Flashline - Week ending July 24, 2014

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Flashline 07/24/2014 by Assurance services
Flashline - Week ending July 24, 2014

At a glance

This week's PwC update on financial reporting developments includes: Private company reporter: PCC makes progress on intangible assets... Global Tax Accounting Services Newsletter (April - July 2014)... SEC seeks comments on PCAOB's auditing standard on related parties... and more

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

This week's topics include:

  • Private company reporter: PCC makes progress on intangible assets
  • Global Tax Accounting Services Newsletter (April - July 2014)
  • SEC seeks comments on PCAOB's auditing standard on related parties
  • SEC adopts money market fund reform rules
  • FASB meetings and project updates
  • IASB finalizes IFRS 9, Financial instruments
  • IESBA publishes "2014 Handbook of the Code of Ethics for Professional Accountants"
  • AICPA issues revenue recognition primer for audit committees

PwC

Private company reporter: PCC makes progress on intangible assets

At its July 15 meeting, the Private Company Council (PCC) continued to deliberate the accounting alternative for the recognition of intangible assets in a business combination, but asked the FASB staff to perform additional research related to the scope of the alternative. Based on deliberations to date, the alternative would allow a private company, at its option, to not separately recognize a non-compete agreement as an intangible asset. In addition, customer-related intangibles would only be recognized if they are capable of being sold or licensed independently from other assets of a business. An entity would likely be required to qualitatively disclose the nature of the intangible assets that are not separately recognized from goodwill under the alternative.

This edition of Private company reporter provides further information on the meeting.

Global Tax Accounting Services Newsletter (April - July 2014)

This newsletter provides an update on a variety of accounting and reporting developments, including:

  1. country-by-country reporting
  2. the Organisation for Economic Cooperation and Development’s project on hybrid mismatch arrangements
  3. the new converged standard on revenue recognition recently issued by the FASB and IASB

The newsletter also (1) highlights some significant tax law and tax rate changes that occurred around the globe during the quarter ended June 30, 2014 and (2) discusses the importance of technology in tax function effectiveness.

Securities and Exchange Commission (SEC)

SEC seeks comments on PCAOB's auditing standard on related parties

The SEC is soliciting input regarding the PCAOB's 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.

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. The SEC will determine if the new requirements would apply to audits of emerging growth companies.

Comments are due 21 days from publication of the SEC comment notice in the Federal Register.

SEC adopts money market fund reform rules

The SEC adopted amendments to the rules that govern money market funds. The amendments are designed to limit the risk of investor runs on money market funds. The SEC's rule will require institutional prime money market funds to move from a stable $1 per share net asset value (NAV), to a floating NAV. The floating NAV is for institutional prime money market funds only, but not for other money market funds. In addition, the new rule includes discretionary liquidity fees and gates for non-government funds. The rules will be effective 60 days after their publication in the Federal Register.

The SEC also issued a related notice proposing exemptions from certain confirmation requirements for transactions effected in shares of floating NAV money market funds. Comments should be received 21 days from publication in the Federal Register.

Additionally, the SEC re-proposed amendments to address provisions that reference credit ratings. The re-proposed amendments would implement section 939A of the Dodd-Frank Wall Street and Consumer Protection Act of 2010, which requires the Commission to review its rules that use credit ratings as an assessment of credit-worthiness, and replace those credit-rating references with other appropriate standards. Comments should be received 60 days from publication in the Federal Register.

Financial Accounting Standards Board (FASB)

FASB meetings and project updates

Meeting summary: The following board meetings were held over the past week:

  1. July 23: Joint FASB/IASB board meeting – The boards discussed their project on leases. See the FASB’s website for the board’s meeting summary.
  2. July 23: FASB board meeting – The board discussed its project on financial statements of not-for-profit entities. See the FASB’s website for the board’s meeting summary.

Next open board meeting: The FASB will meet on July 30. The board plans to discuss: (1) technical corrections & improvements, including disclosures about investments in another investment company, (2) financial instruments classification & measurement, (3) liabilities & equity short-term improvements, and (4) pensions cash balance plans. See the FASB’s website for further information on the meeting.

Project updates: The FASB has updated the summaries of its projects on:

  1. Disclosure framework
  2. Simplifying income statement presentation by eliminating the concept of extraordinary items
  3. Simplifying measurement of inventory

International Accounting Standards Board (IASB)

IASB finalizes IFRS 9, Financial instruments

The IASB has published the final amendments to IFRS 9, Financial Instruments, which replaces IAS 39, Financial Instruments: Recognition and Measurement.

The IASB had divided its project to complete IFRS 9 into three main phases: (1) classification and measurement of financial assets and financial liabilities, (2) impairment methodology, and (3) hedge accounting. IFRS 9

The new Standard will be effective for annual periods beginning on or after January 1, 2018, with early application permitted.

International Federation of Accountants (IFAC)

IESBA publishes "2014 Handbook of the Code of Ethics for Professional Accountants"

IFAC's International Ethics Standards Board for Accountants (IESBA) has published the 2014 Handbook of the Code of Ethics for Professional Accountants. The handbook contains the entire Code of Ethics for Professional Accountants (the Code). This edition incorporates several revised pronouncements that were published previously and are now effective—addressing a breach of a requirement of the Code, conflicts of interest, and the definition of “those charged with governance.” It also contains the revised definition of “engagement team” (effective for audits of financial statements for periods ending on or after December 15, 2014).

American Institute of Certified Public Accountants (AICPA)

AICPA issues revenue recognition primer for audit committees

The AICPA issued a new Financial ReportingBrief which provides an overview of the new FASB revenue recognition standard and highlights questions that audit committee’s should be prepared to ask management about how the new revenue recognition standard will affect the entity’s revenue recognition policies and ensure that management is prepared to adopt the standard.

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.

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