US Week in Review: Week ending 15 April 2021
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
Technical Line: Entities should reevaluate the design of their internal controls over completeness and accuracy of the SEFA
State and local governments and not-for-profit entities that receive federal funding need to make sure their internal controls address the heightened risk that they may not identify all federal awards they are required to report on the Schedule of Expenditures of Federal Awards (SEFA), given all of the new federal programs relating to the COVID-19 pandemic. Preparing a complete and accurate SEFA is important because the entities use it to determine whether they are required to obtain a compliance audit of their federal expenditures, and it is the basis for the audit if one is required.
Our Financial reporting developments (FRD) publication on discontinued operations has been updated to enhance and clarify our interpretive guidance. Refer to Appendix E of the publication for a summary of the updates.
Our FRD publication on bankruptcies, liquidations and quasi-reorganizations has been updated to enhance and clarify our interpretive guidance. See Appendix A for a summary of important changes.
The EY Center for Boards Matters (CBM) webcast What boards need to know about shareholder activism, on 22 April 2021 at 3 p.m. Eastern time, will feature panelists who will discuss what attracts an activist investor, common activist objectives and the board’s role in preparing for and responding to an activist. The webcast is part of our Better Questions for Boards series.
EY panelists will discuss current financial reporting matters and standard-setting activities during our webcast, What you need to know for Q2 2021 financial reporting, on 10 June 2021 from 3:30 p.m. to 5:00 p.m. Eastern time.
Securities and Exchange Commission (SEC)
The Acting Director of the SEC’s Division of Corporation Finance and the SEC’s Acting Chief Accountant said in a statement that certain warrants issued by a SPAC should be classified as liabilities rather than equity. As a result, these warrants would have to be measured at fair value, with changes in fair value reported in net income each period. This statement was made based on the staff’s recent evaluation of fact patterns relating to the accounting for warrants issued in connection with a SPAC’s formation and initial registered offering. Because the statement may require some SPACs to change their classification of certain warrants, the statement also said registrants and their auditors should consider whether previously filed financial statements contain a material error that would require restatement.
Gensler confirmed as new SEC Chairman
Gary Gensler, President Joe Biden’s nominee to chair the SEC, was confirmed by the US Senate for the remainder of former SEC Chairman Jay Clayton’s term, which expires in June 2021. Under SEC rules, Mr. Gensler can serve for another 18 months without Senate approval, but the Senate is likely to vote at a later date on a new five-year term.
When Mr. Gensler, who previously served as chairman of the Commodity Futures Trading Commission, is sworn in, all five seats on the Commission will be filled. Allison Herren Lee has been serving as Acting Chair since January 2021, when she was appointed by President Biden.
Standard Setter updates
Financial Accounting Standards Board (FASB)
14 April 2021 FASB Meeting
The FASB completed its redeliberations on the issue of sales-type leases with variable lease payments and directed the staff to draft an Accounting Standards Update (ASU) for vote by written ballot. The Board added a project to its agenda and directed the staff to draft a proposed ASU that would amend the guidance on how to apply the risk-free discount rate accounting policy election for lessees that are not public business entities. The Board also decided to remove the project on Simplifying the balance sheet classification of debt from its agenda. For details, see the FASB’s Tentative Board Decisions.
20 April 2021 PCC Meeting
Members of the Private Company Council (PCC) and the FASB will discuss (1) ASU 2021-03, Intangibles - Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events, (2) Profits interests and their interrelationship with partnership accounting, (3) current issues in financial reporting, (4) PCC Issue 2018-01, Practical expedient to measure grant-date fair value of equity-classified share-based awards, (5) the FASB’s post-implementation review of revenue, (6) the FASB’s project on Disclosure of supplier finance programs involving trade payables and (7) Simplifying the balance sheet classification of debt. They also will discuss the FASB’s 2021 agenda consultation and an update on PCC town hall and outreach meetings.
21 April 2021 FASB Meeting
The FASB will discuss its project on Conceptual framework: elements.
For details, see the FASB’s calendar.
Governmental Accounting Standards Board (GASB)
GASB proposes renaming the comprehensive annual financial report
The GASB proposed changing the name of the comprehensive annual financial report to annual comprehensive financial report. The GASB is making the change because when the acronym for the current title is pronounced aloud, it sounds like a highly offensive racial slur directed at Black South Africans. The proposal would not make any changes to the structure or content of the report. The proposal would be effective for fiscal years beginning after 15 December 2021, with earlier application encouraged. Comments are due by 9 July 2021.
International standard setter updates
International Accounting Standards Board (IASB)
The IASB is seeking feedback on Exposure Draft ED/2021/3, Disclosure Requirements in IFRS Standards – A Pilot Approach, proposing guidance for itself to use when developing and drafting disclosure requirements in IFRS Standards. In addition, the IASB has applied this guidance to the disclosure sections of IFRS 13 Fair Value Measurement and IAS 19 Employee Benefits and proposes amendments to the disclosure requirements of these IFRS Standards. Comments are due by 21 October 2021.
International Federation of Accountants/International Auditing and Assurance Standards Board (IFAC/IAASB)
Non-authoritative guidance on applying ISAE 3000 (Revised) to extended external reporting assurance engagements
The IAASB released guidance responding to 10 key stakeholder-identified challenges commonly encountered in applying International Standard on Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information. The guidance promotes consistent high-quality application of ISAE 3000 (Revised) in external reporting assurance engagements.
What boards need to know about shareholder activism
22 April 2021, 3 p.m. Eastern time
What you need to know for Q2 2021 financial reporting
10 June 2021, 3:30 p.m. Eastern time
What are the challenges and opportunities of eDiscovery automation
14 July 2021, 11 a.m. Eastern time