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SEC proposes new rules for investment companies and investment advisers

May 22, 2015

The SEC issued two proposed rules that would “modernize and enhance” the reporting and disclosure requirements for investment companies and investment advisers. The purpose of the proposals is to improve the “quality of information available to investors” and facilitate the Commission’s collection and use of data that such companies and advisers provide.

The proposed rule on investment-company reporting would require “mutual funds, ETFs and other registered investment companies” to report information in a new structured format that would be easier for the SEC and the public to analyze. Further, this proposal “would permit but not require registered investment companies to transmit periodic reports to their shareholders by making the reports accessible on a website and satisfying certain other conditions.”

The proposed rule for investment advisers would require disclosures that allow the SEC and investors to get a better picture of the advisers’ risk profiles. In addition, this proposal “would require advisers to maintain records of performance calculations and communications related to performance.”  

Com­ments on both pro­posals are due 60 days after the date of their publication in the Federal Register. For more information, see Deloitte's related journal entry and the press release on the SEC’s Web site.

Highlights from the FASB’s May 21 meeting

May 22, 2015

At its May 21, 2015, meeting, the FASB discussed its projects on (1) clarifying the definition of a business and (2) long-duration insurance contracts.

  • Clarifying the definition of a business — The FASB discussed whether to develop a framework for indicating when a set has “inputs and processes that substantively contribute to the ability to create outputs.”
  • Long-duration insurance contracts — The FASB discussed methods for calculating and recording the impact of assumption updates for traditional long-duration, limited-payment, and universal life-type contracts.

For more information, see Deloitte’s related journal entry and the tentative Board decisions on the FASB’s Web site.

FASB issues ASU on short-duration insurance contract disclosures

May 22, 2015

The FASB has issued Accounting Standards Update (ASU) No. 2015-09, “Disclosures About Short-Duration Contracts,” which amends ASC 944 to expand the disclosures that an insurance entity must provide about its short-duration insurance contracts.

Under the ASU, insurance entities with short-duration insurance contracts must annually provide the following disclosures:

  • ”Incurred and paid claims [and allocated claim adjustment expense] development information by accident year, on a net basis after risk mitigation through reinsurance, for the number of years for which claims incurred typically remain outstanding (that need not exceed 10 years, including the most recent reporting period presented in the statement of financial position). Each period presented in the disclosure about claims development that precedes the current reporting period is considered to be supplementary information.” For the most recent reporting period presented, an insurer also must disclose the total net outstanding claims for all accident years before those presented in the claims development tables (i.e., collectively, for those accident years not separately presented in the development tables).
  • A reconciliation of the claims development disclosures to the aggregate carrying amount of the liability for unpaid claims and CAEs, with separate disclosure of reinsurance recoverable on unpaid claims.
  • For each accident year presented in the claims development tables, disaggregated information about (1) claim frequency (unless impracticable) and (2) the amounts of incurred-but-not-reported (IBNR) liabilities plus the expected development on reported claims.
  • A description of the methods for determining (1) both IBNR and expected development on reported claims and (2) cumulative claim frequency, and any significant changes to those methods.
  • For all claims except health insurance claims, the historical average annual percentage payout of incurred claims by age, net of reinsurance, for those accident years presented in the claims development tables.
  • Information about any significant changes in methods and assumptions used in the computation of the liability for unpaid claims and CAEs, including reasons for the changes and the impact of the changes on the most recent reporting period in the financial statements.
  • The carrying amounts of  liabilities for unpaid claims and CAEs that are presented at present value and the effects of the discounting, including (1) the aggregate discount deducted from the liabilities, (2) the amount of interest accretion recognized during each period, and (3) the line item(s) in the statement of comprehensive income in which the interest accretion is classified.

In addition, insurance entities must disclose the following in both interim and annual periods:

  • The rollforward of the liability for unpaid claims and CAEs.
  • Total IBNR liabilities, plus expected development on reported claims, included in the liability for unpaid claims and CAEs for health insurance claims, either as a separate disclosure or as a component of the disclosure of the rollforward of the liability, at an appropriate level of disaggregation

The ASU is effective for public business entities for annual periods beginning on or after December 31, 2015, and interim periods within annual reporting periods beginning after December 15, 2016. The effective date is deferred by one year for all other entities. Early application is permitted.

For more information, see the press release, ASU, FASB in Focus newsletter, and Understanding Costs and Benefits document on the FASB’s Web site.

FAF trustees reappoint FASB members

May 21, 2015

The FAF board of trustees has reappointed FASB members Daryl E. Buck and R. Harold Schroeder for a second term that begins on July 1, 2015, and ends on June 30, 2021.

Before joining the FASB in 2011, Mr. Buck was a senior vice president and chief financial officer at Reasor’s Holding Company while Mr. Schroeder was a partner at Carlson Capital LP.

For more information, see the press release on the FAF’s Web site.

FASB issues a proposed ASU to simplify the accounting for measurement-period adjustments

May 21, 2015

The FASB has issued a proposed Accounting Standards Update (ASU), “Simplifying the Accounting for Measurement-Period Adjustments,” as part of its simplification initiative (i.e., the Board’s effort to reduce the cost and complexity of certain aspects of U.S. GAAP).

ASC 805-10-25-13 states that “[i]f the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete.” Under the proposal, during the measurement period, the acquirer is no longer required to retrospectively adjust the provisional amounts recognized as of the acquisition date. Instead, the acquirer would need to “record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.”

Comments on the proposed ASU are due by July 6, 2015. For more information, see the proposed ASU on the FASB’s Web site.

IASB amends IFRS for SMEs

May 21, 2015

The IASB has published amendments to its “International Financial Reporting Standard for Small and Medium-sized Entities” (the "IFRS for SMEs"). The amendments are the result of the first comprehensive review of that standard, which was originally issued in 2009. Although the changes affect 21 of the standard’s 35 sections (not counting consequential amendments) as well as the glossary, they are generally minor. The amendments are effective for annual periods beginning on or after January 1, 2017, with earlier application permitted.

Most of the changes constitute clar­i­fi­ca­tions and do not affect the accounting for trans­ac­tions and events. The following are three of the more significant amendments:

  • An entity would be permitted to use the reval­u­a­tion model for property, plant, and equipment.
  • The main recog­ni­tion and mea­sure­ment re­quire­ments for deferred income taxes would be aligned with the current re­quire­ments in IAS 12, Income Taxes.
  • The main recog­ni­tion and mea­sure­ment re­quire­ments for ex­plo­ration and eval­u­a­tion assets would be aligned with those in IFRS 6, Ex­plo­ration for and Eval­u­a­tion of Mineral Resources; thus, the IFRS for SMEs would provide the same relief as full IFRSs do for these ac­tiv­i­ties.

The IASB will issue a complete, revised version of the IFRS for SMEs in the next few months.

For more information, see the press release, final amendments, Basis for Conclusions, and project summary and feedback statement on the IASB’s Web site.

FAF concludes post-implementation review of Statement 160

May 21, 2015

The FAF has issued its post-implementation review (PIR) report on FASB Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements.” Statement 160, which was issued in 2007, was subsequently codified in FASB Accounting Standards Codification Topic 810, “Consolidation.”

The report concludes that Statement 160 is generally useful to investors and fulfills its purpose. For example, the Statement:

  • Eliminates “the diversity associated with reporting noncontrolling interests in the financial statements.”
  • Increases “the relevance of reported financial information on noncontrolling interests.”
  • Converges the guidance on noncontrolling interests with that in the IASB’s IAS 27, Consolidated and Separate Financial Statements.

The FAF did not make any major standard-setting recommendations to the FASB after performing the PIR of Statement 160.

For more information, see the press release, PIR, and FASB response letter on the FAF’s Web site.

IASB proposes to defer the effective date of IFRS 15

May 19, 2015

The IASB has published an exposure draft (ED), “Effective Date of IFRS 15,” which would defer the effective date of IFRS 15, “Revenue From Contracts With Customers,” by one year.

The IASB is proposing the deferral primarily because it is currently preparing another ED that would amend certain portions of IFRS 15. The ED’s new effective date would be annual periods beginning on or after January 1, 2018. Early adoption of IFRS 15 would continue to be permitted, and entities would still have the option of applying the standard ret­ro­spec­tively either to each prior reporting period presented or with the cu­mu­la­tive effect of initial application recog­nized as of the adoption date.

The FASB has also issued a proposal that would defer the effective date of its counterpart revenue standard, ASU 2014-09, by a year.

Comments on the IASB’s ED are due by July 3, 2015. For more information, see Deloitte's IFRS in Focus newsletter as well as the press release and ED on the IASB’s Web site.

FAF issues 2014 annual report

May 18, 2015

The FAF has released its 2014 annual report, which focuses on the FAF/FASB/GASB strategic plan (published in April 2014) and how the organizations can “build a better GAAP.”

The report also summarizes the accomplishments of the three organizations over the past year and reiterates their four strategic goals:

  • “Practicing and promoting continued excellence in standard setting.”
  • “Demonstrating a commitment to leadership in standard setting.”
  • “Building and maintaining trust with stakeholders.”
  • “Contributing to the public discourse on current and future financial reporting issues.”

For more in­for­ma­tion, see the press release and annual report on the FASB’s Web site.

New SEC deputy chief accountant appointed

May 14, 2015

The SEC has announced that it has named Wesley R. Bricker as deputy chief accountant to replace Dan Murdock, who will be leaving the Commission at the end of May. Mr. Murdock worked as an industry professional practice director at Deloitte & Touche LLP before his appointment to the SEC.

Currently, Mr. Bricker is a partner at Pricewaterhouse Coopers LLP, where he works with clients from the banking, capital markets, financial technology, and investment management sectors. SEC Chief Accountant James Schnurr enthusiastically supported Mr. Bricker’s appointment, stating that “Wes’s prior experience as an SEC accounting fellow as well as his experience in public accounting make him well-qualified to take on this new responsibility."

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