FASB

All decisions reached at Board meetings are tentative and may be changed at future meetings. Decisions are included in an Exposure Draft only after a formal written ballot. Decisions reflected in Exposure Drafts are often changed in redeliberations by the Board based on information received in comment letters, at public roundtable discussions, and from other sources. Board decisions become final after a formal written ballot to issue a final Accounting Standards Update.

Meetings held May 23 and 24

The FASB met on May 23 to discuss its projects on revenue recognition, insurance contracts, and repurchase agreements and similar transactions, which are summarized below.

In addition, the FASB and the IASB held a joint meeting on May 24 to discuss their projects on revenue recognition and on the classification and measurement of financial instruments. The Boards did not reach any tentative decisions on their financial instruments classification and measurement project, but highlights of the revenue discussion will be summarized in a future On the Horizon.

Revenue recognition

At its May 23 meeting, the FASB tentatively decided that the proposed revenue guidance relating to the recognition, measurement, and existence of a contract would apply to sales or transfers of nonfinancial assets to noncustomers if those assets do not constitute a business.

Insurance contracts

The Board discussed the costs and benefits of the proposed changes on accounting for insurance contracts and directed the staff to draft a proposed Accounting Standards Update (ASU) for a vote. The Board also decided to hold public roundtable meetings following the comment period for the proposed ASU to solicit further views on the proposed guidance.

Repurchase agreement and similar transactions

The FASB discussed the feedback received on the proposed ASU, Effective Control for Transfers with Forward Agreements to Repurchase Assets and Accounting for Repurchase Financings, and tentatively decided to

  • Retain the current effective control model
  • Require additional disclosures for transfers of financial assets with contemporaneous agreements that result in the transferor retaining risks associated with the transferred financial asset

FAF completes post-implementation review of Statement 141(R)

The Financial Accounting Foundation (FAF) recently completed its post-implementation review of FASB Statement 141(R), Business Combinations, which has been codified in FASB Accounting Standards Codification® (ASC) 805, Business Combinations.

The review team concluded that Statement 141R resolved some practice issues related to the purchase accounting method, but that certain practice issues still remain, such as those related to identifying when a new basis of accounting is appropriate and accounting for business combinations between organizations under common control and between joint ventures. The review team also found that the requirements of Statement 141R are understandable and that investors generally find the resulting information useful. In addition, the review team further indicated that certain aspects of applying Statement 141R are more costly to implement than the FASB had expected.

The FASB will consider feedback on Statement 141R from the FAF and, because this is a converged standard, will coordinate its efforts with the IASB.

The review team identified several areas for improvement in the standard-setting process, including

  • Formalizing the process for identifying, prioritizing, and resolving significant financial reporting issues
  • Reporting on, and updating the status of, those issues
  • Identifying and documenting the needs that a Board project would address
  • Conducting key research as early as possible in the agenda-setting and deliberation process

The FAF review report is available on the FAF website.

Post-implementation review of Statement 157 announced

The FAF recently announced that it will perform a post-implementation review of FASB Statement 157, Fair Value Measurements, which has been codified in ASC 820, Fair Value Measurement. Stakeholders that would like to participate in a review survey on Statement 157 should register online at the FAF website.

AICPA

Guides on A-133 audits and SSARS updated

The AICPA has updated its Audit and Accounting Guide, Government Auditing Standards and Circular A-133 Audits, which now conforms with both the new guidance in the clarified auditing standards issued by the Auditing Standards Board and the 2011 revisions to the Government Auditing Standards (the Yellow Book). The updated version includes revised illustrations on financial statement audit and compliance audit reports, new guidance on Yellow Book and single audits, and discussion of independence requirements.

The AICPA has also released its updated Compilation and Review Engagements guide, which conforms to the Statements on Standards for Accounting and Review Services (SSARS). This guide discusses independence and ethics requirements, as well as various other compilation and review topics, and provides illustrative analytical procedures and review reports.

Audit alert issued for auditors of group financial statements

The AICPA issued an Audit Risk Alert, Understanding the Responsibilities of Auditors for Audits of Group Financial Statements, to assist in the implementation of AU-C Section 600, Statements on Auditing Standards – Special considerations – Audits of Group Financial Statements (Including the Work of Component Auditors).

COMMENT LETTER ISSUED

On May 23, the firm issued a comment letter on the AICPA's proposed Statements on Standards for Accounting and Review Services, Review of Financial Statements and Review of Financial Statements – Special Considerations.

The comment letter is available on the website at grantthornton.com.

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