Accounting- and auditing-related standard-setting activity has heated up recently. Here's a rundown of recent rulemaking from the Financial Accounting Standards Board, the Securities and Exchange Commission, and the Public Company Accounting Oversight Board, worth taking a look at as we approach the Summer of '16.
Final and near-final rules
The FASB has published three final Accounting Standards Updates in the past month, all related to revenue recognition:
- ASU 2016-10: Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
- ASU 2016-11: Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 [the new standard on Revenue from Contracts with Customers (Topic 606)] and 2014-16 Pursuant to Staff Accouncements at the March 3, 2016 EITF Meeting (SEC Update)
- ASU 2016-12: Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients
On May 17, the SEC published an update to its Compliance and Disclosure Interpretations (CDI) series, providing the SEC staff's views on non-GAAP financial measures. Publication of the update is just one of a number of actions and potential actions the SEC has said it has taken or will take to stem an increase in what SEC staff believe to be misleading non-GAAP disclosures. The non-GAAP CDI and related links to recent speeches and interviews of SEC staff on this hot topic appear below.
- Compliance and Disclosure Interpretations: Non-GAAP Financial Measures (SEC, May 17)
- Non-GAAP Revenue Driving Comments from SEC's Division of Corporation Finance (CPA Success, May 5)
- SEC Tightens 'Crackdown' on Adjusted Accounting Measures: (Wall Street Journal, May 19)
On May 10, the PCAOB announced that its final rule requiring disclosure of the name of the audit engagement partner and certain other firms involved in an audit had received the approval of the SEC. The provision in the rule pertaining to disclosure of the name of the engagement partner (on PCAOB Form AP) becomes effective for all public company audits issued on or after Jan. 31, 2017. The provision pertaining to disclosure of certain other participants in the audit is effecive for all public company audits issued on or after June 17, 2017. See:
- PCAOB press release (May 10)
- Improving Transparency Through Disclosure of Engagement Partner and Certain Other Participants in the Audit (Rulemaking Docket No. 29)
In the category of "near-final" rules, as previously reported, the FASB announced at the end of April that it expects to issue its final rule on financial instruments − impairment (a.k.a. credit losses − impairment) by the end of June. See "FASB Approves Final Credit Loss Standard, Defers Effective Date."
Proposed rules / requests for comment The above-noted rules represent a sea-change in accounting and auditing practice. As your firm or business come to grips with implementing these and other new standards, it's worth keeping in mind that the regulators, as part of their due process, seek your views through the public comment period on rule proposals. Don't just wait for the "regulatory roundup" of final rules like these. Check out the proposed rules below and consider filing comments to support (or provide constructive criticism) on the proposals before the horses have left the barn. Recent rule proposals released by the FASB address the presentation of restricted cash in the statement of cash flows, a proposed simplification of goodwill impairment, and technical corrections to the new revenue recognition standard. See:
- Proposed ASU: Statement of Cash Flows (Topic 230) - Restricted Cash (comment deadline June 27)
- Proposed ASU: Technical Corrections and Improvements to Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (comment deadline July 2)
- Proposed ASU: Intangibles—Goodwill and Other (Topic 350) Simplifying the Accounting for Goodwill Impairment (comment deadline July 11)
The PCAOB, having considered comments on its original proposal on the auditor's reporting model, recently issued a revised proposal for public comment. A central feature of the reproposal is that the auditor's report would still follow what has been described as the traditional "pass-fail" model (i.e., it would provide an unqualified or "clean' opinion vs. a qualified audit opinion), but a major change would be the auditor's discussion of "critical audit matters," akin to the issuer's discussion of critical accounting policies. See:
- PCAOB press release (May 11)
- Proposed Auditing Standard: The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion and Related Amendments to PCAOB Standards (comment deadline Aug. 15)
The SEC has a number of proposals currently out for public comment. The most recent item, pertaining to incentive compensation for financial institutions, is a joint proposal issued by the SEC and the federal banking agencies. The item further below, a Concept Release on Reg S-K, is part of the SEC's project on disclosure effectiveness.
- Joint agency press release on incentive comp rule for financial institutions (May 16)
- Joint agency proposed rule: Incentive-Based Compensation Arrangements (comment deadline July 22)
- SEC Issues Concept Release on Disclosure Effectiveness (CPA Success, April 13)
- SEC Concept Release: Business and Financial Disclosure Required by Regulation S-K (comment deadline July 21)