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US Week in Review - Week ending 1 May 2014

The US Week in Review highlights this week’s developments and emerging issues in the financial reporting world and gives you direct access to relevant technical accounting guidance and thought leadership produced by EY.

What’s new from EY


To the Point: PCC discusses intangible assets and adds a project on defining public and private entities

The PCC continued discussing how to simplify the accounting for intangible assets acquired in a business combination and added a project to its agenda to consider whether to change or consolidate the various definitions of public and nonpublic entities that exist in US GAAP. Our To the Point publication tells you what you need to know about the PCC meeting this week.

To the Point: FASB proposes an optional pushdown accounting model

The FASB proposed allowing an acquiree to apply pushdown accounting in its standalone financial statements when an acquirer obtains control of the acquiree. The proposal is a consensus of the EITF. Our To the Point publication describes key aspects of the proposal.

To the Point: SEC moves ahead with modified conflict minerals reporting

The SEC's Director of the Division of Corporation Finance said in a statement this week that registrants still need to file a Specialized Disclosure Report (Form SD), along with any required conflict minerals report (CMR), by the 2 June 2014 deadline to comply with portions of the conflict minerals rule that were upheld by the US Court of Appeals for the District of Columbia Circuit. Registrants will not be required to describe their products as "DRC conflict undeterminable" or "not found to be 'DRC conflict free'" in their CMR because the court said these requirements violate the First Amendment. Our To the Point publication describes the requirements that the SEC staff said are still in effect.

Technical Line: How discontinued operations are changing

The FASB's new guidance changes the criteria for disposals to qualify as discontinued operations and requires new disclosures about disposals of both discontinued operations and certain other disposals that do not meet the new definition. Our Technical Line publication analyzes the changes in reporting discontinued operations and provides examples.


Standard Setter updates


Financial Accounting Standards Board (FASB)

FASB proposes guidance on pushdown accounting

The FASB proposed allowing acquired entities to choose to apply pushdown accounting in their separate financial statements when an acquirer obtains control of them. See our To the Point publication above.

29 April 2014 PCC meeting

See our To the Point publication above.

28 April 2014 FASB meeting

The Board decided to add two projects to its agenda:

  • Presentation issues in the statement of cash flows - The Board added a project to clarify the existing principles in Accounting Standards Codification (ASC) 230, Statement of Cash Flows, and provide additional guidance about determining the classification of certain cash flows where diversity in practice exists. The Board will also consider additional disclosure related to cash flows.
  • Customer's accounting for fees in a cloud computing arrangement - The Board added a project to clarify how a customer should account for fees paid in a cloud computing arrangement. The Board will consider whether to propose guidance that would require a customer to evaluate a cloud computing arrangement consistent with how a vendor would evaluate the arrangement to determine whether it contains a software element (i.e., whether (a) the customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty and (b) it is feasible for the customer to either run the software on its own hardware or contract with another party unrelated to the vendor to host the software). That is, a customer would use the criteria in the software revenue recognition guidance (ASC 985-605-55-121 through 55-123) to determine whether it has purchased a service or has a software license.

The Board decided not to add two projects to its agenda:

  • Disclosure of carbon content in fossil fuel reserves - The Board decided not to add a project to its agenda about disclosure of the carbon content of fossil fuel reserves.
  • Tax credit investments - Accounting Standards Update (ASU) 2014-01, Accounting for Investments in Qualified Affordable Housing Projects, was specifically restricted such that it applied solely to investments in affordable housing projects that qualify for Low Income Housing Tax Credits. When the ASU was issued in January 2014, the Board agreed to later explore whether the scope of that guidance should be expanded to other tax credits. However, after discussing numerous tax credits, including New Markets Tax Credits, Historic Tax Credits and Renewable Energy Tax Credits, the Board decided not to undertake a project to expand the scope of ASU 2014-01. This decision leaves in place the Board's previous conclusion that the guidance in ASU 2014-01 is applicable only to investments in qualified affordable housing projects, in which investors receive Low Income Housing Tax Credits, and it should not be applied to other tax credits.

Upcoming meetings

6-7 May 2014 FASB meeting

The Board is scheduled to discuss its projects on Consolidation: principal versus agent analysis and Going concern.

For additional details, see the FASB's calendar.

Education sessions

See the FASB's calendar for upcoming education sessions. No decisions are made at these sessions.

Center for Audit Quality (CAQ)

CAQ announces effort to pilot test audit quality indicators

The CAQ released a paper that discusses a set of potential audit quality indicators that auditors could use to enhance communications with audit committees. The CAQ plans to test the indicators and conduct outreach to evaluate whether they are useful to audit committees. The CAQ focused on engagement-specific factors, and firm-wide factors when they provide context, such as firm leadership, engagement team experience, monitoring and auditor reporting. The PCAOB is expected to issue a concept release on audit quality indicators in the coming months.


Upcoming Thought Center webcasts and podcasts


Cybersecurity
CFO: need to know quarterly webcast series
25 June 2013, 12 p.m. Eastern time

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