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Accounting Roundup: November 2014

Published on: Dec 02, 2014

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Accounting — New Standards and Exposure Drafts

Pushdown Accounting

FASB Issues ASU on Pushdown Accounting; SEC Rescinds SAB Topic in Response

Affects: All entities.

Summary: On November 18, 2014, the FASB issued ASU 2014-17 in response to the final consensus on Issue 12-F reached by the EITF at its September 2014 meeting. The ASU gives an acquired entity the option of applying pushdown accounting in its stand-alone financial statements upon a change-in-control event.

In a related development, the SEC has rescinded SAB Topic 5.J, which contained the SEC staff’s views on how an SEC registrant should apply pushdown accounting. Thus, all entities — regardless of whether they are SEC registrants — will now apply the guidance in ASU 2014-17.

The ASU became effective upon issuance.

Other Resources: Deloitte’s September 2014 EITF Snapshot.

International

IASB Proposes Amendments to Guidance on Share-Based Payment

Affects: Entities reporting under IFRSs.

Summary: On November 25, 2014, the IASB issued an ED that would amend certain aspects of the share-based payment guidance in IFRS 2. Specifically, the proposal would revise three aspects of the classification and measurement of share-based payment transactions: (1) “the effects of vesting conditions on the measurement of a cash-settled share-based payment,” (2) “the classification of share-based payment transactions with net settlement features,” and (3) “the accounting for a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled.”

Next Steps: Comments on the ED are due by March 25, 2015.

Other Resources: For more information, see the press release on the IASB’s Web site.

Accounting — Other Key Developments

EITF

FASB Adds Three Issues to EITF’s Agenda

Affects: All entities.

Summary: At its November 5, 2014, meeting, the FASB decided to add EITF Issues on the following three topics to the Task Force’s agenda:

  • Normal purchases and normal sales scope (NPNS) exception — Would address whether the NPNS scope exception in ASC 815 would apply to certain electricity contracts for physical delivery within nodal energy markets.
  • Breakage — Would provide guidance on “whether and when an entity should derecognize a prepaid card liability that exists before redemption of the card at a third-party merchant.”
  • Employee benefit plans — Would cover the following topics related to employee benefit plan accounting: (1) differences between the level of detail provided under the ASC 820 fair value measurement disclosure requirements and that provided under the disclosure requirements in the Codification topics on plan accounting, (2) discrepancies in the requirements for disaggregating assets within these disclosures, and (3) inconsistencies between the measurement requirements in ASC 820 and those in the Codification topics on plan accounting with respect to fully benefit-responsive investment contracts.

Other Resources: For more information, see the tentative Board decisions on the FASB’s Web site.

Revenue

FASB and IASB Joint Revenue Transition Resource Group Meets to Discuss Five Topics

Affects: All entities.

Summary: At its October 31, 2014, meeting, the FASB and IASB joint revenue transition resource group (TRG) discussed the following five topics:

  • Customer options for additional goods and services and nonrefundable up-front fees.
  • Presentation of contract assets and contract liabilities.
  • Determining the nature of a license of intellectual property.
  • Determining whether goods or services are “distinct in the context of the contract.”
  • Evaluating the duration of a contract with termination clauses.

As intended, no conclusions were reached at the meeting. The boards and their staffs will consider the feedback from the meeting to determine whether to provide additional guidance or clarification and, if so, what it should be.

Next Steps: The next TRG meeting is scheduled for January 26, 2015.

Other Resources: Deloitte’s November 4, 2014, TRG Snapshot.

Auditing Developments

AICPA

AICPA Proposes Changes to Peer Review Standards

Affects: Auditors that perform engagement reviews.

Summary: On November 18, 2014, the AICPA published the following two EDs related to its standards for performing and reporting on peer reviews:

Next Steps: Comments on both EDs are due by January 2, 2015.

CAQ

CAQ and AICPA Jointly Issue Member Alert on Independence

Affects: Auditors of public entities.

Summary: On November 19, 2014, the CAQ and AICPA jointly issued a member alert that summarizes the SEC’s and PCAOB’s independence rules for audit firms that perform audit and attestation engagements for certain nonissuers, including (1) SEC-registered broker-dealers and (2) SEC- or state-registered private funds, investment advisers, or related-party custodians for whom an engagement “is subject to the requirements of SEC Rule 206(4)-2” (also known as the “custody rule”). Topics discussed in the alert include the following:

  • Applicability of SEC’s and PCAOB’s independence rules.
  • Prohibition of certain bookkeeping and financial statement preparation services under the independence rules.
  • Other engagements that are subject to the SEC’s or PCAOB’s independence rules (i.e., engagements that are not subject to the custody rule.

Other Resources: For more information, see the press release on the CAQ’s Web site.

CAQ Releases Highlights of SEC Regulations Committee’s September Meeting

Affects: All entities.

Summary: On November 7, 2014, the CAQ posted to its Web site highlights of the September 23, 2014, CAQ SEC Regulations Committee joint meeting with the SEC staff. Topics discussed at the meeting included:

  • Recent personnel changes at the SEC’s Division of Corporation Finance.
  • Disclosure effectiveness.
  • Issues related to the FASB’s and IASB’s new revenue recognition standard.
  • Presentation, in an initial public offering, of combined financial statements related to a merger of entities under common control when “the combination does not occur until at or after effectiveness.”
  • SEC staff’s views on predecessor financial statements.
  • Recent changes to the SEC’s requirements related to auditors’ direct reporting about the cessation of client-auditor relationships.
  • Applying IFRSs (as issued by the IASB) to (1) financial statements prepared in accordance with Regulation S-X, Rule 3-14, or (2) “financial statements of a lessee/tenant related to a significant triple net lease.”

PCAOB

PCAOB Issues FAQs on Funding Rules for Broker-Dealers

Affects: Broker-dealers.

Summary: On October 29, 2014, the PCAOB issued a series of FAQs on certain topics related to the Board’s funding rules for broker-dealers. The FAQs are divided into four categories: (1) general questions, (2) payment, (3) broker-dealer-specific queries, and (4) outstanding balance status.

International

IESBA Proposes Revisions to Code of Ethics for Professional Accountants

Affects: Professional accountants.

Summary: On November 25, 2014, the IESBA released an ED that would strengthen the principles in Part C of the Code of Ethics for Professional Accountants. The purpose of the revisions is to help professional accountants address two issues they frequently encounter in practice: (1) producing representationally faithful financial statements and (2) avoiding breaches in ethical principles.

In addition, on November 4, 2014, the IESBA released for public comment a consultation paper that requests stakeholder feedback on whether it should make certain revisions to its Code of Ethics for Professional Accountants. Potential revisions discussed in the consultation paper include:

  • More clearly differentiating requirements from guidance.
  • Reorganizing the code to make relevant material easier to locate.
  • Simplifying the code’s language to improve its readability.
  • Clearly identifying the individuals at an audit firm who are responsible for complying with the code.
  • Creating an electronic version of the code.

Next Steps: Comments on the ED are due by April 15, 2015, and comments on the consultation paper are due by February 4, 2015.

Other Resources: For more information, see the November 25 and November 4 press releases on IFAC’s Web site.

Governmental Accounting and Auditing Developments

GASB

GASB Releases Preliminary Views Documents on Leases and Fiduciary Responsibilities

Affects: Entities reporting under financial accounting and reporting standards for state and local governments.

Summary: On November 20, 2014, the GASB released for public comment the following two preliminary views documents:

  • Leases — Contains a proposal for “how leases would be presented in the financial statements and essential information related to leases that governments would disclose in the notes.” Specifically, the proposal would require government lessors and lessees to report certain information in their financial statements “for all leases except short-term leases (12 months or less).”
  • Financial Reporting for Fiduciary Responsibilities — Would improve financial reporting related to fiduciary responsibilities by (1) “[d]efining when a government has a fiduciary responsibility and, therefore, is required to present fiduciary fund financial statements”; (2) “[c]larifying financial reporting requirements for fiduciary responsibilities, including a requirement for business-type activities that serve in a fiduciary capacity”; and (3) “[i]ntroducing the use of a financial statement that reports the inflows and outflows of resources for all fiduciary fund types.”

Next Steps: Comments on both preliminary views documents are due by March 6, 2015. The GASB plans to draft more detailed proposals on the basis of the feedback received.

Other Resources: For more information, see the press releases related to the leases and fiduciary responsibilities preliminary views on the GASB’s Web site.

Regulatory and Compliance Developments

Federal Reserve

Federal Reserve, FDIC, and OCC Propose Revisions and Technical Corrections to Regulatory Capital Rules

Affects: Banking entities within the scope of the proposal.

Summary: On November 18, 2014, the Federal Reserve, FDIC, and OCC jointly issued a proposed rule that would “clarify, correct, and update aspects of the agencies’ regulatory capital rule applicable to banking organizations that are subject to the advanced approaches risk-based capital rule.” In addition to suggesting such revisions and technical corrections, the proposed rule would make U.S. regulations related to the advanced approaches rule more consistent with those in international standards.

Next Steps: Comments on the proposed rule are due 60 days after the date of its publication in the Federal Register.

Other Resources: For more information, see the press release on the Federal Reserve’s Web site.

Federal Reserve Amends Reserve Requirements for Depository Institutions

Affects: Depository institutions.

Summary: On November 13, 2014, the Federal Reserve issued a final rule that amends Regulation D to “reflect the annual indexing of the reserve requirement exemption amount and the low reserve tranche for 2015.” Specifically, the amendments “set the amount of total reservable liabilities of each depository institution that is subject to a zero percent reserve requirement in 2015 at $14.5 million (from $13.3 million in 2014) [and] set the amount of net transaction accounts at each depository institution (over the reserve requirement exemption amount) that is subject to a three percent reserve requirement in 2015 at $103.6 million (from $89.0 million in 2014).”

Next Steps: The final rule will become effective on December 17, 2014.

Other Resources: For more information, see the press release on the Federal Reserve’s Web site.

Federal Reserve Issues Final Rule to Establish Concentration Limits for Large Financial Companies

Affects: Large financial companies.

Summary: On November 5, 2014, the Federal Reserve issued a final rule in response to a mandate of Section 622 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which “establishes a financial sector concentration limit that generally prohibits a financial company from merging or consolidating with, or acquiring, another company if the resulting company’s liabilities upon consummation would exceed 10 percent of the aggregate liabilities of all financial companies.” The final rule would also contain “reporting requirements for financial companies that do not otherwise report consolidated financial information to the Board or other appropriate Federal banking agency to implement section 14 of the Bank Holding Company Act.”

Next Steps: The final rule will become effective on January 1, 2015.

Other Resources: For more information, see the press release on the Federal Reserve’s Web site.

SEC

SEC Adopts Final Rule to Enhance Technology Infrastructure in Securities Markets

Affects: SEC registrants.

Summary: On November 19, 2014, the SEC issued a final rule that would require certain “key market participants” to establish controls over their technology systems. Known as Regulation SCI (which stands for “systems compliance and integrity”), the new rule is designed to protect against failures in technological and automated systems throughout the securities markets given the ever-increasing reliance on such systems. Entities affected by the rule include “self-regulatory organizations, certain alternative trading systems . . . , plan processors, and certain exempt clearing agencies.”

Next Steps: The final rule will become effective 60 days after the date of its publication in the Federal Register.

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

International

FSB Proposes Enhancements to Loss-Absorbing Capacity of Global Systemically Important Banks

Affects: Banking entities.

Summary: On November 10, 2014, the FSB issued a consultative document that requests feedback on principles for improving the loss-absorbing capacity of global systemically important banks (G-SIBs). These principles “elaborate on the premise . . . that G-SIBs must have sufficient loss absorbing and recapitalization capacity available in resolution to implement an orderly resolution that minimizes any impact on financial stability, ensures the continuity of critical functions, and avoids exposing taxpayers to loss.”

In related news, on November 6, 2014, the FSB issued its annually updated list of G-SIBs.

Next Steps: Comments on the consultative document are due by February 2, 2015.

Other Resources: For more information, see the November 10 and November 6 press releases on the FSB’s Web site.

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Deloitte Publications

Publication Title Affects
November 2014 Real Estate — Accounting and Financial Reporting Update Real estate entities.
November 10, 2014, Financial Reporting Alert Segment Reporting All entities.
November 2014 Banking & Securities — Accounting and Financial Reporting Update Banking and securities entities.
November 2014 Investment Management — Accounting and Financial Reporting Update Investment management entities.
November 2014 TRG Snapshot Joint Meeting on Revenue: October 2014 All entities.
SEC Comment Letter Publication (Updated November 2014) SEC Comment Letters — Including Industry Insights: A Recap of Recent Trends SEC registrants.
November 2014 SEC Comment Letter Examples — Income Taxes SEC registrants.

Leadership Changes

FAF: On November 19, 2014, the FAF’s board of trustees announced the appointment of Jan I. Sylvis as vice chairman of the GASB. Ms. Sylvis, who is currently a member of the GASB, will begin her new position on January 1, 2015.

FASAC: On November 21, 2014, the FAF board of trustees announced that it has appointed seven new members to the FASAC. The appointees are stakeholders from the investor, corporate, and board of director communities. The new members will begin their one-year terms on January 1, 2015, and are eligible to be reappointed for three additional one-year terms.

FSB: On November 7, 2014, the FSB announced that Mark Carney has been reappointed as its chairman for a three-year term that began on November 4, 2014, and is renewable for an additional three years.

GASAC: On November 25, 2014, the FAF board of trustees announced that it has appointed six new members to the GASAC. The two-year terms of the new members will begin on January 1, 2015, and are renewable twice.

IFAC: On November 7, 2014, IFAC announced that it has elected Olivia Kirtley as its new president for a two-year term that will end in November 2016.

IFRS Advisory Council: On November 28, 2014, the trustees of the IFRS Foundation announced that 15 new members have been appointed to the IFRS Advisory Council. The appointments of the new members will become effective on January 1, 2015.

IFRS Foundation: On November 18, 2014, the IFRS Foundation announced that it has appointed Alan Beller and Werner Brandt as trustees for three-year terms beginning on January 1, 2015; ending on December 31, 2017; and renewable for an additional three years.

IVSC: On November 6, 2014, the IVSC announced that it has appointed three new members to each of its three boards (a total of nine appointments) — the standards board, the professional board, and the board of trustees.

Appendix A: Current Status of FASB Projects

Please see Appendix A in the attached PDF.

Appendix B: Significant Adoption Dates and Deadlines

Please see Appendix B in the attached PDF.

Appendix C: Glossary of Standards and Other Literature

Please see Appendix C in the attached PDF.

Appendix D: Abbreviations

Please see Appendix D in the attached PDF.

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