This week's PwC update on financial reporting developments includes: In brief: PCAOB seeks comments on auditing accounting estimates and fair value measurements... FASB issues final guidance to improve financial reporting of going concern uncertainties... FASB meetings and project updates... and more
PwC's weekly alert highlighting current financial reporting developments (including accounting, auditing and regulatory matters).
This week's topics include:
In brief: PCAOB seeks comments on auditing accounting estimates and fair value measurements
As highlighted in last week’s Flashline, the Public Company Accounting Oversight Board (PCAOB) issued for public comment a staff consultation paper on standard-setting activities related to auditing accounting estimates and fair value measurements. The staff consultation paper discusses and solicits comment on certain issues related to auditing accounting estimates and fair value measurements in order to assist the PCAOB staff in evaluating whether the existing PCAOB auditing standards can and should be improved.
The PCAOB staff is specifically seeking feedback on: (1) the potential need for changes to its auditing standards to better address changes in the financial reporting frameworks related to accounting estimates and fair value measurements, (2) current audit practices that have evolved to address issues relating to auditing accounting estimates and fair value measurements, (3) a possible approach to changing existing auditing standards, and the requirements of a potential new standard, and (4) relevant economic data about potential economic impacts to inform the PCAOB's economic analysis associated with standard setting in this area. Comments on the paper are due November 3.
This In brief article provides an overview of the staff consultation paper.
FASB issues final guidance to improve financial reporting of going concern uncertainties
The FASB issued a new standard — Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern — that will explicitly require management to assess an entity's ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances.
According to the new standard, substantial doubt exists if it is probable that the entity will be unable to meet its obligations within one year after the issuance date. The likelihood threshold of "probable" is used similar to its current use in U.S. GAAP for loss contingencies. Disclosures will be required if conditions give rise to substantial doubt. Management will need to assess if its plans will alleviate substantial doubt to determine the specific disclosures.
The new standard will be effective for all entities in the first annual period ending after December 15, 2016 (December 31, 2016 for calendar year-end entities). Earlier application is permitted.
Also see PwC’s In brief article for an overview of the FASB's new standard.
FASB meetings and project updates
Meeting summary: The FASB met on August 27. The board discussed its projects on (1) insurance–targeted improvements to the accounting for long–duration contracts, (2) leases, and (3) financial statements for not for profit entities. See the FASB’s website for the board’s meeting summary.
Next open board meeting: The FASB will meet on September 3 to discuss its projects on: (1) financial instruments –impairment and (2) disclosure framework: disclosure review–fair value measurement. See the FASB’s website for further information on the meeting.
Project updates: The FASB has updated the summary of its projects on accounting for financial instruments—credit impairment.
IFRS Foundation issues proposed Interim Release 2 to the IFRS Taxonomy 2014
The IFRS Foundation published for public comment Proposed Interim Release 2 to the IFRS Taxonomy 2014. The interim release incorporates IFRS Taxonomy elements for (1) IFRS 15, Revenue from Contracts with Customers, and (2) common practices in the transport and pharmaceuticals industries. Comments are requested by October 20, 2014.
IASB announces transition resource group for impairment of financial instrument
The IASB has announced the membership of its Impairment Transition resource Group (ITG). The objective of the ITG is to provide a forum for stakeholders to discuss emerging implementation issues arising from the new impairment requirements of IFRS 9, Financial Instruments, which was issued in July 2014. The ITG will also provide information that will help the IASB to determine what, if any, action will be needed to resolve implementation issues, although it will not itself issue guidance. Meetings will also be observed by regulatory bodies including members of the Basel Committee on Banking Supervision.
See the IASB’s website for the board’s press release and a listing of ITG members.
IFRS for SMEs Update — July/August 2014
This edition of the IASB's IFRS for SMEs Update addresses various items such as (1) IFRS for SMEs Fact Sheet has been updated, (2) SMEIG papers available online, (3) upcoming ‘train the trainers’ workshops, (4) status report of IFRS for SMEs translations, and (5) where to obtain IFRS for SMEs materials.
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.
SEC names James Schnurr as Chief Accountant
The SEC announced it has named James Schnurr as its chief accountant. Mr. Schnurr will begin his new post in October. He will replace Paul A. Beswick., who has served as its chief accountant since 2012. Mr. Schnurr recently retired from Deloitte LLP, where he was vice chairman and senior professional practice director and specialized in financial and SEC reporting for public companies.
SEC adopts asset-backed securities reform rules
The SEC has adopted revisions to rules governing the disclosure, reporting, and offering process for asset-backed securities to enhance transparency, better protect investors, and facilitate capital formation in the securitization market. The new rules, among other things, require loan-level disclosure for certain assets, such as residential and commercial mortgages and automobile loans. The rules also provide more time for investors to review and consider a securitization offering, revise the eligibility criteria for using an expedited offering process known as “shelf offerings,” and make important revisions to reporting requirements.
The revised rules become effective 60 days after publication in the Federal Register. Issuers must comply with new rules, forms, and disclosures other than the asset-level disclosure requirements no later than one year after the rules are published in the Federal Register. Offerings of ABS backed by residential and commercial mortgages, auto loans, auto leases, and debt securities (including resecuritizations) must comply with the asset-level disclosure requirements no later than two years after the rules are published in the Federal Register.
AICPA issues exposure draft on proposed changes to performing and reporting on peer reviews
The AICPA has issued for public comment an exposure draft titled Proposed Changes to the AICPA Standards for Performing and Reporting on Peer Reviews — Preparation of Financial Statements Performed Under SSARS and the Impact on the Scope of Peer Review. Under the proposal, preparation services performed under the Statements on Standards for Accounting and Review Services (SSARS) would be excluded from both the scope of peer review and the definition of an accounting and auditing practice.
Comments are requested by October 31, 2014
The table in the attachment lists meetings of standard-setting bodies, PwC webcasts and other events occurring in August 2014 that may be of interest to you. Click on the name of the meeting, webcast or event for more information. For additional events, see the events calendar on PwC's CFOdirect Network.