US Week in Review - Week ending 16 January 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
The FASB issued final guidance that allows companies that don't meet the new definition of a public business entity to amortize goodwill acquired in a business combination and to use a simpler one-step impairment test. While the guidance is effective for fiscal years beginning after 15 December 2014, early adoption is permitted, and companies can apply it to their 2013 financial statements if they have not yet made those statements available for issuance. Our To the Point publication summarizes what you need to know about the ASU.
The FASB issued final guidance that allows investors to elect to use the proportional amortization method to account for investments in qualified affordable housing projects if certain conditions are met. Under this method, which replaces the effective yield method, an investor amortizes the cost of its investment, in proportion to the tax credits and other tax benefits it receives, to income tax expense. The guidance also introduces disclosure requirements for all investments in qualified affordable housing projects, regardless of the accounting method used for those investments. While the guidance is effective for annual periods beginning after 15 December 2014, early adoption is permitted. Our To the Point publication tells you what you need to know about the new guidance.
Our 2013 Standard Setter Update - Financial reporting and accounting developments publication highlights significant developments in financial accounting and reporting between 1 January 2013 and 31 December 2013 and summarizes certain proposals presently under consideration by the FASB, EITF, PCC, SEC, PCAOB, ASB and GASB.
The National Association of Insurance Commissioners (NAIC) Fall National Meeting was held recently in Washington, DC. Our NAIC Bulletin highlights issues addressed by various NAIC committees, working groups and task forces since the Summer National Meeting in August 2013, including the progress made on the controversial topic of accounting for the annual health insurer fee.
In our comment letter, we said we supported the FASB's efforts to reduce financial reporting cost and complexity by eliminating ASC 915 and its additional reporting requirements for development stage entities. However, we expressed our concern about how the proposed amendments could affect the way in which companies apply ASC 810's variable interest entity guidance and ASC 805's definition of a business when evaluating certain entities or operations that are in a development stage.
Standard Setter updates
Financial Accounting Standards Board (FASB)
FASB issues guidance allowing private companies to simplify accounting for goodwill and certain interest rate swaps
The FASB issued two new standards that allow certain private companies to elect to simplify their accounting for goodwill and certain interest rate swaps. See our To the Point publication above for details of the goodwill guidance. The interest rate swap guidance creates a simplified hedge accounting approach under which companies can assume a hedging relationship involving swaps that economically convert variable rate debt to fixed rate debt is perfectly effective, if certain criteria are met. Our upcoming Technical Line publication will discuss and analyze the guidance.
15 January 2014 FASB meeting
Reporting discontinued operations: The FASB decided to amend a proposed disclosure requirement for discontinued operations to allow entities to disclose either the operating and investing cash flows (as originally proposed) or the amounts of depreciation, amortization, capital expenditures and significant noncash items of the discontinued operations. For additional details, see the FASB's Tentative Board Decisions.
Upcoming meetings and webcasts
22 January 2014 FASB meeting
The FASB is scheduled to discuss three PCC issues in preparation for the upcoming PCC meeting, as well as pre-agenda research work on Operating segments and Pensions and other postretirement benefits. These discussions will be educational.
22-23 January 2014 joint FASB-IASB meeting
The Boards are scheduled to discuss their projects on Leases and Insurance contracts.
For additional details, see the FASB's calendar.
See the FASB's calendar for upcoming education sessions. No decisions are made at these sessions.
Securities and Exchange Commission (SEC)
Investor Advisory Committee to discuss crowdfunding, decimalization at meeting
The SEC Investor Advisory Committee will meet on 31 January 2014 to discuss the SEC's proposal on crowdfunding and a subcommittee recommendation on decimalization, among other things. SEC Commissioners also will address the group during the meeting, which will be webcast on the SEC's website.
American Institute of CPAs (AICPA)
AICPA sheds light on objectives and scope of conflict minerals audits
The AICPA issued a series of questions and answers (Q&As) to clarify the objective and scope of the independent private sector audit (IPSA) that may be required to accompany a registrant's conflict minerals report (CMR) that many registrants will file with the SEC for the first time this year. The AICPA document includes example audit procedures and provides guidance about continuing professional education requirements for auditors who perform these audits.
Key points highlighted in the Q&As include:
- The objectives of the IPSA are to provide assurance about (1) whether the design of the due diligence framework described in the registrant's CMR materially conforms to criteria included in the nationally or internationally recognized framework used by the registrant and (2) whether the registrant performed the due diligence measures that it described in its CMR. These objectives are independent of each other.
- The IPSA does not address whether the company followed the due diligence framework it describes in the CMR or whether the due diligence measures the company performed were effective.
- The objective of the IPSA is not to provide assurance about the accuracy of a registrant's conclusions about conflict minerals (e.g., whether a registrant properly concluded that its conflict minerals are "DRC conflict free"). Among other things, the IPSA does not address whether a registrant assessed all of its products subject to the rule or whether the registrant performed reasonable country-of-origin inquiry procedures.
Under the SEC rule, which is being challenged in court by business groups, companies can be required to obtain an IPSA of their CMRs and include the audit report, along with the CMR, in their Form SD filing. However, during the first two years (or four years for smaller reporting companies), companies are not required to obtain an IPSA with respect to any of their products that are "DRC conflict undeterminable." The first Form SD filings are due by 2 June 2014.
Upcoming Thought Center webcasts and podcasts
Cloud computing – a global perspective
23 January 2014, 11:00 a.m. Eastern time
Update for alternative investment companies
23 January 2014, 2:00 p.m. Eastern time
Hedge Accounting for non-financial entities
28 January 2014, 11:00 a.m. Eastern time
CFO: need to know
A quarterly webcast series
5 March 2014, 12:00 p.m. Eastern time