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On The Horizon: FASB issues Q&A on estimating credit loss reserves

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On the Horizon newsletter Contents FASB staff issues Q&A on estimating credit loss reserves SEC

CorpFin updates Questions and Answers during government shutdown

AICPA

FinREC releases revenue recognition implementation working draft
AICPA and NASBA issue proposed amendments on Peer Review rules

Center for Audit Quality releases new audit quality disclosures framework

FASB staff issues Q&A on estimating credit loss reserves The FASB staff recently issued Staff Q&A, Topic 326, No. 1: Whether the Weighted-Average Remaining Maturity Method is an Acceptable Method to Estimate Expected Credit Losses. The Q&A addresses five issues related to the weighted-average remaining maturity (WARM) method for estimating the allowance for credit losses under ASC 326.

The staff believes that the WARM method may be an acceptable method to estimate credit losses under ASC 326-20. It is one of many methods that an entity might use to estimate credit losses for less complex financial asset pools under ASC 326-20.

The Q&A also includes the FASB staff’s views on the following issues:
  • The factors an entity should consider when determining whether to use the WARM method
  • How an entity might estimate the allowance for credit losses using a WARM method, including an example using annualized loss data as a foundation for estimating the allowance for credit losses for a pool of financial assets
  • Whether there are acceptable ways of estimating the allowance for credit losses using the WARM method, other than the example provided in the preceding bullet point
  • Whether it is acceptable for an entity using a WARM method under ASC 326-20 to adjust historical loss information for current conditions and the reasonable and supportable forecasts through a qualitative approach rather than a quantitative approach



SEC CorpFin updates Questions and Answers during government shutdown On Jan. 10, 2019, the staff of the SEC’s Division of Corporation Finance (CorpFin) updated its Questions and Answers regarding CorpFin’s actions during the government shutdown. Among other things, Question 5 was revised to clarify the specific information required in a registration statement in order to start the 20-day period after which it will become effective. Additionally, Question 9 was added to explain that the staff may be able to process an emergency request for relief under Regulation S-X, Rule 3-13, Filing of other financial statements in certain cases, when there is a reasonable likelihood that a delay in processing the request would compromise the protection of property to some significant degree.

More information on the SEC’s operational status is available in the Jan. 10 On the Horizon as well as on the SEC’s website.



AICPA FinREC releases revenue recognition implementation working draft The AICPA Financial Reporting Executive Committee (FinREC) released a working draft of revenue recognition implementation issues for comment. This working draft presents an example of a note to the financial statements for an SEC-registered broker-dealer applying the revenue recognition guidance in ASC 606, Revenue from Contracts with Customers, as well as an example of a table showing how an SEC-registered broker-dealer might present disaggregated revenue.

These implementation issues will be added to the AICPA Accounting Guide: Brokers and Dealers in Securities after FinREC reviews public comments and finalizes the issues.

The comment period for this working draft ends March 4.

AICPA and NASBA issue proposed amendments on Peer Review rules The AICPA and the National Association of State Boards of Accountancy (NASBA) issued proposed amendments to Article 7, Permits to PracticeFirms, of the Uniform Accountancy Act’s Model Rules. The proposed amendments reflect current practice and would result in rules that conform to the AICPA’s Peer Review Program.

Comments are due by June 30.



Center for Audit Quality releases new audit quality disclosures framework The Center for Audit Quality (CAQ) released a new “Audit Quality Disclosure Framework” that promotes increased transparency about audit quality by providing a framework to help public accounting firms provide more consistent and comparable communications to stakeholders. Stakeholders may also find the framework useful to better understand how a firm’s systems and processes manage risks to audit quality.



© 2019 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.