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On The Horizon: FASB amends lessor accounting guidance

RFP
On the Horizon newsletterContents FASB

ASU amends lessor accounting guidance in ASC 842
PCC posts recap of Dec. 11 meeting
2019 taxonomies available

AICPA

FinREC releases accounting and valuation guide case study working drafts

PCAOB

New standard on accounting estimates considered
Webpages on implementation of standards and rules published

CAQ

Publication on critical audit matters released
Resource for audit committees on emerging technologies available

IASB

Proposal to assist entities in determining whether a contract is onerous issued
Post-implementation review of fair value measurement standard published



FASB ASU amends lessor accounting guidance in ASC 842 The FASB issued ASU 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors, to address concerns raised by stakeholders about how lessors should account for certain (1) sales and similar taxes collected from lessees, (2) lessor costs, and (3) variable payments for contracts with lease and nonlease components.

See our New Developments Summary, “Lessor narrow-scope improvements: ASU 2018-20 provides relief for lessors from certain requirements in ASC 842,” for a summary of the amendments in ASU 2018-20.

PCC posts recap of Dec. 11 meeting The Private Company Council (PCC) reaches official positions only after extensive due process and deliberations. The PCC’s consensuses and consensuses-for-exposure are subject to ratification by the FASB.

During the PCC meeting on Dec. 11, members tentatively decided to add a project to its Technical Agenda to consider a practical expedient that would allow a private company to use the strike price (as the input for fair value) of the underlying share when measuring the grant-date fair value of an equity-classified share-based payment award. The PCC directed the FASB staff to conduct further research on the potential expedient.

PCC members provided input on several other FASB projects.

The next PCC meeting will be held on April 2, 2019.

2019 taxonomies available The FASB announced the availability of the 2019 GAAP Financial Reporting Taxonomy and the 2019 SEC Reporting Taxonomy, pending final acceptance by the SEC.

The 2019 GAAP Financial Reporting Taxonomy contains updates for accounting standards and other recommended improvements.

The 2019 SEC Reporting Taxonomy contains updates for the SEC’s authoritative literature for which the underlying recognition and measurement guidance is not specified by U.S. GAAP, and for certain dimensional elements that are commonly used by filers for which specific recognition and measurement guidance is lacking in U.S. GAAP.



AICPA FinREC releases accounting and valuation guide case study working drafts The AICPA’s Financial Reporting Executive Committee (FinREC) released working drafts of two new case studies from the forthcoming AICPA Accounting and Valuation Guide, Valuation of Portfolio Company Investments of Venture Capital and Private Equity Funds and Other Investment Companies. FinREC developed these case studies in response to feedback received on the working draft of the guide, which was originally released in May, 2018.

These case studies will be included in the completed guide after public comments are reviewed and the issues are finalized.

The comment period for these working drafts ends Jan. 14, 2019.



PCAOB New standard on accounting estimates considered The PCAOB was schedule to hold an open meeting on Dec. 20, to consider adopting enhanced requirements for Auditing Accounting Estimates, Including Fair Value Measurements, as well as amendments to Auditor’s Use of the Work of Specialists.

Webpages on implementation of standards and rules published The PCAOB published new webpages on the New Auditor’s Report and Form AP.



CAQ
Publication on critical audit matters released The Center for Audit Quality (CAQ) has released “Critical Audit Matters: Lessons Learned, Questions to Consider, and an Illustrative Example” to assist auditors, audit committees, and other key stakeholders with the upcoming requirement to communicate critical audit matters (CAMs) in the auditor’s report, beginning with audits of large accelerated filers with fiscal years ending on or after June 30, 2019.

Early lessons learned from “dry runs” include:

  • Determining CAMs involves a principles-based approach and significant judgment.
  • Communicating with management and the audit committee early and often is important.
  • Planning to allow time for CAMs is necessary for the process to run smoothly.
  • Drafting CAMs can be challenging.

Resource for audit committees on emerging technologies available The CAQ has released “Emerging Technologies: An Oversight Tool for Audit Committees” to provide a framework and questions for management and auditors to assist audit committees with their oversight of financial reporting processes related to new technologies, such as artificial intelligence and robotic process automation.



IASB Proposal to assist entities in determining whether a contract is onerous issued The IASB released for comment an Exposure Draft, Onerous Contracts – Costs of Fulfilling a Contract (Proposed amendments to IAS 37), to specify which costs an entity should consider when assessing whether a contract will be onerous.

Under the existing guidance in IAS 37, Provisions, Contingent Liabilities and Contingent Assets, an entity determines that a contract will be onerous if the costs that the entity expects to incur to fulfill the contract exceed the economic benefits that it expects to derive from the contract. The proposal would amend the guidance in IAS 37 by specifying that the costs of fulfilling a contract include both incremental costs and an allocation of other costs that relate directly to the contract, such as the depreciation charge for equipment that the entity uses to fulfill the contract.

An entity would apply the proposed amendments to contracts existing at the beginning of the annual reporting period in which the entity first applies the proposed amendments, and would not be required to restate comparative information. Earlier application would be permitted.

The Board will determine the effective date of the proposed amendments after it receives feedback from stakeholders.

Comments on the proposal are due April 15, 2019.

Post-implementation review of fair value measurement standard published The IASB has published a report on its post-implementation review of IFRS 13, Fair Value Measurement, in which the Board concludes that the requirements of IFRS 13 are working as intended, the information provided under IFRS 13 is useful to investors, and no unexpected costs have arisen from applying IFRS 13.

While some implementation challenges still exist, primarily in areas requiring judgment, the Board said that evidence suggests the practice is resolving these challenges and that its post-implementation review is therefore complete.



© 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.