custom tags to describe financial elements.
Overall, the staff observed a steady decline in custom tag use by large accelerated filers during the rule’s phase-in period and thereafter. This evidence is consistent with both improvements in the XBRL taxonomy over this period and filers’ selections of financial elements. On the other hand, the staff did not observe this same trend among smaller filers. The continued use of custom tags among smaller filers appears to be, in part, due to continued development and growth in the market for filer software and services, resulting in offerings of varying levels of functionality and ease of use.
SEC staff publishes sample letter re: XBRL requirement to include calculation relationships
Included on the SEC’s website is a sample letter that Corp Fin recently sent to certain public companies regarding their reports on Form 10-Q and the XBRL requirement to include calculation relationships. The letter stems from the SEC staff’s selective review of company filings which uncovered that some companies did not include in their XBRL exhibit all required calculation relationships for contributing line item elements for their financial statements and related footnotes. We encourage public companies that did not receive an actual letter from the SEC to review the sample letter and evaluate whether their filings comply with the applicable requirements.
PCAOB updates standard-setting agenda
The PCAOB issued an updated standard-setting agenda, which provides a brief project overview of the board's current standard-setting agenda and outlines key milestones on various standard-setting projects.
AICPA releases white paper “Re-imagining Auditing in a Wired World”
The AICPA Assurance Services Executive Committee's (ASEC) Emerging Assurance Technologies Task Force released a new white paper titled, Re-imagining Auditing in a Wired World. The purpose of the white paper is to offer insight into what future reporting and auditing systems might resemble and how technology could be used to transform auditing.
FinREC publishes roadmap to understanding new revenue recognition standards
The AICPA’s Financial Reporting Executive Committee (FinREC) issued a new Financial Reporting Brief that reorganizes the guidance contained in the FASB revenue recognition standard to follow the five step revenue recognition model along with other guidance impacted by this standard. Additionally, it highlights the differences between the FASB and IASB revenue standards.
Note: Also see PwC’s In depth for a detailed summary of the new revenue recognition standards. Accompanying the In depth are industry-specific supplements with examples and further insights into ways entities within certain industries are likely to be affected.
IFAC and CIPFA release framework for good governance in the public sector
IFAC and the Chartered Institute of Public Finance and Accountancy (CIPFA) have published the International Framework: Good Governance in the Public Sector to help improve and encourage effective public sector governance. It encourages better governed and managed public sector organizations by improving decision making and the efficient use of resources.