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FASB (US Financial Accounting Standards Board) (lt blue) Image

FASB clarifies the definition of a business

Jan 05, 2017

On January 5, 2017, the US Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-01, "Clarifying the Definition of a Business", which provides guidance on evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.

The ASU amends ASC 805 to “provide a more robust framework to use in determining when a set of assets and activities is a business.” In addition, the amendments “provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable.”

The ASU discusses its divergence with IFRS:

The definition of a business in GAAP is currently identical to the definition in IFRS. However, the Board observed that although the definition is identical, it does not appear to be interpreted or applied consistently in practice between jurisdictions that apply GAAP and jurisdictions that apply IFRS. That is, stakeholders have said that in jurisdictions that apply IFRS, the definition of a business generally is not applied as broadly as it is in jurisdictions that apply GAAP. In response to concerns from its stakeholders about the complexity of the definition of a business, the IASB added a project on the definition of a business to its agenda and issued an Exposure Draft, Definition of a Business and Accounting for Previously Held Interests, which proposes similar amendments to those in this Update.

Review the press release, ASU, and FASB in Focus newsletter on the FASB’s website.

SEC (US Securities and Exchange Commission) Image

SEC Chair states that high-quality, globally accepted accounting standards are a "U.S. Imperative"

Jan 05, 2017

On January 5, 2017, the U.S. Securities and Exchange Commission (SEC) released a public statement on global accounting by Mary Jo White, Chair of the SEC, where she stressed that the strength of the U.S. capital markets depended on investors knowing that they could rely on the financial information that is available to them when they make investment decisions. And since U.S. investors also made many investment decisions using IFRS financial statements, ensuring that IFRS, as well as U.S. GAAP, are of the highest quality was one of the Commission's "highest priorities".

While Ms. White acknowledged that there had been no formal action by the Commission since 2010 and that any further action would be in the responsibility of the new SEC Chair Clayton, she nevertheless described the last years as a success.

She also noted that this progress was very important and that it needed to continue as both Boards, as well as investors, would benefit greatly from their sustained engagement.

Review the full statement on the SEC's website.

SEC (US Securities and Exchange Commission) Image

President-elect Trump nominates new SEC chairman

Jan 04, 2017

On January 4, 2017, President-elect Donald Trump announced that he intends to nominate Jay Clayton as chairman of the US Securities and Exchange Commission (SEC).

Mr. Clayton would replace Mary Jo White, who announced in November 2016 that she will leave the SEC at the end of the Obama Administration. Mr Clayton’s appointment is contingent on a Senate confirmation vote.

Review the press release on the president-elect’s transition website.


High-level recap of changes resulting from the application of IFRS 9 and IFRS 15

Jan 03, 2017

On January 3, 2017, the International Accounting Standards Board (IASB) published "IFRS 9 and IFRS 15 — one year to go" on its website.

Basically, the recap offers a very general overview of the changes IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers will bring about and then links to the IASB's IFRS 9 implementation page and IFRS 15 implementation page. The recap also reminds preparers that investors need to be informed about the expected impact of a new standard even before companies apply that standard.

Please click to access the recap on the IASB's website.

AASB Image

Basis for Conclusions – CSOA 5000, Use of the Practitioner’s Communication or Name

Jan 03, 2017

On January 3, 2017, the Auditing and Assurance Standards Board (AASB) released this document which summarizes the process followed in developing this standard and the conclusions reached by the AASB regarding significant comments received in response to its Exposure Draft and Re-exposure Draft.

ED-CSOA 5000 proposed that CSOA 5000 be effective as of, and be applicable to, a practitioner’s consent provided on or after, June 1, 2016. In light of the delay in issuing CSOA 5000, the AASB deferred the effective date to June 1, 2017 to allow for effective implementation of CSOA 5000.

Download the Basis for Conclusions on the AASB's website.

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Are today’s CFOs ready for tomorrow’s demands on finance?

Dec 30, 2016

In December 2016, McKinsey released their latest Global Survey on the role of the CFO. Survey results show that as their role expands to include ever more non-financial demands, CFOs know they must build new skills to lead.

In the survey, finance leaders report that while newer responsibilities, such as digitizing critical business activities and managing cybersecurity, present opportunities for finance leaders to differentiate themselves—and their companies—from competitors, many CFOs believe their companies are not yet prepared to manage these challenges.

These nonfinancial responsibilities are putting many CFOs on alert. Less than one in three believe their companies have the capabilities they need to be competitive in their digitization of business activities.

On the whole, CFOs recognize the need to move beyond traditional or textbook practices. But few say their companies use innovative methods to make decisions. Roughly two in three CFOs say their companies do not yet have the capabilities for agile decision making, scenario planning, and decentralized decision making they’ll need to be competitive in the coming years.

In response to some of the challenges that the survey results revealed, a few steps that CFOs and their companies can take have been identifed:

  • Assert proactive and strategic leadership
  • Adopt an investor’s mind-set—and more innovative practices
  • Embrace technological advances

Review the full survey on the McKinsey's website.

PCAOB (US Public Company Accounting Oversight Board) (dark gray) Image

PCAOB Posts Staff Q&A: Audits of Mainland China Issuers by Registered Firms Outside of Mainland China

Dec 30, 2016

On December 30, 2016, the Public Company Accounting Oversight Board (PCAOB) published staff answers to questions about the obligations of PCAOB-registered firms based outside of Mainland China that provide issuer audit services that they understand to be subject to certain Mainland China regulations.

In 2015, the Chinese Ministry of Finance put into effect Interim Provisions on Auditing Operations Conducted by Accounting Firms Concerning the Overseas Listing of Domestic Chinese Companies (the “MOF Rule”). The MOF Rule includes provisions related to the conduct of auditors based outside of Mainland China that perform audit work in Mainland China.

PCAOB staff has prepared answers to questions that have arisen or may arise in that context.

Review the Staff Q&A on the PCAOB's website.

IESBA (International Ethics Standards Board for Accountants) (lt gray) Image

IESBA Meeting Highlights December 12 - 15, 2016

Dec 30, 2016

In December 2016, the International Ethics Standards Board for Accountants (IESBA) released the highlights of its December 12 - 15, 2016.

Discussion points included:

  • Professional Skepticism
  • Structure of the Code
  • Safeguards
  • Part C of the Code
  • Fees
  • Non-Compliance or Suspected Non-Compliance with Laws and Regulations (NOCLAR)
  • Long Association
  • Strategy Survey

Review the highlights on the IESBA's Web site.

United States Image

Early Adoption of ASC 606, Revenue From Contracts With Customers: First Glance

Dec 22, 2016

On December 22, 2016, Audit Analytics released a blog summarizing their findings resulting from a preliminary analysis of recent public filings where reporting issuers discuss their effort towards the implementation of IFRS 15.

In a recently released tool for the Audit Committees, the Center for the Audit Quality stated that it is “urgent that audit committees understand how management is assessing the impact of the new revenue recognition standard”. ASC 606 (which is based on ASU 2014-09, Revenue from Contracts with Customers) is effective starting with annual reporting periods beginning after December 15, 2017. Early adoption is permitted for fiscal periods beginning after December 15, 2016. The implementation is expected to have a material impact across the broad range of the industries.

Review the blog on the Audit Analytics' website.


EFRAG believes Conceptual Framework should contain guidance on asymmetry

Dec 21, 2016

On December 21, 2016, the European Financial Reporting Advisory Group (EFRAG) wrote to the IASB asking for the Conceptual Framework to include directions for the use of asymmetry.

As EFRAG notes, the IASB decided unanimously at its October 2016 meeting while discussing the Conceptual framework project that the Conceptual Framework should acknowledge that in financial reporting standards asymmetry may sometimes arise as a consequence of requiring the most useful information.

EFRAG supports the decision but believes that such an acknowledgement by itself is not sufficient and that the Conceptual Framework should also include guidance regarding the use of asymmetry when developing recognition and measurement principles. EFRAG quotes examples and also points out that in some cases potential guidance has already been developed by the IASB staff.

Review the letter on the EFRAG's website.

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