Reference Rate Reform & Balance Sheet Classification of Debt
This week’s blog covers two big proposals from FASB that just came out. The first proposal relates to the movement away from LIBOR. As LIBOR has come under scrutiny there has been a movement to replace LIBOR as a reference rate. However, changing the reference rate can cause significant issues for hedging and other relationships. As a result, FASB is proposing a gentler approach to reference rate reform that will help those impacted by LIBOR’s replacement. The second proposal addresses the never-ending drama related to balance sheet classification of debt. While it sounds like an easy area, the movement to a principles-based approach has identified some impacts that may be unexpected. As such, FASB is reproposing the standard to gather feedback. Both standards will impact many entities so we wanted to get them out there in a timely manner!
New Valuation Guide
The AICPA has published the Valuation of Portfolio Company Investments of Venture Capital and Private Equity Funds and Other Investment Companies guide. The guide is intended to help preparers, auditors, and valuation specialists with the accounting for and valuation of portfolio company investments held by investment companies that fall under the scope of FASB’s Accounting Standards Codification ASC 946, Financial Services—Investment Companies. The guide was developed by the AICPA PE/VC Task Force which includes members from the PE/VC industry, auditors, valuation practitioners, and AICPA staff.
Two Proposals to Delay Effective Dates for Private Entities
This blog addresses two proposed ASUs that will delay effective dates for private companies. Now that private companies have started to implement revenue recognition, we know that it takes more effort for private companies to go through the adoption process. In addition, private companies struggle with the back to back nature of these major changes and have to triage each standard. As a result, the FASB is proposing delaying the CECL, hedging and leases standard for private companies. During this process, the Board also updated its framework for effective dates for private companies. In addition, to the three standards, FASB issued a separate exposure draft delaying the effective date of long-duration contracts for all entities.
2 GASB Exposure Drafts – 20XX Omnibus & 457 Plans
https://youtu.be/f7IPQ51mdPk This week's blog is a two for one special. GASB has issued two niche exposure drafts. The first is the 20XX Omnibus that addresses a variety of very specific technical issues and corrections. The second addresses the scope of pension...
ITC – Identifiable Intangible Assets and Subsequent Accounting for Goodwill
https://youtu.be/791it9X8x-U FASB has issued an Invitation to Comment aimed to provide feedback to the standard setter on the subsequent accounting for goodwill as well as feedback related to identifiable intangibles. In 2014, the FASB using a PCC alternative allowed...
Information Systems Services
The AICPA’s Professional Ethics Executive Committee (PEEC) of the AICPA has published a revision to Independence Rule Interpretations related to Information System Services. The interpretation offers guidance to members that provide nonattest services related to an attest client’s information systems. It is much more detailed than previous guidance in order to help members understand under what circumstances independence would be impaired and when it would not be impaired. The newly released amendment is effective on January 1, 2021 and early implementation is allowed.
Proposed SSARS: Materiality in a Review of Financial Statements, Adverse Conclusions, and Special Purpose Frameworks
The AICPA’s Accounting and Review Services Committee has issued a proposed SSARS, Materiality in a Review of Financial Statements, Adverse Conclusions, and Special Purpose Frameworks. The proposed amendments are intended to more closely align SSARS with International Standard on Review Engagements and as well as consider the relationship with the SASes. The proposal includes the requirement for the accountant to determine materiality in reviews of financial statements, permits the expression of an adverse conclusion, and also addresses terminology throughout the SSARS. The revisions would be effective for engagements performed in accordance with SSARSs on financial statements for periods ending on or after June 15, 2021. Comments are due by September 20, 2019.
Proposed SAS: Audit Evidence
The AICPA Auditing Standards Board has issued a Proposed SAS on Audit Evidence. The SAS is intended to modernize auditing standards to recognize new sources of information and evolving business technologies. Emerging technologies such as audit data analytics and blockchain are now used by financial statement preparers and by auditors alike. This evolution drives new challenges related to audit evidence and professional skepticism. The standard includes attributes and factors to be used in evaluating audit evidence. Feedback is due by September 18, 2019.
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