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August

Highlights of the FASB’s August 29 meeting

Aug 31, 2018

At its August 29, 2018, meeting, the FASB discussed its projects on (1) inclusion of the OIS rate based on the SOFR as a benchmark interest rate for hedge accounting purposes and (2) credit loss implementation.

Inclusion of the OIS rate based on the SOFR as a benchmark interest rate for hedge accounting purposes

The FASB continued redeliberating its February 2018 proposed ASU, Inclusion of the Overnight Index Swap (OIS) Rate Based on the Secured Overnight Financing Rate (SOFR) as a Benchmark Interest Rate for Hedge Accounting Purposes. The Board confirmed several decisions, established an effective date, and directed its staff to draft an ASU for a vote by written ballot. For more information, see the meeting minutes on the FASB’s Web site.

Financial instruments — credit losses implementation

The Board discussed the implementation issues raised at the June 2018 meeting of the Transition Resource Group for Credit Losses and made tentative decisions on the following topics:

  • Consideration of capitalized interest by using a method other than a discounted cash flow method under the current expected credit losses (CECL) model.
  • Refinancing and loan repayments.
  • Definition of “amortized cost basis.”
  • Reversal of accrued interest on nonperforming financial assets.
  • Transfer of loans from held for sale to held for investment and transfer of credit-impaired debt securities from available for sale to held to maturity.
  • Accounting for recoveries under the CECL model.

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

FASB staff proposes taxonomy improvements and implementation guide

Aug 31, 2018

The FASB staff has issued proposed improvements related to the U.S. GAAP Financial Reporting Taxonomy.

Specifically, the staff proposed taxonomy enhancements related to (1) Ac­count­ing Stan­dards Update (ASU) No. 2018-13, Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement, and (2) the pro­posed ASU, Codification Improvements to Topic 326, Financial Instruments — Credit Losses. In addition, the staff has issued a proposed taxonomy implementation guide, Insurance, Long-Duration Contracts.

Com­ments on the pro­posed tax­on­omy im­prove­ments related to fair value measurement disclosures are due by September 27, 2018. Com­ments on the pro­posed tax­on­omy im­prove­ments related to the proposed ASU on credit losses are due by September 19, 2018. Comments on the proposed implementation guide are due by October 16, 2018.

FASB clarifies guidance on cloud computing arrangements

Aug 29, 2018

The FASB has issued Accounting Standards Update (ASU) No. 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” in response to the EITF’s consensus on Issue 17-A.

The ASU clarifies certain aspects of ASU 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, which was issued in April 2015. Specifically, ASU 2018-15 “align[s] the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).” The ASU does not affect the accounting for the service element of a hosting arrangement that is a service contract.

For more information, see Deloitte’s related Heads Up newsletter as well as the press release and ASU on the FASB’s Web site.

FASB issues guidance to improve disclosures in notes to financial statements

Aug 28, 2018

The FASB has issued two Accounting Standards Updates (ASUs) and two changes to its conceptual framework that are intended to improve the effectiveness of disclosures in notes to financial statements.

Specifically, the FASB released the following:

  • ASU 2018-13, Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement — Removes, modifies, and adds certain disclosure requirements in ASC 820 on the basis of the concepts in the FASB Concepts Statement Conceptual Framework for Financial Reporting — Chapter 8: Notes to Financial Statements. The ASU is effective for all organizations for fiscal years — and interim periods within those fiscal years — beginning after December 15, 2019. Early adoption is permitted.
  • ASU 2018-14, Disclosure Framework — Changes to the Disclosure Requirements for Defined Benefit Plans — Modifies ASC 715-20 to improve disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The ASU is effective for fiscal years ending after December 15, 2020, for public companies and for fiscal years ending after December 15, 2021, for all other organizations. Early adoption is permitted.
  • Chapter 8 of the conceptual framework, “Notes to Financial Statements” — “[E]xplains what information the Board should consider including in notes to financial statements by describing the purpose of notes, the nature of appropriate content, and general limitations. It also addresses the Board’s considerations specific to interim reporting disclosure requirements.”
  • Amendments to chapter 3 of the conceptual framework, “Qualitative Characteristics of Useful Financial Information” — Updates the FASB’s definition of materiality to be consistent with the definition used by the SEC, PCAOB, AICPA, and U.S. judicial system.

For more information, see the press release and FASB in Focus newsletter on the FASB’s Web site.

PCAOB updates staff guidance on auditor’s report

Aug 24, 2018

The PCAOB has updated its December 2017 staff guidance on the auditor’s report.

The staff guidance is intended to help firms as they implement the first phase of changes to the auditor’s report. The August 23 update amends the following sections:

  • Annotated sample auditor’s report.
  • Auditor tenure.
  • Auditor reporting regarding internal control over financial reporting.
  • Explanatory and emphasis paragraphs.
  • Voluntary disclosure about certain audit participants.
  • Other reporting situations.

For more information, see our earlier story as well as the staff guidance on the PCAOB’s Web site.

SEC amends disclosure requirements related to municipal securities

Aug 24, 2018

The SEC has issued a final rule, “Amendments to Municipal Securities Disclosure,” to enhance transparency in the municipal securities market.

The final rule increases “the amount of information that is publicly disclosed about material financial obligations incurred by issuers and obligated persons.”

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

Highlights of the FASB’s August 22 meeting

Aug 23, 2018

At its August 22, 2018, meeting, the FASB discussed its projects on (1) balance sheet classification of debt and (2) the conceptual framework.

Simplifying the balance sheet classification of debt

The Board continued redeliberating its January 2017 proposed ASU, Simplifying the Classification of Debt in a Classified Balance Sheet (Current Versus Noncurrent), and made decisions on the following issues:

  • Classification principle — unused long-term financing arrangements.
  • Grace periods.
  • Effective date.

The Board directed its staff to draft an ASU for a vote by written ballot. For more information, see Deloitte's related journal entry as well as the meeting minutes on the FASB’s Web site.

Conceptual framework — elements

The Board discussed concepts related to distinguishing liabilities from equity. No decisions were made.

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

FAF trustees reappoint three PCC members

Aug 21, 2018

The Financial Accounting Foundation’s (FAF’s) board of trustees has announced the reappointments of (1) Candace E. Wright as the chairman of the Private Company Council (PCC) for a three-year term and (2) current PCC members Timothy J. Curt and David S. Lomax for two-year terms.

The new terms will begin on January 1, 2019. For more information, see the press release on the FAF’s Web site.

PCAOB issues report on 2017 inspections of broker-dealers

Aug 21, 2018

The PCAOB has published a report on its 2017 inspections of broker-dealer auditors.

The report notes that (1) audit deficiencies remained high, at 91 percent of firms inspected (compared with 97 percent in 2016), and (2) fewer independence violations were found.

For more information, see the press release, report, and executive highlights on the PCAOB’s Web site.

FASB proposes narrow-scope amendments to guidance on credit losses

Aug 21, 2018

The FASB has issued a proposed Accounting Standards Update (ASU), “Codification Improvements to Topic 326, Financial Instruments — Credit Losses.”

The proposed amendments would (1) align the implementation date for annual financial statements with the implementation date for interim financial statements and (2) clarify that operating lease receivables are not within the scope of ASC 326-20 and should instead be accounted for under the new leasing standard, ASC 842.

Comments on the proposed ASU are due by September 19, 2018. For more information, see the press release and proposed ASU on the FASB’s Web site.

Correction list for hyphenation

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