US Week in Review - Week ending 7 December 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

    Updated Technical Line: How the new revenue standard affects life sciences entities

    We have updated our Technical Line, How the new revenue standard affects life sciences entities, to include additional factors that life sciences entities should consider when evaluating the effect of termination clauses on contract duration and to reflect the SEC release that updates the Commission’s guidance on accounting for sales of vaccines that are placed in the national stockpile. This publication supplements our Financial reporting developments publication, Revenue from contracts with customers (ASC 606), and should be read in conjunction with it.

    Comment letter on Codification improvements

    In our comment letter, we agree that, for the most part, the proposed changes would clarify the guidance, correct errors and make minor improvements to the Codification that would not be expected to have a significant effect on current accounting practice or create a significant administrative cost for most entities. However, we express concerns about some of the proposed amendments.

    Comment letter on the AICPA’s proposed new attestation service

    In our comment letter, we support the AICPA’s proposal to create a new type of attestation service called a selected procedures engagement that would provide more opportunities for companies to enhance the value of reports they provide to customers, employees, suppliers and other stakeholders. However, we believe any final standard should include additional requirements and application guidance to protect report users.

    Final reminder: Register now for the EY Q4 2017 financial reporting update webcast on 14 December

    EY panelists will discuss the AICPA Conference on Current SEC and PCAOB Developments, implementation of the new revenue standard, year-end reminders and standard-setting activities at the FASB during the EY Q4 2017 financial reporting update webcast on 14 December 2017 from 1 p.m. to 2:30 p.m. Eastern time.

    Regulatory matters

    Securities and Exchange Commission (SEC)

    SEC staff updates Financial Reporting Manual

    The SEC staff in the Division of Corporation Finance updated its Financial Reporting Manual to clarify that:

    • If an emerging growth company (EGC) that follows private company effective dates for new accounting standards loses its EGC status after the public company effective date of a new standard, it should generally adopt the new standard in its next filing after losing its EGC status. However, the staff said that it may not object to other alternatives, depending on the facts and circumstances.
    • In preparing pro forma financial information, registrants must conform the date and method of adoption of new accounting standards by acquired businesses to their own, though the staff said it will consider requests for relief from this requirement.
    • In preparing pro forma financial information for prior periods, registrants do not need to give effect to new accounting standards adopted retrospectively until they reissue historical financial statements for those periods that reflect the accounting change.


    Standard Setter updates

    Financial Accounting Standards Board (FASB)

    FASB removes guidance for US steamship entities

    The FASB issued Accounting Standards Update (ASU) 2017-15 to supersede obsolete guidance that allowed US steamship entities not to recognize deferred taxes for statutory reserve deposits made on or before 15 December 1992. It is effective for fiscal years and first interim periods beginning after 15 December 2018.

    FAF appoints nine new FASAC members

    The Financial Accounting Foundation (FAF) appointed nine new members of the Financial Accounting Standards Advisory Council (FASAC). For details, see the FAF’s news release.

    Upcoming meetings

    8 December 2017 PCC meeting

    Members of the Private Company Council (PCC) and the FASB will discuss (1) Emerging Issues Task Force Issue 17-A, Customer’s accounting for implementation setup and other upfront costs (implementation costs) incurred in a cloud computing arrangement that is considered a service contract, (2) the FASB’s project on Financial performance reporting: disaggregation of performance information, and (3) the FASB’s decisions on its Invitation to comment, Agenda Consultation.

    13 December 2017 FASB meeting

    The FASB will discuss its projects on Nonemployee share-based payment accounting improvements and Revenue recognition of grants and contracts by not-for-profit entities, and issues related to the implementation of the new standard on credit losses. The Board also will hold educational sessions on Distinguishing liabilities from equity (including convertible debt), Segment reporting and Financial performance reporting: disaggregation of performance information.

    For details, see the FASB’s calendar.

    American Institute of Certified Public Accountants (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:

    • Healthcare
    • Not-for-profit
    • Telecommunications
    • Time-share


    Comments on the working drafts are due by 1 February 2018. The working drafts include considerations and/or examples of how these entities may apply the standard. When they are finalized, the AICPA plans to include them 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.

    Governmental Accounting Standards Board (GASB)

    GASB issues proposed implementation guide

    The GASB issued a proposed implementation guide to clarify, explain or elaborate on several standards recently issued for state and local governments. The guide would include 10 new questions and answers and eight amendments to previously issued questions and answers, which would become category B GAAP. The guide would be effective for reporting periods beginning on or after 15 June 2018. Comments are due by 16 February 2018.

    Center for Audit Quality (CAQ)

    CAQ issues tool to help audit committees prepare for changes in the auditor’s report

    The CAQ released a tool, The Auditor’s Report: Considerations for Audit Committees, to help audit committees understand changes to the auditor’s report. It explains the new PCAOB requirements, including those regarding auditor tenure and critical audit matters, and lists questions for audit committee members to consider, including a set of questions from the National Association of Corporate Directors.

    International standard setter updates

    International Accounting Standards Board (IASB)

    November IFRIC Update

    The IFRIC Update summarizes the issues discussed at the IFRS Interpretations Committee’s November 2017 meeting.

    Upcoming Thought Center webcasts and podcasts

    Accounting for income taxes: a quarterly perspective
    12 December 2017, 11 a.m. Eastern time

    EY Q4 2017 financial reporting update
    14 December 2017, 1 p.m. Eastern time



    Connect with us