This week's PwC update on financial reporting includes: BoardroomDirect: November 2013 edition... FASB responds to post-implementation review of Statement 109 on income taxes... FASB meetings and project updates... IASB proposes amendments to allow equity method accounting... and more.
PwC's weekly alert highlighting current financial reporting developments (including accounting, auditing and regulatory matters).
This week's topics include:
BoardroomDirect: November 2013 edition
The November 2013 edition of BoardroomDirect includes an article that describes a new PwC report that compares the results of our 2013 Annual Corporate Directors Survey and 2013 Investor Survey. The newsletter also includes briefs on (1) a new PwC publication on director-shareholder communications, (2) an upcoming SEC roundtable on proxy advisory firms, (3) Spencer Stuart’s 2013 US Board Index, (4) the PCAOB’s reproposed rule that would require the disclosure of the lead audit partner’s name, and (5) a summary of the Center for Audit Quality’s roundtable on financial statement fraud expectation gap.
FASB responds to post-implementation review of Statement 109 on income taxes
On December 3, the FASB released its response to the Financial Accounting Foundation's post-implementation review (PIR) report on FAS 109, indicating that the FASB will follow-up on areas of concern noted in the report by seeking input from financial statement users, preparers, auditors, and others. The response specified that areas for follow-up include intraperiod tax allocation, intercompany transfers of assets, indefinitely reinvested foreign earnings, and income tax cash flows. The outreach will seek to identify cost-effective solutions to reduce complexity or provide additional decision-useful information, while also understanding stakeholders' views with respect to the priority of addressing those concerns relative to other FASB projects that may be undertaken.
Also, see PwC’s Tax accounting insight for a summary of the PIR findings.
FASB meetings and project updates
Meeting summaries: The FASB did not hold any board meetings this week.
Next open board meeting: The FASB will meet on December 11. The board plans to discuss: (1) its project on consolidation—principal versus agent analysis, (2) whether it will ratify EITF consensuses and tentative conclusions reached at the November 14 EITF meeting, and (3) whether to add to the EITF’s agenda an issue to evaluate whether accounting for investments in qualified affordable housing projects (Issue No. 13-B) should be extended to other types of tax credit investments. See the FASB’s website for more information on this meeting.
Project updates: The FASB has updated the summaries of its projects on:
IASB proposes amendments to allow equity method accounting
The IASB published for public comment an exposure draft titled, Equity Method in Separate Financial Statements (Proposed amendments to IAS 27). The proposed amendments would allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate (parent only) financial statements. The IASB expects the proposed change will reduce compliance costs for many entities, while providing information helpful to an assessment of the investor’s net assets and profit or loss.
Comments on the exposure draft are requested by February 4, 2014.
IFRS for SMEs Update — November 2013
This edition of the IASB's IFRS for SMEs Update highlights various items such as (1) the proposed amendments to the IFRS for SMEs, (2) UNCTAD-ISAR and IFRS Foundation joint workshop on accounting and financial reporting needs of SMEs, (3) status report of IFRS for SMEs translations, and (4) where to obtain IFRS for SMEs materials.
SEC issues compliance and disclosure interpretation re: "Securities Act"
The SEC's Division of Corporation Finance (Corp Fin) has released new compliance and disclosure interpretations ("C&DIs") that comprise the Division’s interpretations of the rules adopted under the Securities Act. New questions 260-14 through 260-27 were added under Section 260: Rule 506 – Exemption for Limited Offers and Sales without Regard to Dollar Amount of Offering.
PCAOB reproposes amendments to improve audit transparency
The PCAOB reproposed for public comment amendments to its auditing standards that aim to provide transparency into audits of public companies, brokers, and dealers about the engagement partner and certain other participants in the audit. This most recent proposal is a follow-up to one issued by the PCAOB in an October 2011.
The reproposed amendments would require auditors to disclose the name of the audit partner in the audit report. The revised proposal also requires audit reports to include the locations and extent of participation of other public accounting firms, and people who participated in the audit but are not employed by the audit firm. The names of the other public accounting firms would also need to be disclosed. The disclosure threshold for these participants is five percent or more of total audit hours.
Comments on the reproposed amendments are requested by February 3, 2014.
PCAOB approves Dodd-Frank amendments for broker-dealer audits
The PCAOB approved amendments, as well as certain updates and clarifications, to tailor certain of its rules to the audits and auditors of brokers and dealers registered with the Securities and Exchange Commission, as authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The amendments insert references to audits and auditors of broker-dealers in relevant board rules, and call for broker-dealer audit client information on the board's registration, withdrawal, and reporting forms. The amendments also require that registered firms that audit broker-dealers comply with certain of the board's professional practice standards; update a number of board rules and forms based on the board's experience administering and enforcing PCAOB rules; and make certain updates to the board's ethics and independence requirements.
If approved by the SEC, the amendments will take effect on June 1, 2014.
AICPA Ethics Division proposes guidance on conflict of interests
The AICPA Professional Ethics Executive Committee (PEEC) has published for public comment revised and new interpretations under Rule 102, Integrity and Objectivity, to provide guidance to members in public practice and business concerning conflicts of interest. In an effort to clarify what would be considered a conflict of interest, the proposed interpretations contain a description of a conflict of interest as well as additional examples of situations that may result in a conflict of interest. The PEEC believes that including the description and additional examples in the proposed interpretations will assist members in identifying the types of relationships and interests that may give rise to a conflict of interest.
Under the proposed interpretations, even where threats are considered to be at an acceptable level, members would be required 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. The proposed interpretations also encourage the member to document such disclosure and consent.
Comments are requested by January 27, 2014.
ARSC proposes a framework for performing and reporting on compilation and review engagements
The AICPA Accounting and Review Services Committee (ARSC) has issued a proposed Statement on Standards for Accounting and Review Services (SSARS) titled Framework for Performing and Reporting on Compilation and Review Engagements), resulting from its clarity project. The proposed SSARS provides a framework for performing and reporting on compilation and review engagements and sets forth the meaning of certain terms used in SSARSs when describing the professional requirements imposed on accountants performing compilation and review engagements.
Comments are requested by May 2, 2014.
Flashline is a weekly alert highlighting current financial-reporting developments (including accounting, auditing and regulatory matters) and is produced by the National Professional Services Group of PwC. It is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. To access additional content on financial reporting issues, visit CFOdirect Network (www.cfodirect.pwc.com), PwC’s online resource for financial executives.