ASU codifies SEC staff views on line-of-credit arrangements

Contents FASB
     ASU addresses SEC staff views on line-of-credit arrangements
     Board discusses potential agenda projects
PCAOB issues annual report on inspections of broker-dealer auditors
IIA publishes report on internal audit and cybersecurity
Comment letter issued

FASB All decisions reached at Board meetings are tentative and may be changed at future meetings. Decisions are included in an Exposure Draft only after a formal written ballot. Decisions reflected in Exposure Drafts are often changed in redeliberations by the Board based on information received in comment letters, at public roundtable discussions, and from other sources. Board decisions become final after a formal written ballot to issue a final Accounting Standards Update.

ASU addresses SEC staff views on line-of-credit arrangements The FASB issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements – Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting, adding the guidance contained in a recent SEC staff announcement to the Codification.

In April, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires entities to present debt issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of the debt liability, but lacks authoritative guidance for debt issuance costs related to line-of-credit arrangements.

During the June 18 EITF meeting, the SEC staff announced that it would not object if an entity deferred and presented debt issuance costs as an asset and subsequently amortized the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit. ASU 2015-15 codifies the staff’s announcement.

ASU 2015-15 became effective upon issuance on August 18.

Board discusses potential agenda projects At its agenda prioritization meeting on August 19, the FASB discussed staff research on a number of potential projects, deciding not to add any to its technical agenda at this time.

PCAOB issues annual report on inspections of broker-dealer auditors The PCAOB issued its fourth annual report of inspection findings and deficiencies issued under its interim inspection program for auditors of broker-dealers registered with the SEC. The report covers inspections conducted in 2014 on audits for fiscal years ended on or before May 31, 2014.

PCAOB staff findings and deficiencies include

  • Independence findings in 26 of the 106 audits inspected, the majority of which related to assisting with the preparation of financial statements. Twenty of those audits were performed by firms that did not also audit public companies or other issuers.
  • Audit deficiencies that involve omitting, or insufficiently performing, procedures related to the customer protection rule, revenue recognition, reliance on records and reports, fair value accounting estimates, and financial statement presentation and disclosure

The findings and deficiencies noted do not necessarily indicate that a broker-dealer’s financial statements contained errors or that the broker-dealer was not in compliance with relevant SEC rules.

IIA publishes report on internal audit and cybersecurity The Institute of Internal Auditors (IIA) published a report, “Internal Audit’s Role in Cyber Preparedness: The Importance of a Holistic Approach.” The report, developed by the Institute of Internal Auditors Research Foundation, details how the internal audit function is critical to cybersecurity preparedness and how organizations must learn to anticipate, withstand, and recover from cyberattacks to be truly cyber-prepared. The report stresses that it is key for boards of directors and audit committees to understand the tools and resources available to their organizations when crafting cybersecurity strategies, policies, and protocols.

The report identifies five key areas of cyber-preparedness:

  • Protection
  • Detection
  • Business continuity
  • Crisis management and communications
  • Continuous improvement

Comment letter issued On August 20, the firm issued a comment letter in response to the FASB’s proposed ASU, Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954): Presentation of Financial Statements for Not-for-Profit Entities.

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