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On The Horizon: SEC's CorpFin to release orders issued to companies through EDGAR

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Contents FASB       Highlights from August 22 meeting posted

SEC       CorpFin to release certain orders issued to companies through EDGAR

PCAOB       Updated staff guidance on the auditor reporting standard issued
      2017 inspections report on audits of broker-dealers released

International Federation of Accountants       IPSASB issues proposal on accounting for certain financial instruments

Comment letter issued

FASB Highlights from August 22 meeting posted  All decisions reached at Board meetings are tentative and may be changed at future meetings.
 
The FASB met on August 22 to continue redeliberations of the proposed ASU, Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent). The Board’s actions related to the proposed ASU are summarized below.

Classification principle – unused long-term financing arrangements

The Board tentatively decided that entities should disregard an unused long-term financing arrangement, such as an unused line of credit, in place at the balance-sheet date when determining how to classify debt. Under the proposed ASU, entities would have been permitted to reduce the amount of current maturities for any other debt arrangements by the unused amount of a long-term financing arrangement and to classify these arrangements as noncurrent.
  
The Board directed the staff to conduct additional outreach on how an issuer should classify redeemable instruments that are subject to remarketing agreements.

Grace periods

The Board also tentatively decided that a borrower should classify debt as a noncurrent liability if the borrower violates a provision of a long-term debt agreement and the creditor provides a specified grace period for the borrower to cure the violation so that the debt is no longer callable at the balance-sheet date.

It further tentatively decided to require an entity to disclose certain information when a borrower violates a provision of a long-term debt agreement and the creditor provides a specified grace period. This disclosure would be required if the violation has not been cured before the financial statements are issued or are made available to be issued and if the violation makes the long-term obligation callable.
 
Effective date

The Board tentatively decided that public business entities would apply the proposed guidance for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. All other entities would apply the proposed guidance for fiscal years beginning after December 15, 2021 and for interim periods in fiscal years beginning after December 15, 2022.

The Board directed the staff to draft a final ASU for vote by written ballot.



SEC CorpFin to release certain orders issued to companies through EDGAR As part of its continuing efforts to enhance the transparency of the review process, the SEC’s Division of Corporation Finance (CorpFin) recently announced that it will release, through EDGAR, certain orders issued to companies granting or denying regulatory relief on behalf of the Commission, starting October 1, 2018. Such orders include those declaring certain registration statements abandoned or accelerating the effective date of certain registration statements.

In subsequent phases of its ongoing efforts, the staff intends to release through EDGAR additional types of documents, including interpretive guidance and no-action relief.



PCAOB Updated staff guidance on the auditor reporting standard issued The Public Company Accounting Oversight Board (PCAOB) released updated staff guidance, “Changes to the Auditor’s Report Effective for Audits of Fiscal Years Ending on or after December 15, 2017 (Updated as of August 23, 2018),” which contains updates since the previous version that was issued on December 28, 2017. The updated guidance replaces previous versions and includes additional guidance on the following areas:

  • Annotated Auditor’s Report example amended to add voluntary disclosures about certain audit participants
  • Auditor tenure
  • Auditor reporting regarding internal control over financial reporting
  • Explanatory and emphasis paragraphs
  • Voluntary disclosure about certain audit participants
  • Other reporting situations

2017 inspections report on audits of broker-dealers released The PCAOB also issued its report, “Annual Report on the Interim Inspection Program Related to Audits of Brokers and Dealers,” which notes that 2017 inspections continued to find a high number of audit deficiencies, with fewer independence violations than in prior years. Broker-dealer owners and audit committees are encouraged to discuss the report results with their auditors. Auditors of broker-dealers can use this report to understand which areas had deficiencies in order to prevent similar deficiencies and to improve audit quality.
 
In addition to audit firm quality control system deficiencies, the areas of highest audit deficiencies included

  • Auditing revenue
  • Assessing and responding to risks of material misstatement due to fraud
  • Auditing supplemental information for the customer protection rule

The PCAOB also issued its Executive Highlights of the report.



International Federation of Accountants IPSASB issues proposal on accounting for certain financial instruments The International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) released for comment Exposure Draft 66, Long-term Interests in Associates and Joint Ventures (Amendments to IPSAS 36) and Prepayment Features with Negative Compensation (Amendments to IPSAS 41)

The proposed amendments in Part I of the Exposure Draft would converge the existing guidance in IPSAS with the narrow-scope amendments made by the International Accounting Standards Board (IASB) in Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28), and would clarify that IPSAS 41, Financial Instruments, including its impairment requirements, would apply to long-term interests in associates and joint ventures.
 
The proposed amendments in Part II of the Exposure Draft would converge the existing guidance in IPSAS with the narrow-scope amendments made by the IASB in Prepayment Features with Negative Compensation (Amendments to IFRS 9). The proposal would amend the classification requirements so that certain financial assets with prepayment features that sometimes result in reasonable negative compensation when a contract is terminated early could be measured either at amortized cost or at fair value through surplus or deficit.

Comments on the proposal are due by October 22.



Comment letter issued On August 20, 2018, the firm issued a comment letter in response to the AICPA’s Professional Ethics Executive Committee’s proposal on disclosing client information related to a quality review.



© 2018 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.