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September

SEC provides regulatory relief for entities affected by the recent hurricanes

Sep 29, 2017

The SEC has issued an order that provides an exemption from certain federal securities law requirements for publicly traded companies, investment companies, accountants, transfer agents, municipal advisers, and others affected by the recent hurricanes.

In addition, the SEC has issued interim final temporary rules for companies that are directly or indirectly affected by the hurricanes. These temporary rules extend the filing deadline for certain reports and forms under Regulation Crowdfunding and Regulation A.

For more information, see the press release, SEC order, and interim final temporary rules on the SEC’s Web site.

FASB proposes technical corrections and improvements to financial instruments and leases standards

Sep 28, 2017

The FASB has issued two proposed ASUs, “Technical Corrections and Improvements to Recently Issued Standards: (I) Accounting Standards Update No. 2016-01, Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities and (II) Accounting Standards Update No. 2016-02, Leases (Topic 842).”

The proposed ASU related to ASU 2016-01 focuses on the following topics:

  • Equity securities without a readily determinable fair value (discontinuation and adjustments.
  • Forward contracts and purchased options.
  • Presentation requirements for certain fair value option liabilities.
  • Fair value option liabilities denominated in a foreign currency.
  • Transition guidance for equity securities without a readily determinable fair value.

The proposed ASU related to ASU 2016-02 addresses the following topics:

  • Residual value guarantees.
  • Rate implicit in the lease.
  • Lessee’s reassessment of lease classification.
  • Lessor’s reassessment of lease terms and purchase options.
  • Variable lease payments that depend on an index or a rate.
  • Investment tax credits.
  • Lease terms and purchase options.
  • Transition guidance for amounts previously recognized in business combinations.
  • Certain transition adjustments.
  • Transition guidance for leases previously classified as capital leases under ASC 840.
  • Transition guidance for modifications to leases previously classified as direct financing or sales-type leases under ASC 840.
  • Transition guidance for sale-and-leaseback transactions.
  • Impairment of net investments in the lease.
  • Unguaranteed residual assets.
  • Effect of initial direct costs on the rate implicit in the lease.
  • Failed sale-and-leaseback transactions.

Comments on the proposals are due by November 13, 2017. For more information, see the proposed ASUs on the FASB’s Web site. In addition, see Deloitte's related journal entry for information on the proposed amendments to ASU 2016-01.

PCAOB issues supplemental request for comment on new requirements for a lead auditor’s use and supervision of other auditors

Sep 27, 2017

The PCAOB has issued a supplemental request for comment on certain proposed revisions to its auditing standards regarding the auditor’s use and supervision of other auditors.

Specifically, the supplemental request for comment identifies revisions that would clarify the PCAOB’s 2016 proposal on audits involving other auditors. The PCAOB’s objective is to strengthen the requirements related to audits involving accounting firms and individual accountants that are not part of the accounting firm that issues the auditor’s report (i.e., “other auditors”).

The supplemental request for comment reflects the PCAOB’s analysis of comments received on the 2016 proposal. The Board is considering amending the 2016 proposal by:

  • Revising its provisions related to assessing the prospective lead auditors’ sufficiency of participation by expressly requiring consideration of the importance of the location or business units audited by the lead auditor.
  • Revising its provisions related to understanding the qualifications of the other auditor as well as the other auditor’s compliance with independence and ethics requirements by requiring the lead auditor to understand the other auditor’s process for determining compliance and the other auditor’s experience in applying the requirements (rather than understanding each other auditor’s knowledge of requirements).
  • Extending the requirements regarding the assessment of the knowledge, skill, and ability of the other auditor to include an inquiry by the lead auditor about the other auditor’s policies and procedures related to (1) training of firm personnel who work on audits performed under PCAOB standards and (2) assigning personnel to PCAOB audits, not just supervisory personnel.
  • Clarifying that the necessary level of detail in the other auditor’s documentation that is to be obtained and reviewed by the lead auditor should be determined by the lead auditor depending on the necessary extent of supervision of the other auditor’s work.
  • In audits that involve multiple tiers of the other auditors in which the other auditor may supervise the work of a second other auditor on the engagement, allowing the lead auditor to either (1) communicate the scope of work, tolerable misstatement, and risk of material misstatement to the second other auditor or (2) direct the other auditor to communicate that information under certain conditions.
  • In relatively rare circumstances in which financial statements of a company’s business unit audited by the other auditor are prepared on the basis of a financial reporting framework that differs from the framework used to prepare the company’s financial statements, allowing division of responsibility if (1) either the lead auditor or referred-to auditor audits the conversion adjustments and (2) the lead auditor’s report identifies who has audited the conversion adjustments.

Comments are due to the PCAOB by November 15, 2017. 

Next Steps

See Deloitte’s forthcoming Audit & Assurance Update, which will contain additional analysis of the PCAOB’s supplemental request for comment. For information about the PCAOB’s 2016 proposal, see Deloitte’s April 29, 2016, Audit & Assurance Update. For a summary of the May and November 2016 meetings of the PCAOB’s Standing Advisory Committee, at which the 2016 proposal was discussed, see Deloitte’s June 22, 2016, and December 9, 2016, Audit and Assurance Update.

SEC announces cyber unit and retail strategy task force

Sep 26, 2017

The SEC Enforcement Division has announced the creation of a cyber unit that will “focus on targeting cyber-related misconduct” and a retail strategy task force that will “develop proactive, targeted initiatives to identify misconduct impacting retail investors.”

For more information, see the press release and the October 26, 2016, speech by Stephanie Avakianon the SEC’s Web site.

FASAB issues concepts statement on federal financial reporting

Sep 26, 2017

The FASAB has issued a concepts statement, “Federal Financial Reporting.”

Topics addressed in the concepts statement include:

  • “[C]ontent and presentation of financial statements and [required supplementary information (RSI)] for government-wide and component reporting entities.”
  • “[P]resentation of budgetary information in component reporting entity financial statements and RSI.”
  • “[P]resentation of performance information in financial statements and RSI.”
  • “[S]ummary-level information related to financial statements and RSI.”

For more information, see the press release and concepts statement on the FASAB’s Web site.

FASB proposes clarifications to application of new leases standard to land easements

Sep 26, 2017

The FASB has issued a proposed ASU, “Land Easement Practical Expedient for Transition to Topic 842.”

The proposed ASU would “(1) clarify that land easements should be evaluated under Topic 842 and (2) address stakeholder concerns about the costs and complexity of complying with the transition requirements in Topic 842 for land easements not previously assessed under Topic 840 by providing an optional transition expedient.”

Comments on the proposed ASU are due by October 25, 2017. For more information, see the press release and proposed ASU on the FASB’s Web site.

SEC issues interpretive guidance on pay ratio disclosures

Sep 22, 2017

The SEC has issued interpretive guidance, “Commission Guidance on Pay Ratio Disclosure.”

The interpretive guidance will “assist companies in their efforts to comply with the pay ratio disclosure requirement mandated by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.” In addition, the SEC’s staff has issued guidance on the pay ratio rule that includes “hypothetical examples of use of sampling and other reasonable methodologies.”

Further, the staff of the SEC’s Division of Corporation Finance has updated the compliance and disclosure interpretations related to Regulation S-K to reflect the pay ratio guidance contained in the interpretive release. The update revises 128C.01, withdraws 128C.05, and adds 128C.06.

For more information, see the press release, interpretive guidance, and staff guidance on the SEC’s Web site.

FASB discusses its technical agenda

Sep 21, 2017

At its September 20, 2017, meeting, the FASB discussed financial reporting issues identified in its agenda consultation project.

The FASB decided to add to its agenda three projects on the following topics:

  • Distinguishing liabilities from equity.
  • Disaggregation of performance information.
  • Segment reporting.

In addition, the Board removed the following four topics from its research agenda:

  • Accounting for financial instruments: interest rate risk disclosures.
  • Pensions and other postretirement employee benefit plans.
  • Intangibles (however, as part of its disclosure framework project, the Board will retain the portion of the intangibles project that focuses on developing qualitative disclosures).
  • The segment disclosure component of phase 2 of its project related to the financial statements of not-for-profit entities.

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

SEC details its approach to cybersecurity

Sep 21, 2017

SEC Chairman Jay Clayton has issued a statement on cybersecurity.

The cybersecurity statement addresses the following:

  • Collection and use of data by the Commission.
  • Management of internal cybersecurity risks.
  • Incorporation of cybersecurity considerations into the Commission’s disclosure-based and supervisory efforts.
  • Coordination with other governmental entities.
  • Enforcement of the federal securities laws.                                         

The cybersecurity statement also provides examples of intrusions at the SEC, including the recent discovery that a 2016 breach of the EDGAR filing system may have lead to illicit gain through trading.

For more information, see the press release and statements by SEC Chairman Jay Clayton and SEC Commissioner Michael Piwowar on the SEC’s Web site.

FASB proposes reorganization of consolidation guidance

Sep 20, 2017

The FASB has issued a proposed Accounting Standards Update (ASU), “Reorganization,” which affects the current organization of the consolidation guidance in ASC 810.

The pro­posed ASU will create a new Codification topic, ASC 812, that reorganizes and clarifies certain aspects of the consolidation guidance. The goal of the proposed ASU is to make “navigating and understanding consolidation guidance easier without affecting how consolidation analyses are currently performed.”

Com­ments on the proposal are due by December 4, 2017. For more in­for­ma­tion, see Deloitte's October 5, 2017, Heads Up, as well as the pro­posed ASU on the FASB’s Web site.

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