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On The Horizon: FASB combines Codification topics

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Contents    FASB    Board combines Codification topics
   FAF announces new appointments

AICPA issues report on audit quality GASB issues exposure draft on accounting for certain equity interests CAQ issues highlights from its July SEC Regulations Committee meeting Anti-Fraud Collaboration issues report on reporting misconduct IASB    November 2017 update issued
   TRG for IFRS 17 holds introductory meeting

Comment letters issued

FASB Board combines Codification topics The Board issued Editorial and Maintenance Update 2017-19 to combine the content in ASC 225, Income Statement, into ASC 220, Comprehensive Income, thereby eliminating Topic 225. As a result, all guidance related to the income statement and the statement of comprehensive income is now located in one topic. The combined topic has been renamed ASC 220, Income Statement – Reporting Comprehensive Income.

There are no other changes to the existing guidance.

FAF announces new appointments The Board of Trustees of the Financial Accounting Foundation (FAF) announced the appointment of Kathleen L. Casey, Jeffrey L. Esser, and David C. Villa to the Board of Trustees, effective January 1, 2018. These appointees will succeed Ann Marie Petach, Charles S. Cox, and John C. Dugan, whose terms will conclude on December 31, 2017.

The Board also appointed Gary R. Buesser to the FASB, effective July 1, 2018, for an initial five-year term. Mr. Buesser will succeed Marc A. Siegel, whose term will conclude on June 30, 2018.

James L. Kroeker was reappointed as Vice Chairman of the FASB, effective July 1, 2018. Mr. Kroeker’s second and final term will conclude on June 30, 2024.



AICPA issues report on audit quality The AICPA issued a report, “Enhancing Audit Quality: 2017 highlights and progress,” discussing the progress made in enhancing audit quality in 2017. Areas where significant progress was made include
  • Peer review – Including new requirements for reviewers to meet additional qualifications and requirements that expedite the process for remediating and removing reviewers and firms that are unwilling or unable to perform
  • Audit documentation – Including actions to improve documentation and the release of a documentation toolkit
  • Single audits – Including development of single audit tools and identification of three key factors that strongly correlate to quality performance: (a) the number of single audits performed annually, regardless of the size of the firm, (b) the qualifications of the engagement partner, and (c) membership in the Government Audit Quality Center
  • Employee benefit plans – Including work with the FASB on simplifying employee benefit plan reporting
  • Quality control – Including collaboration with IFAC’s International Auditing and Assurance Standards Board on a quality control project



GASB issues exposure draft on accounting for certain equity interests The GASB issued a proposed Statement, Accounting and Financial Reporting for Majority Equity Interests – an amendment of GASB Statement 14, which is intended to improve the consistency in practice of how a government reports a majority equity interest in a legally separate organization.

Under the proposal, a government would report its holding of a majority equity interest in a legally separate organization as an investment if the holding meets the definition of an investment in Statement 72, Fair Value Measurement and Application. This type of interest would be measured under the equity method, unless it is held by a special-purpose government engaged only in fiduciary activities; a fiduciary fund; or an endowment (including permanent and term endowments) or a permanent fund, in which case, the interest would instead be measured at fair value.

All other holdings of a majority equity interest in a legally separate organization would be reported as a component unit, and the government or fund that holds the equity interest would report an asset related to the majority equity interest under the equity method.

The proposal would also require that governments use values as of the acquisition date to measure the assets, deferred outflows of resources, liabilities, and deferred inflows of resources for a component unit in which the primary government acquires a 100 percent equity interest. Transactions presented in flows statements of the component unit would include only those that occurred after the acquisition.

The requirements of the proposal would be effective for reporting periods beginning after December 15, 2018. Earlier application will be encouraged.

The proposed guidance would be applied retroactively, except for provisions related to (1) reporting a majority equity interest in a component unit, and (2) reporting a component unit in which the primary government acquires a 100 percent equity interest. These provisions would instead be applied prospectively.

The comment period on the proposed statement ends January 19, 2018.



CAQ issues highlights from its July SEC Regulations Committee meeting The Center for Audit Quality (CAQ) SEC Regulations Committee meets periodically with the SEC staff to discuss emerging financial reporting issues relating to SEC rules and regulations. The highlights summarize matters discussed at the meetings and do not represent official positions of the AICPA or the CAQ, nor are they authoritative positions or interpretations issued by the SEC or its staff.

The CAQ recently issued highlights of the July 11 joint meeting between its SEC Regulations Committee and the SEC staff, including the following topics:
  • Discussion of SEC staff waiver requests:
    1. Rule 3-13 of Regulation S-X to permit the omission of, or substitution for, certain financial statements otherwise required by Regulation S-X: The SEC staff will consider granting such waivers where consistent with investor protection.
    2. Item 301 of Regulation S-K: The SEC staff does not have the delegated authority to waive Regulation S-K requirements, including the requirement for non-emerging growth company domestic registrants to provide selected financial data. In lieu of written requests, registrants may call the staff to facilitate the resolution of their specific fact patterns.
  • Continued observations on current trends in SAB 74 disclosures on ASC 606, Revenue from Contracts with Customers, and a reminder to registrants of the requirement to provide an estimate of the impact of adoption or, in absence of quantitative information, additional qualitative information to assist readers in assessing the impact of adopting the new standard on the financial statements.
  • Clarification from the SEC staff that a bright-line significance threshold will not be set for evaluating whether financial statements of a disposed business are required in proxy statements soliciting authorization for the disposal. Registrants are welcome to discuss their individual fact patterns with the staff.
  • Indication from the SEC staff that when a significant acquisition occurs after a previously reported significant acquisition during the most recent fiscal year or subsequent interim period, the instruction for Item 9.01(b)(1) of Form 8-K does not expressly require the pro-forma effect of both acquisitions. However, the staff indicated that reflecting the effect of both acquisitions in the second pro forma financial information included in Form 8-K is encouraged because it results in a more comprehensive disclosure. Registrants are welcome to discuss individual fact patterns with the staff.



Anti-Fraud Collaboration issues report on reporting misconduct The Anti-Fraud Collaboration issued a report, “Encouraging the Reporting of Misconduct,” providing recommendations developed from roundtables that included corporate directors, financial executives, and internal and external auditors for creating an environment for reporting suspected financial fraud. The recommendations developed from the roundtable discussions focus on the negative impact that fear of retaliation has on the timely reporting of suspected financial reporting fraud. Topics discussed include
  • What organizations can do to encourage the reporting of misconduct
  • What creates fear of retaliation and what can be done to mitigate that fear
  • What organizations and each participant in the financial reporting supply chain can do to create a retaliation-free environment



IASB November 2017 update issued All decisions reached at IASB meetings are tentative and may be changed or modified at future meetings. Board decisions become final only after completion of a formal ballot to issue a new Standard or Interpretation or to publish an Exposure Draft.

The IASB has issued the November 2017 Update summarizing the tentative decisions reached by the Board during its November public meeting. The Board discussed the following topics:
  • Dynamic risk management
  • Improvements to IFRS 8, Operating Segments
  • Primary financial statements
  • Wider corporate reporting

TRG for IFRS 17 holds introductory meeting The Transition Resource Group (TRG) for IFRS 17, Insurance Contracts, held an introductory meeting on November 13 and discussed an overview of the TRG, along with its operating procedures.

The objective of the TRG is to provide a public forum for stakeholders to share implementation questions with the IASB and to follow a discussion of those questions. The TRG does not issue any authoritative guidance, but the IFRS Foundation publishes summaries and recordings from these meetings on its website.

A link to the TRG’s webpage is included on the IFRS Foundation’s website.



Comment letters issued On November 13, the firm issued two comment letters in response to the following FASB proposals:


In addition, on November 17, the firm responded to the PCAOB’s request for comments on Proposed Amendments Relating to the Supervision of Audits Involving Other Auditors and Proposed Auditing Standard – Dividing Responsibility for the Audit with Another Accounting Firm



© 2017 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.