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Tax & Accounting Update

Tax & Accounting Update is provided by Thomson Reuters and based on material published on Checkpoint, its online news and research platform. The Update is a quick-reference guide to the most pressing issues coming down the regulatory and administrative pipeline. Visit https://tax.thomsonreuters.com/checkpoint-news/ for further information and daily updates.

SEC News

Audit committee reporting project remains in monitoring mode.

The SEC is monitoring the reporting practices of public companies' audit committees as regulators consider how to push for more informative disclosures. A July 2015 preliminary rule-making document generated some worthwhile commentary, but the divergent views in the comment letters left regulators with no clear path forward. “We received a number of really good, thoughtful comments from our concept release,” SEC Chief Accountant Wesley Bricker said in reference to the July 2015 release. For the time being, the agency staff will continue to monitor the disclosures in proxy statements before deciding on its next steps.

FASB News

Some contributions remain hard to classify.

The subtle distinction between a “restriction” and a “condition” on a donation to a charity determines when a not-for-profit (NFP) organization can record the revenue from the contribution. FASB is trying to clarify its guidance so that charities, museums, colleges, and other organizations will be more easily able to apply the board's revenue recognition standard. “This is an area where there's already a great deal of judgment out there in practice,” FASB Assistant Director Jeffrey Mechanick said. “We're trying to give better guidance to provide the framework for making that judgment.” The board has tentatively decided that for a donor-imposed condition to exist, a right of return—the ability for the donor to ask for the money back—must exist, and the agreement must include a “barrier.” FASB has a draft list of indicators to describe the barriers; for example, if an NFP group must perform a measurable task, such as erecting a building or creating a scholarship, the organization has limited discretion about how the money can be spent. FASB hopes to issue a proposal by midyear.

Consolidation guidance may be carved in two.

FASB wants to clear up several aspects of its sprawling consolidation guidance without fundamentally rewriting it. On March 8, the board agreed to release for public comment a proposal to split from the guidance the sections on variable interest entities and voting interest entities and create a new topic in U.S. GAAP. If finalized, FASB said the split would make the complex consolidation guidance easier to navigate and would also conform to how the Big Four write their own manuals—manuals many other accountants consult when they find U.S. GAAP too complex to follow. The board also wants to update its executive summary to better explain the concept of “expected.”

SEC approves 2017 GAAP taxonomy.

On March 9, FASB said that the SEC has accepted the accounting board's 2017 GAAP Financial Reporting Taxonomy, which is developed and updated each year by the FASB staff to reflect amendments to U.S. GAAP. The board also said it has scheduled a webcast for March 28 to explain this year's changes. FASB also released a series of implementation guides for the 2017 edition. Separately, the SEC said that it updated its Electronic Data Gathering and Retrieval (Edgar) system to support the 2017 taxonomy.

PCAOB News

Updated interpretive guidance explains disclosure rules for employees on temporary assignment.

The PCAOB has updated its staff guidance for the requirements of Form AP to explain how audit firms should disclose information about employees who work for them in a secondment arrangement. Such an arrangement means the employee is working on the audit of a client's financial statements while on a temporary assignment from another audit firm, such as a foreign affiliate of the firm leading the audit. “For purposes of determining participation in the audit and calculating audit hours, professional employees in a secondment arrangement should be treated as if they were employed by the accounting firm to which they are seconded,” the guidance says.

IASB News

Mixed reviews for key part of planned revision to business combinations standard.

The IASB has received mixed feedback on its proposal for public comment to help accountants distinguish between the purchase of a business and a routine purchase of groups of assets. The board's proposal calls for an initial screen to filter out simple purchases of groups of assets, but not all standards setters are convinced the test will work in practice. Some members of the global standards-setting community repeated their concerns to the IASB at a March 6 meeting of the international board's Accounting Standards Advisory Forum. “Generally speaking, IFRS is meant to be a principles-based standard; introducing a screening test is clearly a rule,” said Kris Peach, chair and CEO of the Australian Accounting Standards Board.

 

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