PCC posts highlights of May 5 meeting

Contents FASB
     FASB discusses financial performance reporting
     Board proposes XBRL guidance
PCC posts highlights of May 5 meeting
EITF releases agenda for May 14 educational meeting
AICPA publishes Audit Risk Alerts
PCAOB issues publication sharing insights on recurring audit deficiencies
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.

FASB discusses financial performance reporting At its meeting on May 6, the Board considered ways to potentially improve the transparency of infrequently occurring items in the income statement, including establishing a lower threshold for identifying infrequent items and considering whether frequency of occurrence is the best method for distinguishing particular items.

ASC 225, Income Statement, requires entities to present or disclose items that are unusual or infrequent (or both). The staff identified challenges with the existing guidance, noting that very few transactions meet the definition of “infrequent.”

The Board asked the staff to research other possible methods for discussion at a future meeting.

Board proposes XBRL guidance The FASB Taxonomy staff recently exposed for comment changes to the U.S. GAAP XBRL taxonomy as a result of the following recently proposed and final ASUs:

  Proposed ASUs:

  • Revenue from Contracts with Customers: Deferral of the Effective Date (comments due May 29)
  • Income Taxes: Balance Sheet Classification of Deferred Taxes (comments due June 16)
  • Income Taxes: Intra-Entity Asset Transfers (comments due June 16)
  • Liabilities: Recognition of Breakage for Certain Prepaid Stored-Value Cards – a consensus of the FASB Emerging Issues Task Force (comments due June 29)

  Final ASUs (stakeholders may comment directly on the Development Taxonomy website throughout the year):

  • ASU 2015-05, Intangibles Goodwill and Other Internal-Use Software: Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement
  • ASU 2015-06, Earnings Per Share: Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions – a consensus of the FASB Emerging Issues Task Force
  • ASU 2015-07, Fair Value Measurement: Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) – a consensus of the FASB Emerging Issues Task Force

PCC posts highlights of May 5 meeting The Private Company Council (PCC) met on May 5 and discussed the following topics:

  • Effective date of PCC alternatives and transition guidance: The PCC directed the FASB staff to perform additional research and to develop recommendations on whether to give private companies an unconditional option to initially elect a PCC alternative. This change would remove the need to demonstrate preferability for private companies that elect a PCC alternative after its effective date, as required in ASC 250, Accounting Changes and Error Corrections.
  • Share-based payment accounting improvements: The FASB staff presented stakeholder feedback and research on possible alternatives for share-based compensation accounting. The PCC will consider public input on the FASB’s anticipated exposure document of improvements to employee share-based payment accounting and discuss these issues further in a future meeting.
  • Variable interest entity guidance: The PCC asked the FASB to consider researching ways to clarify the application of the variable interest entity guidance for private companies under common control.

The PCC also discussed current FASB projects on disclosures about government assistance by business entities and the disclosure framework, and expressed concerns about the project on simplifying the balance sheet classification of debt.

The PCC next meets on July 21.

EITF releases agenda for May 14 educational meeting The EITF recently released its proposed agenda for its May 14 educational meeting, which will include the following topics:

  • Issue 15-D, “Effect of Derivative Contract ‘Novations’ on Existing Hedge Accounting Relationships”
  • Issue 15-E, “Evaluation of Accounting for Embedded Put and Call Options in a Debt Instrument”
  • Issue 15-F, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments”

AICPA publishes Audit Risk Alerts The AICPA recently issued the following Audit Risk Alerts to provide information and guidance on emerging practice issues and industry, technical, regulatory, and professional developments:

  • Not-for-Profit Entities Industry Developments – 2015
  • Employee Benefit Plans Industry Developments – 2015

PCAOB issues publication sharing insights on recurring audit deficiencies The PCAOB published “Audit Committee Dialogue,” the first in a series of communications intended to help audit committee members in their ongoing dialogue with, and oversight of, auditors. The publication highlights recurring audit concerns identified in past PCAOB inspections that are expected to still be significant and identifies emerging audit risks that might require increased focus by audit committees and auditors.

Of particular concern to audit committees may be the significant deficiencies frequently found in the following areas:

  • Auditing internal control over financial reporting
  • Assessing and responding to risks of material misstatements
  • Auditing accounting estimates, including fair value measurements
  • In cross-border audits, deficient work performed by other audit firms and used by the signing firm

Some of the potential emerging audit risks that may be part of the PCAOB’s inspection planning during 2015 include:

  • Mergers and acquisitions
  • Falling oil prices
  • Undistributed foreign earnings
  • Maintenance of audit quality when growing other business lines

Comment letter issued On May 11, the firm submitted a comment letter to the Financial Accounting Foundation in response to its request for comments in connection with its three-year review of the Private Company Council.

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