This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

Accounting Roundup — May 2017

Published on: 02 Jun 2017

Download PDF 

by Magnus Orrell and Joseph Renouf, Deloitte & Touche LLP

Welcome to the May 2017 edition of Accounting Roundup. Highlights of this issue include the following:

  • The FASB’s issuance of ASUs on (1) service concession arrangements and (2) the scope of modification accounting for share-based payment arrangements.
  • The IASB’s release of its new insurance contracts standard, IFRS 17.
  • The PCAOB’s issuance of a new standard on the auditor’s reporting model.

Be sure to monitor upcoming issues of Accounting Roundup for new developments. We value your feedback and would appreciate any comments you may have on this publication. Take a moment to tell us what you think by sending us an e-mail at accountingstandards@deloitte.com.

Leadership Changes

FASAB: On May 17, 2017, the FASAB announced that Graylin Smith has been reappointed to the FASAB for a second five-year term beginning on July 1, 2017, and ending on June 30, 2022.

GASB: On May 17, 2017, the FAF board of trustees named Jeffrey J. Previdi as vice-chairman of the GASB to replace Jan I. Sylvis, whose term ends on June 30, 2017. Mr. Previdi’s term will begin on July 1, 2017.

IASB: On May 11, 2017, the IFRS Foundation trustees announced that Dr. Jianqiao Lu has been appointed as a member of the IASB for a five-year term beginning in August 2017.

SEC: The Senate has confirmed Walter J. “Jay” Clayton III as chairman of the SEC. Mr. Clayton was nominated by then-President-elect Donald Trump on January 4, 2017. Mr. Clayton replaces acting chairman Michael Piwowar, who has led the SEC since Mary Jo White’s resignation in January 2017. Mr. Clayton’s term will end on June 5, 2021.

Further, on May 12, 2017, the SEC appointed William H. Hinman as the director of the agency’s Division of Corporation Finance. Mr. Hinman replaces acting director Shelley Parratt, who has led the Division since Keith Higgins’s resignation in January 2017.

Accounting — New Standards and Exposure Drafts

Service Concession Arrangements

FASB Issues Guidance on Service Concession Arrangements

Affects: All entities.

Summary: On May 16, 2017, the FASB issued ASU 2017-10 in response to a consensus reached by the EITF at its March 2017 meeting. The ASU addresses “diversity in practice in how an operating entity determines the customer of the operation services for transactions within the scope of [ASC] 853” by “clarifying that the grantor is the customer of the operation services in all cases for those arrangements.” The amendments also allow for a “more consistent application of other aspects of the revenue guidance, which are affected by this customer determination.”

Next Steps: For entities that have not yet adopted ASC 606, the effective date is aligned with that for ASC 606. For public business entities that have adopted ASC 606, the ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For most other entities, the ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted.

Share-Based Payment

FASB Amends the Scope of Modification Accounting for Share-Based Payment Arrangements

Affects: All entities.

Summary: On May 10, 2017, the FASB issued ASU 2017-09, which amends the scope of modification accounting for share-based payment arrangements. The ASU provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification.

Next Steps: For all entities, the ASU is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period.

Other Resources: Deloitte’s May 11, 2017, Heads Up.

International

IASB Issues New Insurance Contracts Standard

Affects: Entities reporting under IFRSs.

Summary: On May 18, 2017, the IASB released IFRS 17, which supersedes IFRS 4 and establishes principles for the recognition, measurement, presentation, and disclosure of insurance contracts. The main objective of IFRS 17 is to reduce the diversity in practice that arose under IFRS 4, which allowed companies “to carry on accounting for insurance contracts using national accounting standards, resulting in a multitude of different approaches.” The new standard increases comparability “by requiring all insurance contracts to be accounted for in a consistent manner.”

Next Steps: IFRS 17 is effective for annual reporting periods beginning on or after January 1, 2021. Earlier application is permitted if both IFRS 15 (on revenue recognition) and IFRS 9 (on financial instruments) have also been applied. The standard should be applied retrospectively unless it is impracticable to do so; entities then have the option to use a modified retrospective approach or the fair value approach.

Other Resources: Deloitte’s May 18, 2017, IFRS in Focus. Also see the following resources on the IASB’s Web site:

Accounting — Other Key Developments

XBRL

FASB Seeks Comments on Its Review of the Financial Reporting Taxonomy

Affects: All entities.

Summary: On May 10, 2017, the FASB released an invitation to comment that is intended to allow the Board “to assess the efficiency and effectiveness of the U.S. GAAP Financial Reporting Taxonomy (GAAP Taxonomy).” The invitation to comment discusses potential enhancements to (1) “the usability of the GAAP Taxonomy” and (2) “the processes that support taxonomy-related activities.” The FASB is performing the taxonomy review in response to a request made by the SEC in January 2017.

Next Steps: Comments are due by June 15, 2017. The FASB will hold a public roundtable on July 18, 2017, to discuss the feedback received.

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

Auditing Developments

PCAOB

PCAOB Issues Standard on Auditor’s Reporting Model

Affects: Registered public accounting firms.

Summary: On June 1, 2017, the PCAOB released an auditor reporting standard that significantly modifies the auditor’s reporting model. While the standard retains the current “pass/fail” approach, it also significantly increases the information included in auditors’ reports. The key changes to the auditor’s report under the standard are:

  • A new required section describing critical audit matters (CAMs) arising from the audit of the current period’s financial statements. In this new section, the auditor will identify the CAMs, describe the principal considerations that led to the particular CAMs, describe how the auditor addressed the CAMs in the audit, and refer to the related financial statement accounts and disclosures. In addition:
    • CAMs are defined as any “matter that was communicated or required to be communicated to the audit committee and that:
      1. relates to accounts or disclosures that are material to the financial statements, and,
      2. involved especially challenging, subjective, or complex auditor judgment.”
    • The standard includes a nonexclusive list of factors for the auditor to take into account when determining whether a matter involved especially challenging, subjective, or complex auditor judgment.
    • The determination of a CAM should be made in the context of a particular audit with the aim of providing audit-specific information rather than a discussion of generic risks.
  • The standardization of the order and form of the auditor’s report, with the opinion section appearing first and section titles included to guide the reader.
  • The addition of a new statement indicating that the auditor is required to be independent with respect to the company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB.
  • Enhanced descriptions of the auditor’s roles and responsibilities in the audit.
  • Inclusion of the year the auditor began serving consecutively as the company’s auditor.

Next Steps: The effective date will be phased in as follows:

  • Communication of CAMs will be effective:
    • For fiscal years ending on or after June 30, 2019, for auditor reports issued in connection with audits of large accelerated filers (as defined by the SEC).
    • For fiscal years ending on or after December 15, 2020, for auditor reports issued for all other audits to which the requirements apply.
  • Remaining changes to the auditor’s report, including auditor tenure, will apply to auditor reports issued for fiscal years ending on or after December 15, 2017.

The PCAOB will submit the new auditor reporting standard and related amendments to the SEC for its approval. The SEC’s approval process typically includes an additional public comment period. Auditors may elect to comply with the standard before its effective date at any point after the SEC approves it.

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

Governmental Accounting and Auditing Developments

FASAB

FASAB Issues Statement on Tax Expenditures

Affects: Entities reporting under federal financial accounting standards.

Summary: On May 31, 2017, the FASAB issued Statement 52, which requires that the U.S. government’s consolidated financial report contain “narrative disclosures and information regarding tax expenditures.” FASAB Chairman D. Scott Showalter states that the new requirements “will help users understand tax expenditures, their general purposes, impact on tax collections, and contribution to program costs.”

Next Steps: Statement 52 is effective for reporting periods beginning after September 30, 2017. Early application is encouraged.

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

GASB

GASB Issues Guidance on Certain Debt Extinguishment Issues

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

Summary: On May 16, 2017, the GASB issued Statement 86, which improves “consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources — resources other than the proceeds of refunding debt — are placed in an irrevocable trust for the sole purpose of extinguishing debt.”

Next Steps: Statement 86 is effective for reporting periods beginning after June 15, 2017. Early application is encouraged.

GASB Issues Implementation Guide Related to OPEB Standard

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

Summary: On May 10, 2017, the GASB issued an implementation guide consisting of Q&As that are intended to help state and local government financial statement preparers and auditors apply GASB Statement 74, which provides guidance on financial reporting for postemployment benefit plans other than pension plans. Topics discussed in the guide include the following:

  • Scope and applicability of Statement 74.
  • Types of other postemployment benefits (OPEB) and OPEB plans.
  • Defined benefit OPEB plans that are administered through trusts.
  • Assets accumulated to provide OPEB through defined benefit OPEB plans that are not administered through trusts that meet the criteria in paragraph 3 of Statement 74.
  • Defined contribution OPEB plans that are administered through trusts that meet the criteria in paragraph 3 of Statement 74.
  • Effective date and transition of Statement 74.

Next Steps: Most of the requirements in the guide are effective for reporting periods beginning after December 15, 2016. Early application is encouraged if Statement 74 has been implemented.

Dbriefs for Financial Executives

We invite you to participate in Dbriefs, Deloitte’s webcast series that provides valuable insights on important developments affecting your business. Gain access to innovative ideas and critical information during these webcasts.

Dbriefs also provides a convenient and flexible way to earn CPE credit — right at your desk. Join Dbriefs to receive notifications about future webcasts.

For more information, please see our complete Dbriefs program guide or click a link below for more information about any of these upcoming Dbriefs webcasts (all webcasts begin at 2:00 p.m. (EDT) unless otherwise noted):

Don’t miss out — register for these webcasts today.

Featured Publication

On May 9, 2017, Deloitte issued a Heads Up that addresses internal control considerations related to adoption of the new revenue recognition standard (ASU 2014-09).

Other Deloitte Publications

Publication Title Affects
May 2017 Roadmap A Roadmap to the Preparation of the Statement of Cash Flows All entities.
May 11, 2017, Heads Up FASB Amends the Scope of Modification Accounting for Share-Based Payment Arrangements All entities.
May 2017, Power & Utilities Spotlight Making Power and Utilities Companies Resilient in a Changing Risk Landscape Power and utilities entities.

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.

Download

Related Topics

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.