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.

Revenue recognition discussed at May 24 joint meeting

The FASB and the IASB held a joint meeting on May 24 and discussed the application of the proposed revenue recognition model to credit card reward programs in response to some preparers in the financial services industry. In a tentative decision, the Boards agreed to amend one of the implementation examples in the proposed guidance to clarify that a promise to award credits would not automatically result in a performance obligation. These arrangements may include two or more parties (for example, card issuer, card holder, and merchant, among others), and the Boards noted that each entity involved should consider all facts and circumstances in its determination of whether a performance obligation exists.

Highlights of meeting held on May 29 released

On May 29, the Board added a new standard-setting project to its agenda and discussed its project on financial reporting for not-for-profit entities, as summarized below.

New agenda project on clarifying definition of "business"

The Board added a new standard-setting project to its agenda aimed at clarifying the definition of a "business." Specifically, the objective of the new project is to determine whether to account for a transaction involving in-substance nonfinancial assets held directly or in a subsidiary as an acquisition (or disposal) of nonfinancial assets or as an acquisition (or disposal) of a business.

Not-for-profit financial reporting: financial statements

Board members tentatively agreed that the definition of an "intermediate operating measure" would be based on the following two dimensions for not-for-profit (NFP) financial reporting purposes:

  • A mission dimension, based on whether resources are derived from, or used for, executing a not-for-profit entity's purpose
  • An availability dimension, based on whether resources are available for current-period activities, which would reflect both internal actions taken by the entity's governing board as well as external limitations

The Board also tentatively agreed to support a method for presenting an intermediate measure in an NFP's statement of activities whereby all legally available mission-related revenue is presented before reductions for amounts designated by the governing board for future use. Previously unavailable resources made available by the governing board in the current period also would be presented.

Dodd-Frank Wall Street Reform and Consumer Protection Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) mandates numerous studies and regulatory rule changes. Initiatives that impact financial reporting are described in On the Horizon as information becomes available.

CorpFin issues FAQs on conflict minerals and resource extraction disclosures

On May 30, the staff of the SEC's Division of Corporation Finance (CorpFin) released frequently asked questions (FAQs) to provide guidance on the application and implementation of two Final Rules, Conflict Minerals and Disclosure of Payments by Resource Extraction Issuers, as follows:

  • Conflict minerals FAQs: The Final Rule requires issuers to publicly disclose their use of conflict minerals that originate in the Democratic Republic of the Congo (DRC) or adjoining countries if those minerals are necessary to the functionality or production of a product manufactured (see NDS 2012-06, Conflict minerals disclosure, for further discussion of the Final Rule). The topics covered in the FAQs include
  • The applicability of the disclosure requirements to all filers under the 1934 Securities Exchange Act, including those filing voluntarily, and the impact of a delayed filing of Form SD on eligibility to use Form S-3
  • Whether mining is considered manufacturing of minerals
  • Whether the Final Rule applies to an issuer whose subsidiary manufactures a product that uses conflict minerals
  • Certain activities that are not considered "contracting to manufacture"
  • Whether an issuer's responsibility for performing its country of origin inquiry extends to generic components included in a product
  • Whether certain packaging and equipment are considered to be a part of a product
  • Disclosure expectations for products that are not "DRC conflict free" or "DRC conflict undeterminable"
  • The filing requirement when conflict minerals that are "DRC conflict free" are used in products
  • Timing for the initial filing of Form SD after an initial public offering
  • Disclosure of payments by resource extraction issuers FAQs: The Final Rule requires resource extraction issuers to publicly disclose certain payments made to the U.S. federal government or foreign governments for the purpose of commercial development of oil, natural gas, or minerals. The topics covered in the FAQs include
  • Clarification of the definition of a mineral
  • The applicability to an issuer that does not directly engage in activities to further the commercial development of oil, natural gas, or minerals, but whose subsidiary or other entity under its control makes payments to the government for such activities
  • Whether certain activities would be considered as furthering the commercial development of oil, natural gas, or minerals, such as services or transportation activities, and whether certain payments should be disclosed
  • The impact of a delayed filing on eligibility to use Form S-3

These FAQs are based on the CorpFin staff's understanding of these Final Rules and do not constitute rules, regulations, or statements of the SEC.

AICPA

Updated guides issued

The AICPA has released the following guides:

  • Investment Companies - Audit and Accounting Guide, which now conforms with the clarified auditing standards issued by the Auditing Standards Board
  • (ASB), incorporates the latest relevant accounting pronouncements including fair value measurements, and provides illustrative auditor's report and management representation templates
  • Service Organizations: Reporting on Controls at a Service Organization Relevant to User Entities' Internal Control Over Financial Reporting, which now conforms with the ASB's clarified auditing standards and provides additional guidance and illustrations, including service auditor's reports, to help auditors effectively perform service organization control (SOC 1) engagements
  • Valuation of Privately-Held Company Equity Securities Issued as Compensation - Accounting and Valuation Guide, the first in a series of three accounting and valuation guides, which provides guidance and illustrations on the valuation of privately held company equity securities issued as compensation, including accounting treatment and disclosures

Comment letters issued

On May 28, Grant Thornton LLP issued a comment letter in response to PCAOB Rulemaking Docket Matter No. 40, Proposed Framework for Reorganization of PCAOB Auditing Standards and Related Amendments to PCAOB Auditing Standards and Rules.

On May 31, Grant Thornton LLP issued a comment letter in response to the FASB's proposed Accounting Standards Update, Financial Instruments - Credit Losses.

The comment letters are available at grantthornton.com.

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