FASB ISSUES GUIDANCE FOR PRIVATE COMPANIES

Norwalk, Conn. -- The Financial Accounting Standards Board has released an Accounting Standards Update to improve the way private companies account for intangible assets in a business combination.

ASU No. 2014-18, Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination, is based on a consensus reached by the Private Company Council, and allows a private company to elect an accounting alternative for recognizing certain intangible assets that are acquired in a business combination.

In this alternative, an electing company would no longer recognize the following apart from goodwill:

  • Customer-related intangible assets unless they are capable of being sold or licensed independently from the other assets of the business; and,
  • Non-competition agreements.

The board noted that some customer-related intangible assets that are capable of being sold or licensed independently -- such as mortgage servicing rights, commodity supply contracts, core deposits, and customer information -- would continue to be separately recognized.
 

PCAOB REVAMPS STANDARD-SETTING AGENDA

Washington, D.C. -- The Public Company Accounting Oversight Board has updated its standard-setting agenda after undergoing criticism that it is not moving faster on releasing new standards.

The new agenda was posted to the PCAOB's Web site in early January, and notes that the PCAOB staff anticipates recommending that the board propose a standard and related amendments on auditing accounting estimates, including fair value measurements and related disclosures, for public comment in the fourth quarter of 2015. The staff had released a public consultation paper last August seeking input on the matter.

Although the comment period on a reproposed version of a new standard for disclosure of the engagement partner and certain other participants in audits ended last March, the PCAOB staff is drafting for the board's consideration a supplemental request for comment that takes into account the comments that were received on the reproposal, including comments related to liability and an alternative location for the disclosure.

A proposed standard on revamping the auditor's reporting model was issued in August 2013, and the board held a public meeting in April 2014 to discuss the proposed standard and the comments it had received. The PCAOB said in the updated agenda that the staff is still analyzing the comments received on the proposal and at the public meeting and is drafting a reproposal for the board's consideration.

The PCAOB is still planning to turn its attention eventually to some long-delayed standards, such as for audit confirmations. On July 13, 2010, the board issued for public comment a proposed auditing standard on confirmation. The comment period ended on Sept. 13, 2010. The staff has analyzed the comments received and is planning to draft a reproposal for the board's consideration.

During a conference in December hosted by the American Institute of CPAs, Securities and Exchange Commission Chief Accountant James Schnurr criticized the slow movement in standard-setting in recent years by the PCAOB. "Considering the lack of progress on a number of projects, I have questioned what might be the root cause or causes with respect to the PCAOB standard-setting process," he said. "Accordingly, [PCAOB Chairman] Jim Doty and I have discussed the need to work together with the other PCAOB board members to take a fresh look at the PCAOB's standard-setting process with a focus on what improvements can be made to the timing of a project from inception to adoption of a standard or termination of a project. I am optimistic that working together the PCAOB can begin to reduce the significant standard-setting backlog."

Doty spoke later in the day, and said, "Let me just say now that, as Chief Accountant Jim Schnurr said earlier this morning, we are looking closely at our standard-setting process to make sure it is as efficient and effective as possible. ... We have been reviewing our processes, especially in light of our goal to understand and analyze the economic impact of any potential rulemaking. This past summer's staff consultation paper on auditing estimates and fair value measures is an example of a new tool identified by this review."

"We will further expand the review of our processes in the upcoming year to identify efficiencies in the rulemaking process from staff-level deliberation and drafting to board-level review and decision-making," Doty added. "Re-evaluating our processes, like any good organization does, is a constructive effort. We should issue new rules only after thoughtful assessment of the need to improve audit quality and evaluating the economic impact of any rule-making. But once we decide that any such improvement is appropriate, we want the organization, from staff to board, to be nimble in our execution."

 

IAASB SETS NEW STRATEGY FOR AUDIT QUALITY

New York -- The International Auditing and Assurance Standards Board, which operates under the auspices of the International Federation of Accountants, released its Strategy for 2015-2019: Fulfilling Our Public Interest Mandate in an Evolving World and its Work Plan for 2015-2016: Enhancing Audit Quality and Preparing for the Future in late December.

The board's five-year strategy is underpinned by three strategic objectives that reflect a continued focus on International Standards on Auditing as the basis for high-quality audits, the importance of the IAASB's standards for other services to address emerging needs of stakeholders, and the board's intention to strengthen collaboration with others to address public interest matters relevant to its work.

 

 

SEC FACILITATES XBRL ANALYSIS

Washington, D.C. =- The Securities and Exchange Commission has launched a pilot program aimed at simplifying investor analysis and comparisons of public company financial statement data using the Extensible Business Reporting Language, or XBRL.

Under the new program, data that companies provide in structured formats will be combined and organized into structured data sets and posted for bulk downloads on the SEC's Web site for use by investors and academics. The data sets initially will contain financial statement data from XBRL exhibits as filed with the SEC. They will be expanded in 2015 to include data in footnotes to the financial statements.

The SEC requires U.S. public companies to structure the data in their quarterly and annual financial reports using XBRL, which is machine-readable. The structured data files are available in the SEC's EDGAR database as exhibits to company filings. To facilitate the use of this information, the SEC's Division of Economic and Risk Analysis will organize it into combined data sets on the SEC's Web site in formats other than XBRL.

The pilot program builds on efforts related to the use of structured data in corporate reports, including a staff assessment of custom tag rates in XBRL exhibits issued in July. SEC staff also sent letters earlier this year to certain companies regarding required calculations in their XBRL exhibits.

An industry trade group that promotes the use of XBRL, the Data Transparency Coalition, said it would knock down virtual walls and create a tool that will eliminate a major hurdle for investors and other users of SEC financial data. "The SEC's release of financial statement information as a single data set, rather than thousands of separate files, will make life easier for investors and the research data companies serving them," said Data Transparency Coalition executive director Hudson Hollister. "This action is another step forward to data transparency in financial regulation, but we're not there yet. To truly modernize, the SEC should stop requiring companies to submit two duplicative versions -- document and data -- of each financial statement, and should adopt consistent data formatting throughout the hundreds of document-based forms it currently collects."

 

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