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    US Week in Review - Week ending 5 October 2017

    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: PCAOB asks for more input on its proposal on supervision of other auditors

    The PCAOB issued a supplemental request for comment on its proposal to strengthen the requirements for supervising other auditors who participate in an audit but don’t issue the auditor’s report. Comments are due by 15 November 2017.

    To the Point: FASB proposes narrow amendments and technical corrections to the new leases standard

    The FASB proposed narrow amendments and technical corrections to clarify how to apply certain aspects of the new leases standard. The proposed clarifications would address the rate implicit in the lease, impairment of the net investment in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments, among other things. Comments are due by 13 November 2017.

    To the Point: FASB proposes clarifying the new guidance for recognizing and measuring financial instruments

    The FASB proposed technical corrections and improvements to its new standard on recognizing and measuring financial instruments that would clarify that entities would use a prospective transition approach only for equity securities they elect to measure using the new measurement alternative. The amendments would also clarify the guidance on how to apply the measurement alternative and the presentation requirements for financial liabilities measured under the fair value option. Comments are due by 13 November 2017.

    SEC in Focus – October 2017 edition

    Our latest newsletter summarizes SEC developments in the last quarter, including certain items we have not previously reported in Week in Review. Highlights include remarks from SEC Chairman Jay Clayton on cybersecurity disclosures in SEC filings, recent guidance on pay ratio disclosure requirements, regulatory relief for companies and individuals affected by recent hurricanes, staff clarifications about its nonpublic review program and recent trends in SEC staff comments on non-GAAP measures and other topics.

    Updated FRD on an issuer’s accounting for debt and equity financings

    We have updated our Financial reporting developments (FRD) publication on an issuer’s accounting for debt and equity financings to reflect the issuance of ASU 2017-11 on accounting for certain financial instruments with down round features. We have also enhanced and clarified our interpretive guidance. Refer to Appendix F of the publication for a summary of the updates.

    Updated FRD on fair value measurement

    We have updated our FRD publication on fair value measurement to further clarify and enhance our interpretative guidance. Refer to Appendix F of the publication for a summary of the updates.

    Updated FRD on earnings per share

    We have updated our FRD publication on earnings per share primarily to add information to reflect the issuance of ASU 2017‑11 that simplifies the accounting for financial instruments with down round features.

    Eyes on US tax reform: A guide to income tax accounting considerations

    Our Eyes on US tax reform: A guide to income tax accounting considerations publication provides tax accounting considerations and references to EY interpretive guidance to help companies prepare for changes in accounting that could result from US tax reform.

    The tax plan now under consideration by Congress would reduce the corporate income tax rate to 20%, allow immediate capital expensing, broaden the tax base and create a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings.

    While ASC 740, Income Taxes, requires changes in tax law to be accounted for in the period of enactment (i.e., when the President signs legislation), companies need to understand the tax proposals under consideration so they can evaluate and prepare for changes in their financial reporting.

    The impacts of FASB’s new hedge accounting model webcast

    The impacts of FASB’s new hedge accounting model webcast will air on 26 October 2017 from 1 p.m. to 2:30 p.m. Eastern time. EY subject matter professionals will share insights about FASB’s new hedge accounting guidance that will enable entities to better portray the economics of their risk management activities in their financial statements. The panelists will discuss the increased flexibility the new guidance provides, as well as potential implementation issues.


    Regulatory matters


    Securities and Exchange Commission (SEC)

    SEC provides relief for companies and individuals affected by hurricanes

    The SEC issued an order providing temporary relief to companies and individuals affected by hurricanes Harvey, Irma or Maria from certain filing and regulatory requirements of the federal securities laws.

    The order extends the deadlines to file or furnish reports required under Section 13(a) or 15(d) of the Exchange Act (e.g., Forms 10-K, 10-Q, 8-K). The extended deadlines are 10 October 2017 for those affected by Hurricane Harvey, 19 October 2017 for those affected by Hurricane Irma and 2 November 2017 for those affected by Hurricane Maria.

    The order also temporarily allows independent auditors to help clients reconstruct accounting records that were lost or destroyed in the hurricanes. Such bookkeeping services are usually prohibited under SEC Rule 2-01(c)(4)(i). Before accepting such an engagement, the auditor must carefully evaluate whether the scope of the proposed services falls within the relief provided under the order and obtain audit committee pre-approval.

    The order also temporarily exempts registered investment companies from their obligation to transmit annual and semi-annual reports to investors who are affected by any of the hurricanes. In addition, the Commission adopted an interim final temporary rule extending the deadlines for affected issuers to file specified reports and forms required by Regulation Crowdfunding or Regulation A.


    Standard Setter updates


    Financial Accounting Standards Board (FASB)

    FASB adds SEC paragraphs to the Codification for recent SEC staff announcement

    The FASB issued ASU 2017-13 to add SEC paragraphs to the new revenue and leases sections of the Codification on the announcement the SEC Observer made at the 20 July 2017 Emerging Issues Task Force (EITF) meeting. The SEC Observer said that the SEC staff would not object if entities that are considered public business entities only because their financial statements or financial information is required to be included in another entity’s SEC filing use the effective dates for private companies when they adopt ASC 606, Revenue from Contracts with Customers, and ASC 842, Leases. This would include entities whose financial statements are included in another entity’s SEC filing because they are significant acquirees under Rule 3-05 of Regulation S-X, significant equity method investees under Rule 3-09 of Regulation S-X and equity method investees whose summarized financial information is included in a registrant’s financial statement notes under Rule 4-08(g) of Regulation S-X. The ASU also supersedes certain SEC paragraphs in the Codification related to previous SEC staff announcements and moves other paragraphs, upon adoption of ASC 606 or ASC 842.

    FASB proposes Codification improvements

    The FASB proposed amendments to a variety of topics in the Accounting Standards Codification to clarify the guidance, correct errors or make minor improvements. The FASB proposed transition guidance for certain amendments but said others would be effective upon issuance of a final ASU. Comments are due by 4 December 2017.

    4 October 2017 FASB meeting

    Insurance: targeted improvements to the accounting for long-duration contracts – The Board tentatively decided to retain today’s guidance on measuring the liability for future policy benefits for participating insurance contracts and to expand the definition of market risk benefits to include features in general account deposit products that have the same economic characteristics as separate account products.

    The FASB also discussed issues related to the implementation of the new standard on credit losses and its projects on Collaborative arrangements: targeted improvements and Disclosure framework: Board’s decision process. For details, see the FASB’s Tentative Board Decisions.

    Upcoming meetings

    11 October 2017 FASB meeting

    The FASB will discuss its project on Conceptual framework: elements.

    12 October 2017 EITF meeting

    The EITF plans to discuss Customer’s accounting for implementation, setup, and other upfront costs (implementation costs) incurred in a cloud computing arrangement that is considered a service contract (Issue 17-A).

    For details, see the FASB’s calendar.

    American Institute of CPAs (AICPA)

    FinREC industry working drafts on revenue out for comment

    The AICPA’s Financial Reporting Executive Committee (FinREC) issued working drafts addressing accounting issues entities in the following industries may encounter as they apply the new revenue recognition standard:

    • Airlines
    • Asset management
    • Construction
    • Gaming
    • Healthcare
    • Oil and gas
    • Power and utilities
    • Telecommunications

    Comments on the working drafts are due by 1 December 2017. The AICPA plans to include the final drafts in a new Accounting and Auditing Guide on Revenue Recognition (the Guide). While the Guide will be non-authoritative, US stakeholders will likely consider it for industry-specific matters.


    Upcoming Thought Center webcasts and podcasts


    The impacts of FASB’s new hedge accounting model
    26 October 2017, 1 p.m. Eastern time


     

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