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PCAOB issues audit practice alert related to new revenue standard

Oct 06, 2017

The PCAOB has issued Staff Audit Practice Alert No. 15, “Matters Related to Auditing Revenue From Contracts With Customers.”

The practice alert discusses PCAOB requirements and other topics “relevant to auditors’ consideration of companies’ implementation of the new revenue standard,” including:

  • Auditing management’s transition disclosures in the notes to the financial statements.
  • Auditing transition adjustments.
  • Internal control over financial reporting.
  • Fraud risks.
  • Evaluating whether revenue is recognized in conformity with the applicable financial reporting framework.
  • Evaluating whether the financial statements include the required disclosures regarding revenue.

For more information, see the press release and practice alert on the PCAOB’s Web site.

Highlights from the FASB’s October 4 meeting

Oct 06, 2017

At its October 4, 2017, meeting, the FASB dis­cussed its pro­jects on (1) credit losses implementation, (2) collaborative arrangements, (3) long-duration insurance contracts, and (4) the disclosure framework.

Financial instruments — credit losses implementation

The Board dis­cussed the estimation of expected future payments on credit card receivables and tentatively decided that it is appropriate for such estimation to take into account either all or a portion of the payment an entity expects to collect from the borrower.

For more in­for­ma­tion, see Deloitte’s related journal entry as well as the meeting minutes on the FASB’s Web site.

Collaborative arrangements — targeted improvements

The Board discussed possible enhancements to the guidance on collaborative arrangements in ASC 808. Specifically, the Board made ten­ta­tive de­ci­sions related to revenue scoping, the unit of accounting, and the nonrevenue model.

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

Insurance — targeted improvements to the accounting for long-duration contracts

The Board continued deliberating the amendments in its proposed ASU Targeted Improvements to the Accounting for Long-Duration Contracts and made tentative decisions related to participating insurance contracts, deferred acquisition costs, and market risk benefits.

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

Disclosure framework — Board’s decision process

The Board tentatively decided to exclude financial statements of employee benefit plans from the scope of its proposed Concepts Statement Conceptual Framework for Financial Reporting — Chapter 8, Notes to Financial Statements.

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

SEC updates EDGAR filer manual for 2017 IFRS taxonomy

Oct 04, 2017

The SEC has implemented Release 17.3.1 of its Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system filer manual to support the 2017 IFRS taxonomy.

The 2017 IFRS taxonomy is identical to the one issued by the IFRS Foundation on March 9, 2017, and is consistent with IFRSs issued by the IASB as of January 1, 2017.

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

FASB proposes Codification improvements

Oct 03, 2017

The FASB has issued a proposed Accounting Standards Update (ASU), “Codification Improvements.”

The pro­posed ASU makes “changes to clarify, correct errors in, or make improvements to” various Codification topics.

Com­ments on the pro­posal are due by De­cem­ber 4, 2017. For more in­for­ma­tion, see the pro­posed ASU on the FASB’s Web site.

AICPA issues 20 revenue working drafts

Oct 03, 2017

The AICPA’s revenue recognition task forces have released for public comment 20 working drafts on accounting issues associated with the implementation of the new revenue standard for airlines, asset management, construction, gaming, health care, oil and gas, power and utilities, and telecommunications entities.

The working drafts address the fol­low­ing topics:

Com­ments on the working drafts are due by December 1, 2017. For more in­for­ma­tion, see the revenue recog­ni­tion page on the AICPA’s Web site.

FASB releases investor podcast on revenue recognition for airlines entities

Oct 02, 2017

The FASB has released an investor podcast on the impact of revenue recognition on entities in the airlines industry.

Topics discussed during the investor podcast include the following:

  • Overview of the new revenue guidance.
  • Loyalty points.
  • Ancillary services and change fees.
  • Breakage for unused tickets.
  • Transition to the new guidance.

The podcast is available on the FASB’s YouTube channel.

FASB issues ASU amending certain SEC guidance

Oct 02, 2017

The FASB has issued Accounting Standards Update (ASU) No. 2017-13, “Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments.”

At the July 20, 2017, EITF meeting, the SEC staff announced that it would not object when certain public business entities (PBEs) elect to use the non-PBE effective dates solely to adopt the FASB’s new standards on revenue (ASC 606) and leases (ASC 842). This ASU reflects comments made by the SEC.

For more in­for­ma­tion, see Deloitte’s July 20, 2017, Heads Up as well as the ASU on the FASB’s Web site.

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.

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