FinREC Proposals – CECL & Inventory
The AICPA’s FinREC has issued two items for public comment. One related to the Current Expected Credit Loss (CECL) model and the related to the fair valuing of inventory in a business combination. Both topics will be included in future A&A guides. As a result, the AICPA is looking for feedback on the proposals to insure preparers, valuation experts and auditors agree with the proposed methodologies. Comments are due to the AICPA.
Codification Improvements: Financial Instruments
FASB has issued a proposal related to its financial instruments suite. The proposal makes technical corrections to ASU 2016-01 (recognition and measurement), ASU 2016-13 (the CECL model) and ASU 2017-12 (hedging). The updates come in part from meetings with its Transition Resource Group (TRG) and from feedback received from preparers and auditors. Comments are due by December 19th.
Proposed Changes to DCF
The Federal Audit Clearinghouse (FAC) has issued round 2 of proposed changes to the Data Collection Form (DCF). The DCF is what is used to provide public information regarding Single Audits of state and local governments, Indian tribes, institutions of higher education and nonprofit entities. The GAQC has posted a version of the proposed form on their website. Comments are due December 6, 2018.
Future of the Profession
The AICPA has been actively working behind the scenes to roll out new technology options to assist firms of all sizes be proactive about changes to the profession. This blog takes a look at the new technology recently released by the AICPA for comps, reviews and prep engagements called Onpoint PCR. It also looks at the press release issued by the AICPA regarding the Dynamic Audit Solution and the technology the AICPA hopes to build to reflect the audit of the future.
Peer Review & Risk Assessment
The AICPA has updated the Peer Review Manual to address identified issues in Risk Assessment. According to the Journal of Accountancy, one in ten firms fail to comply with the risk assessment suite. As a result, the Peer Review Program Manual was updated to include specific guidance regarding evaluation of noncompliance with the risk assessment standards. The changes were effective October 1, 2018. Risk assessment, internal controls and documentation will continue to be targets of the AICPA based on the results of the Enhancing Audit Quality (EAQ) Initiative.
Q3 in Review
This blog gives a high level of overview of what standard setters issued during the third quarter of 2018! Q3 was a busy quarter for FASB. They rolled out several final standards ranging from niche industry guidance for insurance entities to two lease updates. They also rolled out an update to the concept statements which resulted in two ASUs removing, adding and clarifying disclosures for fair value and defined benefit plans. GASB also issued one final statement on equity interests.
Recognition of Elements of Financial Statements
GASB has proposed a Preliminary Views Document for a Concept Statement – Recognition of Elements of Financial Statements. The concept statement addresses recognition which deals with measurement focus and basis of accounting, what should be reported and when. The PV proposes a short-term financial resources measurement focus (which was discussed in last week blog on the PV for the Financial Reporting Model) and an economic financial resources measurement focus. The PV also includes a hierarchy for recognition. Comments are due by February 15, 2019.
Financial Reporting Model Improvements
GASB has issued a Preliminary Views document, Financial Reporting Model Improvements. It is a follow up to the ITC proposed in December 2016. The PV introduces the short-term financial resources measurement focus for governmental funds which also brings a change in format to governmental fund financial statements. Also addressed in the PV is the definitions of operating and nonoperating revenues and expenses. The PV also addresses new subtotals for proprietary fund financial statements, requires two new variance columns for budgetary information and introduces a new schedule of government wide expenses by natural classification. Comments are due by February 15, 2019.
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