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On the Horizon -- PCAOB issues Staff Inspection Briefs

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Contents FASB tentative decisions from July 13 meeting posted Dodd-Frank Wall Street Reform and Consumer Protection Act      SEC adopts certain amendments to Regulation SBSR

SEC proposes amendments to simplify certain disclosure requirements
PCAOB issues Staff Inspection Briefs on 2016 inspections ASB issues exposure draft on exempt offering documents IAASB develops practice aid on determining key audit matters FAC issues updated Data Collection Form

FASB tentative decisions from July 13 meeting posted 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.

The FASB met on July 13 to discuss its projects on hedging and defined benefit plan disclosures. The Board’s discussions are summarized below.

Hedging Board members tentatively decided to

  • Allow an entity to use the Critical Terms Match (CTM) method for a cash flow hedge of a group of forecasted transactions if the forecasted transactions occur and the derivative matures within the same 31-day period, and the entity meets all other requirements for the CTM method
  • Amend one criterion of the shortcut method related to matching the expiration date of the interest rate swap and the maturity date of the hedged item, which would allow partial-term fair value hedges of interest rate risk under the shortcut method
  • Require that if a hedged forecasted transaction is probable of not occurring, amounts reclassified from accumulated other comprehensive income to earnings be presented in the same income statement line item in which the hedged forecasted transaction would have been presented had the forecasted transaction occurred
  • Permit only a modified retrospective transition approach

The Board directed the staff to draft a proposed ASU for vote by written ballot, with a comment period of 75 days.

Defined benefit plan disclosures The Board discussed comments received from stakeholders on the proposed ASU, Changes to the Disclosure Requirements for Defined Benefit Plans, but made no decisions. The Board also directed the staff to perform research on certain aspects of the proposed ASU.




Dodd-Frank Wall Street Reform and Consumer Protection Act The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) mandates numerous studies and regulatory rule changes. Initiatives that impact financial reporting are described in the On the Horizon as information becomes available.

SEC adopts certain amendments to Regulation SBSR On July 14, the SEC adopted the Final Rule, Regulation SBSR—Reporting and Dissemination of Security-Based Swap Information, mandated by Title VII of the Dodd-Frank Act, to amend certain provisions within Regulation SBSR. Regulation SBSR was adopted in May 2015 to increase transparency in the security-based swap market and to ensure that security-based swap data repositories maintain complete records of these transactions that can be accessed by regulators.

The Final Rule will become effective 60 days after publication in the Federal Register.



SEC proposes amendments to simplify certain disclosure requirements On July 13, pursuant to its Disclosure Effectiveness Initiative and to implement provisions of the FAST Act, the SEC proposed amendments to eliminate redundant, overlapping, outdated, and superseded disclosure requirements resulting from changes in disclosure rules, accounting principles, and technology. The amendments are intended to simplify issuer compliance efforts while providing investors with substantially the same information.

The SEC is also requesting comment on disclosure requirements that overlap with U.S. GAAP and whether to retain, modify, or delete such disclosures or refer them to the FASB for potential incorporation into U.S. GAAP.

The proposed rule is mainly applicable to domestic issuers and foreign private issuers, however some amendments to the proposed rule will impact other entities regulated by the SEC including, Regulation A issuers, investment advisers, investment companies, and broker-dealers.

The comment period ends 60 days after publication in the Federal Register.



PCAOB issues Staff Inspection Briefs on 2016 inspections The PCAOB issued Staff Inspection Brief, “Information about 2016 Inspections,” detailing the scope, focus, and objectives of its ongoing 2016 inspections. The 2016 inspections continue to focus on areas where inspectors have found frequent and recurring deficiencies, including

  • Auditing internal control over financial reporting
  • Assessing and responding to risks of material misstatements
  • Auditing accounting estimates, including fair value measurements

Inspectors are also focusing on the implementation of Auditing Standards 2410, Related Parties, which became effective for audits of financial statements for fiscal years beginning on or after December 15, 2014.

The PCAOB also issued Staff Inspection Brief, “Information about 2016 Inspections of Auditors of Brokers and Dealers,” detailing the scope, focus, and objectives of its ongoing 2016 inspections of brokers and dealers. Inspection staff are focusing on the following audit areas and attestation procedures:

  • Auditor independence
  • Financial statement areas with recurring deficiencies
  • Audit procedures for related party transactions
  • Audit procedures on the supporting schedules to the financial statements
  • Procedures for attestation engagements (examination of compliance reports and review of exemption reports)
  • Engagement quality review



ASB issues exposure draft on exempt offering documents The AICPA’s Auditing Standards Board (ASB) issued an exposure draft, Proposed Statement on Auditing Standards (SAS): Auditor Involvement With Exempt Offering Documents. Because the SEC does not directly regulate exempt offerings, an auditor is not required to participate in or undertake procedures with respect to such offerings.

The proposed SAS includes performance requirements when the auditor is involved (as defined) with an exempt offering. An auditor would be involved in an exempt offering document when both of the following conditions are met:

  • The auditor’s report on financial statements or the auditor’s review report on interim financial information is included or incorporated by reference in an exempt offering document
  • The auditor performs one or more specified activities (as defined in the proposed SAS) with respect to the exempt offering document

If adopted, the proposed SAS would be codified in AU-C section 945, Auditor Involvement With Exempt Offering Documents, and would be effective for exempt offering documents with which the auditor is involved that are initially distributed, circulated, or submitted on or after June 15, 2018.

Comments are due by October 13.



IAASB develops practice aid on determining key audit matters The International Auditing and Assurance Standards Board (IAASB) developed a practice aid to add to its Auditor Reporting Toolkit. The practice aid, “Determining and Communicating Key Audit Matters (KAMs),” provides guidance on determining which matters constitute KAMs. The concepts outlined in the practice aid include

  • What must be included in the required description of a KAM in the auditor’s report
  • The factors and considerations involved in determining what matters are of most significance
  • Recognition that the concept of significance is risk-based



FAC issues updated Data Collection Form The Federal Audit Clearinghouse (FAC) issued the updated Data Collection Form (DCF) and related instructions. The DCF is to be used for fiscal periods beginning on or after December 26, 2014 and can be accessed on the FAC website.

The FAC has extended the single audit submission deadline to September 19, 2016 for single audits performed under the Uniform Guidance (fiscal periods beginning on or after December 26, 2014). The extension is for single audit submissions due prior to September 19, 2016 and is for the submission of the DCF only. The audit must still be completed within the timeframe specified by the Uniform Guidance. The extension is not applicable to single audits performed under OMB Circular A-133, Audits of States, Local Governments, and Non-Profits.




© 2016 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.