Financial reporting


  FASB voted to endorse a GAAP alternative initiated by the Private Company Council (PCC) that will exempt private company lessees from a requirement to consolidate variable-interest entities (VIEs) in common-control leasing arrangements.

The exemption will be allowed only if:

  • The private company lessee and the lessor entity are under common control.
  • The private company has a leasing arrangement with the lessor entity.
  • Substantially all activity between the entities is related to the leasing activity between the lessor and the private company.


Any obligation of the lessor that is being guaranteed or collateralized by the private company could, at inception of the obligation, be sufficiently collateralized by the asset or assets leased to the private company.

FASB was scheduled to issue the update to GAAP in late March. Private companies that elect the alternative will be required to apply it to all current and future lessor entities under common control that meet the criteria for applying the approach.

The VIE disclosures will be replaced with additional disclosures about the lessor entity. FASB’s endorsement created the third GAAP alternative for private companies initiated by the PCC.


  Businesses may one day have specific requirements under GAAP for making disclosures in their financial statements about the government assistance they receive, because of a new project that FASB added to its technical agenda.

Board members said the lack of guidance on disclosure of government assistance leads to a significant shortcoming in financial statements. No GAAP standard currently exists for accounting for government assistance.

FASB Topic 958, Not-for-Profit Entities, provides guidance for contributions received and applies to all entities that receive contributions. But the guidance excludes tax exemptions, tax incentives, tax abatements, and the transfer of assets from governments to business entities.

“The fact that we have no disclosure right now is a real hole,” board member Daryl Buck said during a board meeting.

In addition, the board decided to drop from its technical agenda projects on emissions trading; earnings per share; income taxes (short-term convergence project); other financial communications in not-for-profit financial reporting; and real estate property investments for investment property entities and investment companies.

FASB Chairman Russell Golden said he will ask for research on accounting issues in employee benefit plan financial statements; hedging—and liquidity and interest rate disclosures—in accounting for financial instruments; FASB’s conceptual framework; financial statement presentation; liquidity and equity; pensions—cash balance plans; and a simplification initiative aimed at targeted improvements to GAAP.

Golden also will ask the PCC to consider a second phase of the project dedicated to defining a nonpublic entity.


  Businesses expect difficulties in implementing proposed changes to lease accounting rules, according to a new Deloitte survey.

FASB and the International Accounting Standards Board (IASB) have resumed deliberations in the difficult convergence project, which inspired significant opposition after the release of a second exposure draft in May.

Final rules could be written this year, although Golden has said he expects changes based on the feedback the boards received.

Almost four out of five (79%) executives surveyed by Deloitte said they expect implementation of the proposed changes to be somewhat difficult or extremely difficult. Deloitte surveyed 138 executives at companies that are lessees or lessors.

Compared with a 2011 survey, which followed the first exposure draft, concerns have increased for lessees and decreased for lessors, according to Scott Hileman, a director of Deloitte Transactions and Business Analytics LLP.

“Given the standard’s complexity, the financial impact, and the significant data challenges posed, companies should start getting their houses in order,” Hileman said in a news release.

Executives expect the changes to have the greatest impact on their financial reporting. Balance sheets (58%) and financial statement disclosures (53%) were identified most often as the areas that would be affected. The survey report is available at tinyurl.com/n3uwjbm.


  GASB published a guide to help state and local government financial statement preparers and auditors as they implement its new standards for accounting and reporting for pensions.

The guide for GASB Statement No. 68, Accounting and Financial Reporting for Pensions, provides authoritative guidance that has been prepared by GASB’s staff and cleared by the board for issuance. The guide is available at tinyurl.com/o2vzjgu.

The standard takes effect for reporting periods beginning after June 15, 2014.

GASB also published an implementation guide for Statement No. 67, Financial Reporting for Pension Plans, in June 2013. The guide is available at tinyurl.com/nadmjba.  


  The IFRS Foundation will receive assistance for work on international convergence projects from its U.S. counterpart, the Financial Accounting Foundation (FAF).

FAF announced that it will make a nonrecurring contribution of up to $3 million in 2014 to the IFRS Foundation to support the work by the International Accounting Standards Board (IASB) on the four joint projects it is completing with FASB.

The joint projects are underway in an attempt to achieve converged financial reporting standards for revenue recognition, leases, financial instruments, and insurance. FAF will make up to three payments of $1 million each this year to support the projects.

The contributions will come from FAF’s reserve fund. FAF contributed $500,000 to the IFRS Foundation in 2011. FASB also has contributed work by its technical staff to the convergence projects.

The FAF Board of Trustees consulted with the SEC before deciding to make the 2014 contribution.

AICPA President and CEO Barry Melancon, CPA, CGMA, commended FAF for a contribution that he said will advance the convergence work of FASB and the IASB.

“We hope it serves as a catalyst for a broader discussion by all parties in the financial reporting process on how IFRS should evolve in the United States,” Melancon said in a news release.


  The IASB issued an interim standard on rate-regulated activities for use by first-time IFRS adopters while the board works to develop a permanent standard.

Previously, IFRS did not contain any guidance for rate-regulated activities. The IASB has a plan to consider the broad issue of rate-regulated activities and plans to issue a discussion paper on the topic this year.

The interim standard, IFRS 14, Regulatory Deferral Accounts, will guide financial reporting of rate-regulated activities while the permanent standard is developed. The objective of IFRS 14 is to enhance the comparability of financial reporting by entities that engage in rate-regulated activities. Existing preparers of IFRS financial statements are not eligible to apply the interim standard.

The interim standard takes effect Jan. 1, 2016, and early application is permitted. More information is available at tinyurl.com/pkp24n9.


  The SEC plans to consider whether a single set of high-quality global accounting standards is achievable, according to one initiative described in a draft of the commission’s strategic plan for 2014 to 2018.

An initiative described on Page 8 of the 39-page document says the SEC will continue to promote the establishment of high-quality accounting standards by independent standard setters. In its oversight of FASB, the SEC plans to strengthen the board’s independence and maintain its focus on the needs of investors in financial reporting, according to the draft.

The agency also plans to promote higher-quality financial reporting worldwide and will consider whether a single set of global standards is achievable, the document says. The document does not specifically mention IFRS.

The draft of the plan is available at tinyurl.com/oxfo436.


  The IASB began its consultation with the public in its review of IFRS 3, Business Combinations. The board published a request for information—available at tinyurl.com/msj25n9—on experience with the standard and the effects of implementation.

Comments are sought by May 30.

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