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September 2018  »  Tax & Accounting Update

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.

Tax News

Senate approves IRS funding bill.

The Senate has approved a spending measure—the Interior, Environment, Financial Services, and General Government Appropriations Act of 2019 (H.R. 6147)—that provides $11.263 billion for the IRS, an increase of $186 million above the enacted level for fiscal year 2018. Of this amount, $77 million is dedicated to implementation of tax reform. The bill also provides Taxpayer Services an additional $31 million above the 2018 level to support the IRS's customer service, such as phone call and correspondence response times, and funding for fraud prevention and cybersecurity.

FASB News

EITF effort to clarify business combinations guidance delayed.

FASB's Emerging Issues Task Force (EITF) recently determined that it needs to further revise a proposed amendment to U.S. GAAP intended to clear up an aspect of the business combinations standard. The EITF is trying to resolve an apparent conflict between Table of ASC 805, Business Combinations, and ASC 606, Revenue From Contracts With Customers. The EITF plans to review the near-finished draft at its meeting this month, FASB Technical Director Sue Cosper said at the end of FASB's July 25 weekly meeting. “Since we drafted the ASU [Accounting Standards Update], we have gotten a number of observations from EITF members on some unintended consequences that they've observed from the application of that ASU,” Cosper told FASB. “As a result, we decided, upon consultation with EITF members, to defer issuance.” FASB members did not make any public remarks after Cosper's announcement. A FASB spokesperson said the board had questions regarding how the proposed amendments would affect financial reporting.

Credit unions, community banks to get more time to implement credit loss standard.

FASB agreed to clarify its new accounting standard requiring earlier recognition of credit losses to ensure that community banks and credit unions have extra time to comply with it compared to larger financial institutions. That was the board's objective all along, FASB Chairman Russell Golden said, but the nuances of the language in Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, suggested that the smaller, less complex financial institutions did not have the lead time that the accounting board envisioned. “We intended to give these financial institutions longer,” Golden said. “There's confusion out there, and we need to correct that confusion so that the board's intent in the original document is appropriately reflected at the transition date for these financial institutions.” FASB plans to release the proposed wording change in August or September for a 30-day comment period.

The nuances of the language in Accounting Standards Update (ASU) 2016-13 suggested that the smaller, less complex financial institutions did not have the lead time that the accounting board envisioned.

IASB News

IFRS Interpretations Committee asked to assess accounting for digital currencies.

After months of questions about the accounting for the rapidly growing digital currency market, on July 17 the IASB agreed to a limited response and asked its IFRS Interpretations Committee (IFRIC) to study the issue. IASB Vice Chair Sue Lloyd stated that the members of the committee would be able to sift through the accounting literature and give the IASB information about the most appropriate accounting treatment for cryptocurrencies and initial coin offerings. “As a secondary question, assuming we are clear where we land, does it give us a good outcome or not?” Lloyd said. “Just pretending it's all OK is probably a risky strategy.” The IASB has fielded questions from around the world about whether businesses should consider digital currencies inventory, investments, or intangible assets for accounting purposes. An IASB staff member said the board is asked at almost every public forum when it plans to address the questions.

AICPA News

Auditing Standards Board agrees to issue final standard for ERISA plan audits.

The AICPA's Auditing Standards Board (ASB) voted to issue a final standard for audits of benefit plan financial statements covered by the Employee Retirement Income Security Act of 1974 (ERISA) at its next meeting. The balloting process is expected to be completed by late August, according to Ahava Goldman, associate director for audit and attest standards with the Association of International Certified Professional Accountants, a joint venture between the AICPA and the Chartered Institute of Management Accountants. The planned standard is intended to help auditors better understand their responsibilities and provide plan sponsors and participants, Department of Labor officials, and others with more information about auditors' process when examining the financial statements of benefit plans governed by ERISA.

Audit risk assessment tool published as aid to audit planning.

On July 25, the AICPA issued the Audit Risk Assessment Tool to supplement accounting firms' modules for planning audits. The AICPA is recommending that the tool be used for somewhat smaller, less complex audits. The AICPA also said the tool can be used to establish a risk-based approach to focus on high-risk areas when planning an audit, but it is not intended as a substitute for authoritative standards or an accounting firm's audit planning guidance. “In applying the auditing guidance included in this Audit Risk Assessment Tool, the auditor should, using professional judgment, assess the relevance and appropriateness of such guidance to the circumstances of the audit,” the AICPA said.

SEC News

Commissioner Jackson doubts need to expand exemption for internal control audits.

The SEC is considering a plan to widen the availability of the exemption from the requirement that an outside auditor attest to the soundness of a company's financial reporting controls. But at least one member of the commission believes there needs to be proof that a wider exemption is warranted, given the benefits to investors when internal controls receive an independent verification. SEC Commissioner Robert Jackson said any effort to broaden the exemption from the independent audit requirements for financial reporting controls must be backed with evidence that justifies a wider exemption. “I look forward to their recommendations. I hope it comes with some real analysis, with some real proof,” Jackson said. “But if all it is is giving something away to people who have been asking for a while, I am not likely to support it.”

 
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