Flashline - Week ending August 21, 2014

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Flashline 08/21/2014 by Assurance services
Flashline - Week ending August 21, 2014

At a glance

This week's PwC update on financial reporting developments includes: Tax accounting insights: FASB adds income tax accounting topics to its agenda... Webcast: On the horizon at the FASB — Thursday, September 11... FASB proposal to shed some light on the accounting for the Cloud... and more

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

This week's topics include:

  • Tax accounting insights: FASB adds income tax accounting topics to its agenda
  • Webcast: On the horizon at the FASB — Thursday, September 11
  • FASB proposal to shed some light on the accounting for the Cloud
  • FAF issues post-implementation review report on share-based payment standard and announces next standard for review
  • FASB meetings and project updates
  • IASB issues exposure draft proposing amendments to IAS 12, Income Taxes
  • PCAOB seeks comments on auditing accounting estimates and fair value measurements
  • CAQ issues highlights of the June 25 meeting of the SEC Regulations Committee
  • IESBA proposes changes to Ethics Code that addresses long association of personnel with an audit or assurance client
  • FAF issues post-implementation review report on GASB Statement 42 and announces next standards for review

PwC

Tax accounting insights: FASB adds income tax accounting topics to its agenda

During its Agenda Prioritization meeting on August 13, the FASB added the following two income tax accounting topics to its agenda as part of its broader simplification initiative:

  • Possible elimination of the exception for recognizing deferred taxes on certain intercompany transactions
  • Possible classification of all deferred tax assets and liabilities as non-current

The board also asked the staff for additional research on potentially eliminating the intra-period tax allocation rules by having income tax expense reported as a single line item.

This publication provides a brief overview of the income tax accounting topics added to the FASB's agenda.

Webcast: On the horizon at the FASB — Thursday, September 11

We invite you to join us for our 'On the horizon at the FASB' webcast at 1:00pm EDT on Thursday, September 11. This 90-minute webcast will provide an update on the FASB’s current agenda and take a look at where some of the major FASB projects stand. Our PwC specialists will discuss the following projects:

  • Disclosure framework
  • Financial statement presentation
  • Going concern
  • M&A–related standards, such as goodwill, pushdown, and the PCC project on intangibles
  • Accounting for financial instruments, including classification and measurement, impairment, and hedging
  • Leases
  • Consolidation

The webcast will provide 1.5 CPE credits to participants. We invite you to pre-register for the webcast through the CFOdirect Network.

Financial Accounting Standards Board (FASB)

FASB proposal to shed some light on the accounting for the Cloud

The FASB issued an exposure draft, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement, describing how purchasers of hosted computing services should evaluate whether such arrangements contain a software license that should be accounted for separately. The proposal will affect all entities that apply U.S. GAAP and purchase Cloud, Software-as-a-Service, or other hosted computing services irrespective of industry.

Comments on the exposure draft are requested by November 18.

Also, see PwC’s In brief article for a high-level summary of the exposure draft.

FAF issues post-implementation review report on share-based payment standard and announces next standard for review

The Financial Accounting Foundation (FAF), the oversight body of the FASB and GASB, has completed its post-implementation review report (PIR) of FASB Statement No. 123(R), Share-Based Payment (now part of Accounting Standards Codification Topic 718).

Overall the PIR found that (1) FAS 123(R) adequately resolved the issues underlying its stated need to provide a single definition of fair value, (2) information from the application of FAS 123(R) generally provides investors with decision-useful information, and (3) its requirements are understandable and can be applied as intended for public companies. However, the PIR also noted that the standard is often more difficult for private companies to understand and apply as intended, primarily because of the complexity of the financial instruments they use for share-based payment awards and their lack of internal expertise.

With the completion of the FAS 123(R) review, the PIR team will begin a review of FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements, in a few weeks.

FASB meetings and project updates

Meeting summary: The FASB met on August 20. The board discussed its projects on (1) financial instruments–classification and measurement and (2) disclosure framework: disclosure review–defined benefit plans. See the FASB’s website for the board’s meeting summary.

Next open board meeting: The FASB will meet on August 27. The board will discuss its projects on: (1) insurance–targeted improvements to the accounting for long-duration contracts, (2) leases, and (3) financial statements for not-for-profit. See the FASB’s website for further information on this meeting.

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

International Accounting Standards Board (IASB)

IASB issues exposure draft proposing amendments to IAS 12, Income Taxes

The IASB published an exposure draft which proposes amendments to IAS 12, Income Taxes. The proposed amendments aim to clarify how to account for deferred tax assets related to debt instruments measured at fair value in certain circumstances in which the entity reports tax losses. The issue originated from a submission to the IFRS Interpretations Committee to address diversity in practice. In response, the IFRS Interpretations Committee recommended that the IASB amend IAS 12.

Comments on the exposure draft are requested by December 18.

Public Company Accounting Oversight Board (PCAOB)

PCAOB seeks comments on auditing accounting estimates and fair value measurements

The PCAOB has issued for public comment a Staff Consultation Paper that discusses and solicits comments on certain issues related to auditing accounting estimates and fair value measurements. It describes the PCAOB staff's preliminary views concerning the potential need for change and presents potential revisions to PCAOB standards in response to that potential need for change. The PCAOB staff is requesting comments on the issues described in the paper and on a possible approach to changing existing standards, as well as possible alternatives. Comments are requested by November 3.

American Institute of Certified Public Accountants (AICPA)

CAQ issues highlights of the June 25 meeting of the SEC Regulations Committee

The CAQ's SEC Regulations Committee meets periodically with the staff of the SEC to discuss emerging financial reporting issues relating to SEC rules and regulations. Highlights of the June 25 meeting are now available.

Numerous financial reporting matters were discussed during the meeting. Some examples of the topics covered are:

  • Earnings per unit within master limited partnerships
  • Income statement presentation for REITs upon adoption of ASU 2014-08, Reporting Discontinued Operations
  • Complying with S-X Rule 3-12 in connection with a registration statement on Form 10 which becomes effective automatically
  • Use of a "to-be-issued" audit report
  • Impact of new revenue recognition standard on disclosures outside of the financial statements

International Federation of Accountants (IFAC)

IESBA proposes changes to Ethics Code that addresses long association of personnel with an audit or assurance client

IFAC's International Ethics Standards Board for Accountants (IESBA) released for public comment an exposure draft that responds to stakeholder concern about the appearance of independence and the need to ensure that any threats created by the long association of audit firm personnel with an audit client are appropriately addressed on all audit engagements. Among the proposed changes are:

  • Strengthened general provisions applicable to all audit engagements regarding the threats created by long association
  • With respect to partner rotation, an increase in the mandatory “cooling-off” period, from two to five years, for the engagement partner on the audit of a public interest entity
  • Strengthened restrictions on the type of activities that can be undertaken with respect to the audit client and audit engagement by any former key audit partner during the cooling-off period
  • A requirement to obtain the concurrence of those charged with governance regarding the application of certain exceptions to the rotation requirements

Comments on the exposure draft are requested by November 12.

Governmental Accounting Standards Board (GASB)

FAF issues post-implementation review report on GASB Statement 42 and announces next standards for review

The FAF has completed its post-implementation review report (PIR) of GASB Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries. Overall, the PIR report concluded that Statement 42 provides:

  • Important information to users of financial statements and resolves some but not all of the issues underlying its purpose. In particular, users have mixed views on the standard’s recognition criteria for impairments and whether its requirements appropriately measure the effects of impairments.
  • Useful information in the financial statements, however, that information may be difficult for some users to understand.
  • Requirements that are operational but some stakeholders find certain aspects challenging.

With the completion of the review of GASB Statement 42, the PIR team announced that it will now initiate reviews of GASB Statements No. 33, Accounting and Financial Reporting for Nonexchange Transactions, and No. 36, Recipient Reporting for Certain Shared Nonexchange Revenues, later this year.

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