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FASB deliberates disclosure framework project

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Contents
FASB posts October 21 meeting highlights
     Disclosures for income taxes
     Fair value measurement disclosures
AICPA
     PEEC issues new interpretation concerning firm mergers and acquisitions
     Definition of ‘affiliate’ clarified
Federal Audit Clearinghouse extends single audit submission deadline
IFAC updates Companion Manual to include compilation agreements



FASB posts October 21 meeting highlights

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.

At its meeting on October 21, the FASB discussed its disclosure framework project, addressing disclosures related to income taxes and fair value measurement.

Highlights of the Board’s discussion follows.

Disclosures for income taxes

The Board discussed income tax disclosures and tentatively decided to require that entities disclose the following information:

  • The fact that a change in tax law has been enacted, and it is probable that the change will affect the reporting entity in a future period
  • If deferred taxes are not presented as a separate line item in the balance sheet, the line item(s) in which the amount is presented
  • Domestic income taxes paid and foreign income taxes paid
  • An explanation of the nature and amounts of the valuation allowance recorded and released during the reporting period

The Board also tentatively decided that all entities would be required to disclose the rate reconciliation that is currently required only for public companies. Additionally, the current rate reconciliation requirement would be modified to require the following information:

  • If an individual reconciling item amounts to more than 5 percent of the amount computed by multiplying the income before tax by the applicable statutory federal income tax rate, the amount of the item
  • A qualitative description of those items that have caused a significant movement in the rate year over year

The Board tentatively decided to revise the carryforward disclosure requirements to require that all entities disclose

  • Amounts and expiration dates of the carryforwards recorded on the tax return (not tax-effected)
  • Amounts and expiration dates of the carryforwards that will give rise to a deferred tax asset (tax-effected)
  • Total amount of the unrecognized tax benefit that offsets the tax-effected carryforwards

The Board asked the staff to perform further outreach on all of the proposed changes to the income tax disclosures.

Fair value measurement disclosures

The Board asked the staff to begin drafting the fair value measurement disclosure amendments discussed at its October 7, 2015 meeting.

After it reviews the draft, the Board will discuss any final issues at a future meeting.



AICPA

PEEC issues new interpretation concerning firm mergers and acquisitions

The AICPA’s Professional Ethics and Executive Committee (PEEC) has issued a new interpretation to provide guidance and safeguards in situations where the independence of an attest client may be impaired because (1) a firm merges with or acquires another firm or entity, or (2) the firm (or part of its business) is merged with or acquired by another firm.

The interpretation focuses on two types of relationships that could potentially impair independence due to a merger or acquisition of an attest client:

  • An employment relationship or association: The interpretation provides safeguards required to eliminate such threats to a firm’s independence.
  • The performance of a nonattest service to an attest client: If the acquiring firm performs prohibited nonattest services for an attest client of the acquired firm during the period covered by the financial statements, threats to independence could not be reduced to an acceptable level, and the acquiring firm’s independence would be impaired. If prohibited nonattest services were performed by the acquired firm for an attest client of the acquiring firm during the period covered by the financial statements, the acquiring firm’s independence would be impaired, unless certain steps are taken to apply safeguards that reduce threats to an acceptable level.

The interpretation is effective for mergers or acquisitions with closing dates on or after January 31, 2016.

Early adoption is permitted.

Definition of ‘affiliate’ clarified

The PEEC has adopted a revised definition of “affiliate” that applies to multiemployer and multiple employer benefit plan financial statement attest clients (FSAC).

Under the revised definition, an “affiliate” now includes

  • A multiemployer plan FSAC when a group association of employers has significant influence over the plan and the plan is material to the group association
  • A multiemployer plan when a FSAC or an entity controlled by the FSAC has significant influence over the plan and the plan is material to the FSAC
  • The participating employer that is the plan administrator of a multiple employer FSAC
  • A single or multiple employer plan sponsored by a FSAC or an entity controlled by a FSAC (All participating employers of a multiple employer plan are considered sponsors.)

The new definition is effective October 31, 2015.



Federal Audit Clearinghouse extends single audit submission deadline

The Federal Audit Clearinghouse (FAC) has extended the deadline to December 31, 2015 for single audit submissions due between July 22, 2015 through December 30, 2015.

The FAC has been closed since July 2015 due to a security incident, and an investigation of the incident is ongoing. Updated submission deadline information can be obtained at https://harvester.census.gov/sac. No submissions to the FAC can be made at this time.



IFAC updates Companion Manual to include compilation agreements

The International Federation of Accountants (IFAC) released an updated Companion Manual to include the Guide to Compilation Engagements, which was released in September 2015.

The manual provides member bodies and other professional accountancy organizations with guidance on how best to use the following implementation guides produced by IFAC’s Small- and Medium-sized Practice Committee:

  • Guide to Quality Control for Small- and Medium-Sized Practices
  • Guide to Using International Standards on Auditing in the Audits of Small- and Medium-Sized Entities
  • Guide to Review Engagements
  • Guide to Compilation Engagements

The above guides provide guidance on applying the standards developed by the International Auditing and Assurance Standards Board, including International Standards on Quality Control, International Standards on Auditing, International Standards on Review Engagements 2400 (Revised), and International Standards on Related Services 4410 (Revised).




© 2015 Grant Thornton LLP, U.S. member firm of Grant Thornton International Ltd. All rights reserved. This Grant Thornton LLP On the Horizon provides information and comments on current accounting and SEC reporting issues and developments. It is not a comprehensive analysis of the subject matter covered and is not intended to provide accounting or other advice or guidance with respect to the matters addressed in this publication. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this publication. For additional information on topics covered in this publication, contact a Grant Thornton client-service partner.