Proposed Framework for Valuing Financial Instruments Released
On July 6, the AICPA issued a proposed framework intended to help accountants and financial reporting professionals determine the amount of documentation required to support the valuation of a security, debt instrument, or trade receivable. “Financial instruments have become increasingly complex, and determining their value has been a challenge that has adversely affected the market in the past,” said Jeannette Koger, the AICPA’s vice president of advisory services and credentials, in a statement. “The AICPA is responding to marketplace needs by creating a standardized and replicable process for financial professionals who perform valuations on financial instruments.” Comments on the proposal are due by September 26.
Amendments Proposed for Broker-Dealer Guide
An AICPA panel is proposing amendments to its Audit and Accounting Guide (AAG): Brokers and Dealers in Securities. The proposed change addresses an auditor’s responsibilities for examining a broker’s clearing activities, particularly the cash reported on the balance sheet that comes from clients to serve as collateral for their trading. “Each broker-dealer clearing member will need to consider their individual facts and circumstances and the factors considered to be relevant when evaluating whether cash [initial margin] should be recorded on its balance sheet,” the proposed amendment says. Comments on the proposed amendments are due by August 1.
Effort to Redesign Income Statement Raises Concerns
The IASB has more work to do before it decides whether to allow new line items in company income statements that proponents say would lend better insight into a business’s financial health. The IASB is considering adding two subtotals to the statement of financial performance—earnings before finance income/expenses and tax (EBIT) and a new, yet-to-be-defined “management performance measure.” But the board’s most recent discussion about the effort raised questions about how it should proceed. “As usual, we are very good at creating problems and seeing problems, and finding all sorts of obstacles, which are undoubtedly there,” IASB Chairman Hans Hoogervorst said toward the end of the board’s discussion.