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Coronavirus and Wayfair decision affecting state tax revenues

The Supreme Court decision in the Wayfair case combined with the pandemic are having a wide-ranging impact. It’s one thing to have economic nexus, but states also need to impose the obligation on marketplace facilitators. If you just have economic nexus, then all those retailers that sell on the marketplace have the obligation to collect, but the marketplace doesn’t. The states have figured out that if they make the marketplace collect, they can collect on the really small sellers that they couldn’t otherwise, since many of the smaller retailers don’t meet the threshold for economic nexus.

Global economic confidence plummets due to coronavirus, say ACCA and IMA

In normal circumstances, economic conditions change little in the space of just a few weeks. But these are not normal circumstances. So, although global confidence and orders both fell significantly in the Q1 survey, they do not convey the true scale of the global economic contraction that is now in progress. What is abundantly clear is that the global economy is heading into a recession, initially at least a severe one.

The coronavirus pandemic requires bold firm leadership

One of the pillar qualities of great leadership is adapting to the situation. Every workplace has different variables, from the personalities on a team to the health of a business. In accounting, one of the biggest environmental factors in the workplace comes in the form of seasonality. There are no getting around tax deadlines and the way they warp the accounting calendar. No matter how far you plan ahead, you will have to deal with the added stress and excess work that tax season entails. How you approach this situation as a leader goes a long way toward determining team success and mental well-being.

10 ways to immunize your firm during a crisis like the coronavirus

While the effects of the pandemic will be felt — and continue to evolve — for some time to come, it’s crucial for accounting leaders to think through their firms’ actions and to have a process in place to evaluate and redirect as necessary. Here are 10 suggestions to help firms think through near-term needs and create a plan to help shore up business continuity and mitigate some risks during this sensitive time.

3 steps to manage your company during economic uncertainty

Some companies are mobilizing to meet increased demand or pivoting their business models to better serve the changing needs of their customers. Others are facing much more difficult scenarios as their revenue streams evaporate. These challenges are exacerbated by the speed at which conditions are changing. Businesses must adapt rapidly, and the time for decisive action is now. Companies that operate well through this downturn may be able to leapfrog competitors.

Below is an analysis of all changes made to the work plan since our last analysis on March 27, 2020.

Standard-setting projects

• The Board extended the consultation period for the Exposure Draft General Presentation and Disclosures until September 30, 2020
  

Maintenance projects

• Changes in accounting policies and estimates — Final amendments are now expected in the fourth quarter of 2020 (previously no date given)
• Amendments to IFRS 17 "Insurance Contracts" — Final amendments are now expected in June 2020 (previously second half of 2020)
• Deferred tax related to assets and liabilities arising from a single transaction — The discussion of exposure draft feedback is now expected in June 2020 (previously second quarter of 2020)
• Disclosure initiative — Accounting policies — The last work plan stated that feedback to the exposure draft would be discussed (no date given); this has now changed to final amendments to be expected in  the fourth quarter of 2020 without redeliberations having occurred yet
• Disclosure initiative — Disclosure review — An exposure draft is now expected in the first half of 2021 (previously second half of 2020)
• IBOR reform and its effects on financial reporting — Phase 2 — An exposure was published on 9 April 2020; discussion of the feedback received is expected to occur in the third quarter of 2020
• IFRS 16 and COVID-19 — A project newly added to the work plan; an exposure draft is expected "by 27 April 2020"
• The Board extended the consultation period for the Request for Information Comprehensive Review of the IFRS for SMEs Standard until October 27, 2020

Research projects

• Business combinations under common control — A discussion paper is now expected in the third quarter of 2020 (previously second quarter of 2020)
• Dynamic risk management — Outreach on the core model is now expected in the second half of 2020 (previously second quarter of 2020)
• Extractive Activities — Research findings will now be discussed in June 2020 (previously second quarter of 2020)
• Goodwill and impairment — The feedback received on the discussion paper will be discussed in the first half of 2021 (previously second half of 2020); the consultation period for the Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment has been extended until 31 December 2020
• Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12 — in the last work plan, the research review was announced for April 2020; this has now been given an entry "fourth quarter of 2020" although the Board will actually discuss the feedback at the upcoming Board meeting

Other projects

• 2020 Agenda Consultation — A request for information is now expected in the first half of 2021 (previously second half of 2020)

Review the press release and the revised IASB work plan on the Board's website.

Staff Alerts under Development

A core element of their COVID-19 response is to develop Staff Alerts on several targeted topics to support the application of our standards under current circumstances. Their goal is to support the public interest and the role auditors must play in sustaining trust in financial and other external reporting.

In addition to the IAASB Staff Alert, Highlighting Areas of Focus in an Evolving Audit Environment Due to the Impact of COVID-19, they are drafting Staff Alerts on the following topics:

• Auditor Reporting
• Going Concern
• Subsequent Events
• Auditing Accounting Estimates
• Public Sector Audit Considerations

The Staff Alerts on Auditor Reporting and Going Concern will be issued next and are expected to be available within the next two weeks.

Review the press release on the IAASB's website.

On the Board's timelines in view of the COVID-19 pandemic, the staff recommended that the Board:

• (a) delay by one year the effective date of Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) to annual reporting periods beginning on or after 1 January 2023.
• (b) extend the consultation period by (approximately) three months for the following consultation documents:
  • the Exposure Draft General Presentation and Disclosures;
  • the Request for Information Comprehensive Review of the IFRS for SMEs Standard; and
  • the Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment.

All Board members agreed with the staff recommendations and also agreed that the exposure draft on delaying the effective date of the IAS 1 amendments should have a comment period of 30 days. The Board gave the permission to begin the balloting process for the exposure draft and no Board member intends to dissent.

On accounting for COVID-19-related rent concessions, the staff recommended that the Board amend IFRS 16 to provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. Entities applying the exemption would account for the changes as if they were not lease modifications. The exemption would have to be applied retrospectively but comparative figures would not be restated. A lessee would recognise any difference arising on initial application of the amendment in opening retained earnings (or other component of equity, as appropriate) in the annual reporting period that includes the date of initial application.

All Board members agreed with the staff recommendations and also agreed that the exemption would be effective immediately, when the final amendment is issued. The Board will ask the Trustees to approve a comment period of 14 days. The Board gave the permission to begin the balloting process for the exposure draft and no Board member intends to dissent. 

Note: The shortened comment periods for both exposure drafts were discussed in a DPOC call yesterday.

To inform its work, the SFN drew on a survey of the initiatives planned or undertaken by securities regulators and market participants to address the opportunities and challenges posed by sustainable finance. The report reflects the expectations from regulators and market participants that IOSCO should take an active role in facilitating global coordination and addressing transparency. The report notes:

[T]he SFN work to date points to a need to improve the comparability of sustainability-related disclosures. The lack of consistency and comparability across third party frameworks could create an obstacle to cross border financial activities and raise investor protection concerns.

The SFN has identified several actions that could contribute to enhanced comparability of sustainability related disclosure:

• Alignment of frameworks and requirements
• Identification of relevant components of disclosure
• Increased public accountability and assurance standards
• Increased engagement with asset managers on the integration of ESG factors in investment decision processes

Building on these, the report sets out the role that IOSCO can play and a proposal for next steps:

In response to these demands, IOSCO is looking to play an important role in addressing the challenges identified by the SFN while avoiding duplicating work done or being carried out by other standard-setting bodies or similar organizations. In particular, facilitating the provision of disclosure, both qualitative and quantitative, that is decision useful for both investors and companies is an area where IOSCO should be able to contribute meaningfully.

Therefore, IOSCO has decided to establish a Sustainability Task Force (STF). With a view to improve sustainability–related disclosures made by issuers and asset managers, the STF will identify and develop categories of disclosure which are material for investors and which are capable of falling within the supervisory and regulatory competence of securities regulators. The STF will then examine the categories of disclosure to assess whether industry specific or more broad metrics would provide decision useful information and comparability between different issuers. For this work, the STF will engage with the industry, voluntary third-party disclosure standard-setters and other relevant organisations.

Please click for the press release and the final report on the IOSCO website.

Similar to the guidance on IFRS 9 published in March, the new guidance on IFRS 16, Leases is intended to support the consistent application of requirements in IFRS Standards. Therefore, it highlights requirements within IFRS 16 and other IFRS Standards that are relevant for companies considering how to account for rent concessions granted as a result of the covid-19 pandemic; it does not change, remove nor add to, the requirements of IFRS 16. Please click to access the document on the IASB website. The IASB has also announced that the issue will be discussed by the IASB at its upcoming meeting.

At the meeting, the IASB will also discuss:

• whether to propose a deferral by one year to 1 January 2023 of the effective date of the amendments to IAS 1 regarding the classification of liabilities;
• whether to extend the consultation period for three major ongoing consultations (the ED General Presentation and Disclosures, the RfI Comprehensive Review of the IFRS for SMEs Standard, and the DP Business Combinations — Disclosures, Goodwill and Impairment) by three months; and
• delaying the publication of forthcoming major consultation documents originally planned for 2020.

The Appendix A of agenda paper 32 for the meeting offers a tabular overview over the proposed changes to consultation document timelines.

Review the press release on the IASB's website.

On March 18, the CSA announced that all CSA proposals currently out for comment would have their comment periods extended by 45 days. Until at least May 30, 2020, the CSA will also not publish any new proposals for comment.

CSA members continue to be in close contact with the companies and firms they regulate, and based on these discussions, will consider proceeding with burden reduction initiatives if they are immediately helpful to businesses in responding to COVID-19.

As the situation evolves, the CSA will consider whether additional relief for market participants is warranted. We will also consider actions to support investors and ensure they are treated fairly during this difficult time. The needs of both stakeholder groups are important, and CSA members will consider and balance these needs as we fulfil our mandates.

Review the press release on the CSA's website.

The statements covers:

• Detailed discussion of the importance of disclosure, particularly forward-looking disclosure, for investors, markets and our fight against covid-19
• Discussion of investor protection, market integrity and legal risk

Review the statement on the SEC's website.

The new comment deadline is June 4, 2020. Stakeholders who are able to submit their feedback by May 4, 2020, the original comment deadline, are encouraged to do so. 

The EDs were released on January 21, 2020 and include proposals aimed at strengthening the non-assurance services (NAS) and fee-related independence provisions of the International Code of Ethics for Professional Accountants (including International Independence Standards).

Review the press release on the IESBA's website.

Look at worst-case scenarios that may emerge from paying less attention to maintenance routines and investments such as those in cybersecurity that protect against operational, financial, and reputational risks.

Review the blog on the NACD's website.