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On The Horizon: Argentina’s ‘highly inflationary’ economy

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Contents Current reporting issue Argentina’s ‘highly inflationary’ economy: Accounting and financial reporting considerations

FASB posts highlights from July 11 meeting AICPA Revisions to attestation standards proposed
Technical auditing Q&As issued to consider the effect of ASUs

IASB publishes materials on implementing IFRS 17


Current reporting issue Argentina’s ‘highly inflationary’ economy: Accounting and financial reporting considerations Based on rates used to evaluate a country’s three-year cumulative inflation, Argentina’s economy was determined to be “highly inflationary” under the guidance in ASC 830-10-45, Foreign Currency Matters: Other Presentation Matters, as of no later than the second quarter for calendar years ending June 30, 2018. As a result, an entity with an investment in a foreign entity operating in Argentina is required to apply “highly inflationary accounting” to this investment.

The guidance in ASC 830-10-45-11 requires the functional currency of a foreign entity in a highly inflationary economy to be changed to the reporting currency of the parent entity. For example, if a U.S. parent entity has an investment in a foreign entity with a functional currency other than the parent’s reporting currency (generally, the foreign entity’s local currency), the parent would remeasure the foreign entity’s financial statements into its reporting currency instead of into the foreign entity’s functional currency.

Entities should also apply the guidance in ASC 830-10-45-10 when accounting for a change in functional currency from a foreign currency to the reporting currency if an economy becomes highly inflationary. Under this guidance, translation adjustments are not removed from equity, and the translated amounts for nonmonetary assets and liabilities at the end of the prior period become the accounting basis for those assets both in the period of the change and in subsequent periods.

Entities are required to apply highly inflationary accounting as of the beginning of the accounting period that follows the accounting period when the foreign economy becomes highly inflationary. Public business entities are required to apply highly inflationary accounting to foreign entities operating in Argentina as of July 1, 2018 because Argentina’s economy was determined to be highly inflationary no later than the second quarter ended June 30, 2018. Although public business entities will not apply highly inflationary accounting until July 1, 2018, they might want to prepare for the financial statement disclosure requirements in ASC 830, ASC 855, Subsequent Events, and ASC 275, Risks and Uncertainties, along with other disclosure requirements (for example, Management’s Discussion and Analysis of Financial Condition and Results of Operations) that might apply to Form 10-Q, for the quarter ended June 30, 2018.

The Center for Audit Quality (CAQ) SEC Regulations Committee and its International Practices Task Force periodically accumulate and discuss certain inflation data. See the CAQ’s website for the activities and publications of the Task Force.



FASB posts highlights from July 11 meeting All decisions reached at Board meetings are tentative and may be changed at future meetings.

The FASB met on July 11 to discuss alternatives for amending and improving the disclosure requirements in ASC 270, Interim Reporting, along with possible approaches to making these amendments. Amending and improving interim disclosure requirements is a part of the Board’s disclosure framework project.

The Board directed the staff to develop principles for interim disclosures and to perform research and outreach. No tentative decisions were made.



AICPA Revisions to attestation standards proposed The Auditing Standards Board (ASB) of the AICPA issued the Exposure Draft, Proposed Statement on Standards for Attestation Engagements: Revisions to Statements on Standards for Attestation Engagements No. 18, Attestations Standards: Clarification and Recodification, which proposes amendments to Statements on Standards for Attestation Engagements (SSAEs). If adopted as proposed, it would amend the following sections of SSAE 18, with conforming amendments to specific subject matter attestation standards:

  • AT-C Section 105, Concepts Common to All Attestation Engagements
  • AT-C Section 205, Examination Engagements
  • AT-C Section 210, Review Engagements
  • AT-C Section 215, Agreed-Upon Procedures Engagements

Proposed changes to existing standards include:

  • No longer requiring the practitioner to request a written assertion from the responsible party when the practitioner is reporting directly on the subject matter
  • Adding a statement to the practitioner’s report to indicate the practitioner is independent and has fulfilled the practitioner’s other ethical responsibilities in accordance with relevant ethical requirements related to the engagement
  • Revising AT-C Section 210 to conform more closely to International Standard on Assurance Engagements 3000 (Revised), Assurance Engagements Other Than Audits and Reviews of Historical Financial Information, by (1) changing the term “review engagement” to “limited assurance engagement,” (2) clarifying the description of the types of procedures a practitioner may perform, and (3) requiring the practitioner’s report to include a summary of the work performed as a basis for the practitioner’s conclusion
  • Revising AT-C Section 215 to (1) no longer require that all parties to the engagement agree to the procedures to be performed and take responsibility for their sufficiency, and (2) allow the practitioner to issue a general use report unless otherwise required

Comments are requested by October 11.

Technical auditing Q&As issued to consider the effect of ASUs The AICPA issued the following new technical questions and answers (TQ&As) to consider the effect of FASB ASUs:

  • TQA Section 1200.01, “Disclosure of Revenues of an Agent
  • TQA Section 6910.25, “Considerations in Evaluating Whether Certain Liabilities Constitute ‘Debt’ for Purposes of Assessing Whether an Investment Company Must Present a Statement of Cash Flows”



IASB publishes materials on implementing IFRS 17 The IASB has prepared educational materials in response to questions submitted to the Transition Resource Group for IFRS 17 on how to apply the guidance in IFRS 17, Insurance Contracts, to insurance contracts issued by mutual entities.

The materials discuss

  • What is a mutual entity
  • How to account for insurance contracts issued by a mutual entity
  • Whether a mutual entity can have equity

The IASB has also published a pocket guide on reinsurance contracts held, as well as an example of a reinsurance contract held. The guide demonstrates how IFRS 17 applies to reinsurance contracts, and the example illustrates how the requirements in IFRS 17 are applied to a group of underlying insurance contracts and to a reinsurance contract held that provides proportionate coverage for that group of underlying insurance contracts.

The IASB has produced a series of materials to support the implementation of IFRS 17 located on the IFRS 17 implementation page.



© 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.