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Swedish regulator and PCAOB enter into cooperative agreement

Mar 31, 2014

The Supervisory Board of Public Accountants of Sweden and the PCAOB have announced a cooperative agreement related to the oversight of audit firms subject to the jurisdictions of both regulators. The agreement is effective immediately.

The arrangement, which includes a data protection agreement, provides a framework for joint inspections and allows for the exchange of confidential information in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act.

See the press release on the PCAOB's Web site for more information.

Highlights from the FASB’s March 26 meeting

Mar 28, 2014

At its March 26, 2014, meeting, the FASB discussed its projects related to going concern, identifiable intangible assets in a business combination, and goodwill for public business entities and not-for-profit entities.


Going concern

The FASB discussed the results of additional outreach conducted by its staff and redeliberated the going-concern reporting model. On the basis of feedback received, the Board made tentative decisions related to the following topics:

  • Single-threshold model.
  • Definition of “substantial doubt.”
  • Going-concern assessment period.
  • Frequency of the going-concern assessment.
  • Disclosures.
  • Nonpublic entities.

For more information, see the related Deloitte Accounting Journal entry and the meeting minutes on the FASB's Web site.


Accounting for identifiable intangible assets in a business combination (PCC Issue 13-01A)

The FASB discussed accounting alternatives in connection with the Private Company Council’s (PCC's) project on accounting for intangible assets in a business combination. The discussion, which was educational (no decisions were made), was in preparation for the PCC’s April 29 meeting.

For more information, see the meeting notes on the FASB's Web site.


Accounting for goodwill for public business entities and not-for-profit entities

The FASB continued its discussion of alternatives related to goodwill measurement and reviewed the results of the research performed by the staff after the February 12, 2014, Board meeting. The FASB considered four alternatives but deferred further discussions until after the IASB issues its findings on the post-implementation review of IFRS 3, Business Combinations, which is expected later this year.

For more information, see the meeting minutes on the FASB's Web site.

SEC extends comment deadline on proposals related to asset-backed securities

Mar 28, 2014

The SEC has again extended the comment deadline on two proposed rules, "Asset-Backed Securities" (33-9117) and "Re-Proposal of Shelf Eligibility Conditions for Asset-Backed Securities" (33-9244). Comments on the proposals are now due by April 28, 2014.

In February, the SEC had extended the proposals’ comment period to March 28, 2014, but has now extended it again to "permit interested persons additional time to analyze and comment on . . . an approach for the dissemination of potentially sensitive asset-level data."

For more information, see the release on the SEC's Web site.

PCAOB board member discusses "perfect storm" for ICFR

Mar 28, 2014

In her speech at the Institute of Internal Auditors’ 2014 General Audit Management Conference this week, PCAOB Board Member Jeanette Franzel described the current state of internal control over financial reporting (ICFR) as a "perfect storm [that] demands effective action by all participants in the financial reporting and auditing chain.”

Ms. Franzel noted that auditors and management will be implementing the Committee of Sponsoring Organizations of the Treadway Commission’s updated "Internal Control — Integrated Framework" around the same time that firms will be adjusting their procedures in response to PCAOB inspection findings. She emphasized that management, internal auditors, external auditors, audit committees, and the PCAOB will therefore need to work together to meet their respective responsibilities. Her remarks focused on the following:

  • Trends in audits of internal control over financial reporting.
  • Recent PCAOB reports and guidance regarding ICFR audits.
  • Emerging issues in audits of ICFR.

A transcript of her speech is available on the PCAOB's Web site.

FASB ratifies EITF consensus and tentative conclusion

Mar 27, 2014

At its meeting on March 26, 2014, the FASB ratified the Emerging Issues Task Force (EITF) consensus on Issue No. 13-D, "Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period," and will release it soon as an Accounting Standards Update (ASU).

The Board also approved the issuance of a proposed ASU related to EITF Issue No. 12-F, “Recognition of New Accounting Basis (Pushdown) in Certain Circumstances.”

For more information, see Deloitte’s EITF Snapshot as well as the meeting minutes on the FASB's Web site.

SEC staff releases analyses related to money market fund reform

Mar 25, 2014

The SEC staff has made available certain analyses of data and academic literature related to money market fund (MMF) reform. The analyses are intended to help the public evaluate final rule amendments for the regulation of MMFs.

The SEC staff has added the analyses to the comment file for the SEC’s June 2013 proposed rule on MMF reform. As noted in the Commission’s press release, the analyses examine:

  • “The spread between same-day buy and sell transaction prices for certain corporate bonds from Jan.  2, 2008 to Jan. 31, 2009.
  • The extent of government money market fund exposure to non-government securities.
  • Academic literature reviewing recent evidence on the availability of ‘safe assets’ in the U.S. and global economies.
  • The extent various types of money market funds are holding in their portfolios guarantees and demand features from a single institution.”

The press release also specifies that the public can submit comments on the analyses to the comment file until April 23, 2014, and that “[a]dditional studies, memoranda, or other substantive items may be added by the Commission or staff to the comment file during this rulemaking.”

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

IASB proposes amendments to IAS 1 as result of the disclosure initiative

Mar 25, 2014

The IASB has published an exposure draft (ED) of proposed amendments to IAS 1, "Presentation of Financial Statements." The amendments clarify IAS 1 to address perceived impediments to preparers exercising their judgment in presenting their financial reports. Comments are requested by July 23, 2014.


The IASB formally added an initiative on disclosure to its work program in December 2012 to complement the work being done in the Conceptual Framework project. The initiative is made up of several smaller projects aimed at exploring opportunities to improve presentation and disclosure principles and requirements in existing Standards. Included is a narrow scope project on IAS 1, Presentation of Financial Statements, to ensure that entities are able to use judgment when presenting their financial reports, because the wording of some of the requirements in IAS 1 had, in some cases, been read to prevent the use of judgment.


Suggested changes

The IASB proposes in ED/2014/1, Disclosure Initiative (Proposed amendments to IAS 1), amendments in four areas that seem to impede the use of judgment:

  • Materiality. The IASB proposes clarifications that emphasize that (1) information should not be obscured by aggregating or disaggregating information, (2) materiality considerations apply to all parts of the financial statements, and (3) even when a Standard requires a specific disclosure materiality, considerations do apply.
  • Statement of financial position and statement of profit or loss and other comprehensive income (OCI). The IASB proposes to introduce (1) a clarification that the list of line items to be presented in these statements can be disaggregated and aggregated as relevant and (2) additional guidance on subtotals in these statements.
  • Notes. The IASB proposes to clarify that (1) the understandability and comparability should be considered when determining the order of the notes and (2) the notes need not be presented in the order listed in paragraph 114 of IAS 1.
  • Accounting policies. The IASB proposes to remove guidance and examples with regard to the identification of significant accounting policies that are perceived as being potentially unhelpful.

The IASB has also included one proposal that arose from a submission to the IFRS Interpretations Committee:

  • Presentation of items of OCI arising from equity-accounted investments. The IASB proposes to clarify that an entity's share of OCI of equity-accounted associates and joint ventures should be presented in aggregate as single line items based on whether or not it will subsequently be reclassified to profit or loss.


Transition requirements and effective date

The ED does not contain a proposed effective date. Also, no specific transition provisions are included in the ED.


Additional information

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CAQ publishes cybersecurity alert

Mar 24, 2014

Last week, the Center for Audit Quality (CAQ) published Alert #2014-3, which summarizes independent auditors’ responsibilities regarding cybersecurity matters. The alert was published in anticipation of the SEC’s cybersecurity roundtable, which will be held on March 26, 2014.

The alert discusses audit procedures related to cybersecurity that are to be performed in audits of financial statements and, when applicable, of internal control over financial reporting (ICFR). It notes that the auditor is required to understand how the company uses information technology (IT) and the effect of IT on its financial statements but that the auditor’s “financial statement and ICFR audit responsibilities do not encompass an evaluation of cybersecurity risks across a company’s entire IT platform.”

The alert also outlines procedures to be performed by auditors related to a company’s financial statement disclosures about cybersecurity risks and other cyber incidents as well as other information contained in its Form 10-K.

For additional information, see the alert on the CAQ’s Web site and Deloitte's Heads Up newsletter summarizing the highlights of the cybersecurity roundtable.

FASB lets private-company lessees elect an alternative to the VIE guidance

Mar 21, 2014

Yesterday, the FASB issued Accounting Standards Update (ASU) No. 2014-07, "Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements." Under the ASU, a private-company lessee that satisfies certain criteria would not be required to apply the variable interest entity (VIE) guidance in FASB Accounting Standards Codification Topic 810, "Consolidation," to a lessor entity under common control.

A private-company lessee (reporting entity) can “elect an alternative not to apply VIE guidance to a lessor if:

  1. The private company lessee and the lessor are under common control,
  2. The private company lessee has a leasing arrangement with the lessor,
  3. Substantially all of the activity between the private company lessee and the lessor is related to the leasing activities (including supporting leasing activities) between those two companies, and
  4. If the private company lessee explicitly guarantees or provides collateral for any obligation of the lessor related to the asset leased by the private company, then the principal amount of the obligation at inception does not exceed the value of the asset leased by the private company from the lessor.”

A private company that elects the alternative would, instead of providing VIE disclosures, be required to disclose “(1) the amount and key terms of liabilities recognized by the lessor entity that expose the private company lessee to providing financial support to the lessor entity and (2) a qualitative description of circumstances not recognized in the financial statements of the lessor entity that expose the private company lessee to providing financial support to the lessor entity.”

Editor’s Note: A private-company lessee is still required to apply the classification and accounting guidance in other codification topics, including ASC 840, Leases, and ASC 460, Guarantees.

The guidance is effective for annual reporting periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015. Early application would be permitted. Entities that elect the alternative would use a full retrospective approach to apply it.

For more information, see the press release, ASU 2014-07, FASB in Focus, and video on the FASB’s Web site.

FASB and IASB continue deliberating joint guidance on leases

Mar 21, 2014

At the March 18–19, 2014, joint meeting, the FASB and IASB continued redeliberating their exposure draft on leases. The boards discussed the lessee and lessor accounting models, small-ticket leases, determining lease terms, and short-term leases.

The FASB tentatively decided on a dual-recognition approach for lessee accounting, while the IASB favored a single-model approach. For lessor accounting, the boards generally agreed that a “lessor should determine lease classification (Type A versus Type B) on the basis of whether the lease is effectively a financing or a sale, rather than an operating lease”; however, the boards differed on how to assess certain types of leases.

For more information, see:

Correction list for hyphenation

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