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U.S. finalizes country-by-country tax reporting rules.
The U.S. Treasury Department and the IRS released final rules that will require large U.S. multinational corporations to file annual reports containing detailed, country-by-country income tax filing information for each jurisdiction in which they do business. The move, which was the subject of contention between Treasury Secretary Jack Lew and several members of Congress, aligns U.S. corporate tax policy with the global guidelines proposed by the Organization for Economic Cooperation and Development (OECD) in its Base Erosion and Profit Shifting (BEPS) project. According to the OECD, this detailed reporting process will provide tax authorities with complete transparency into profit generated in each tax regime and will eliminate uncertainty regarding where the profits on goods sold can be claimed.
Chair White says sustainability may have a place in reporting rule book.
Investors are growing more interested in information about companies’ handling of environmental and social policy concerns, and the SEC is starting to respond, asking for views on sustainability reporting. SEC Chair Mary Jo White has acknowledged the growing public interest in corporate sustainability information, but has stopped short of committing to a specific plan to mandate reporting or disclosure of such information. “The issue has our attention,” White said at her keynote speech for the International Corporate Governance Network annual conference in San Francisco on June 27. “At this juncture, the path forward on enhancing sustainability reporting is clearly still developing.”
More delays snarl plan to propose guidance for audits of estimates and specialists.
The PCAOB plans to issue two proposals related to audits of accounting estimates and the use of specialists in the first quarter of 2017, according to a standards-setting agenda the board updated on June 30. This shift means the work on the standards has been delayed twice in the past six months. The delays may be due in part to changes in the board’s standards-setting process that were developed at the SEC’s urging. “The staff plans to continue its research and outreach activities to seek input on potential approaches to improving the performance and reporting requirements in the existing standard and addressing the changes in the accounting requirements,” the agenda said. “These activities could result in a staff consultation paper, a staff audit practice alert, or other possible actions.”
Early comment letters say audit engagement quality review works as intended.
In comment letters to the PCAOB, auditors report that Auditing Standard 7, Engagement Quality Review, has worked as it was intended since it was adopted in 2009. The comment letters were in response to the board’s postimplementation review of the standard, which requires auditors to evaluate the work of other auditors to examine the significant judgments related to the planning of the audit engagement. “Any time a subsequent review of an audit report is made prior to its issuance, there is always the possibility that any errors or omissions may be identified and corrected,” Jerilyn Barthel, who chairs the professional standards committee of the Texas Society of Certified Public Accountants, wrote in a comment letter. “An additional review provides some degree of increased comfort.”
Hoogervorst plans effort to revise look of financial statements.
The IASB has decided that its priorities for the next few years will include an effort to rework the look of financial statements and make them easier for investors to use. As part of the effort, the IASB plans to consider producing new guidance for how cash flow statements and balance sheets should look. “The big questions here are to what extent the board should provide more structure to the statements of profit or loss, including the use of subtotals,” IASB Chairman Hans Hoogervorst said at a Zurich conference sponsored by the accounting board’s parent organization, the IFRS Foundation on June 30. Terms like revenue, profit, and loss are defined in IFRS, but other terms that are also widely employed, such as operating income, as well as non-GAAP measurements, like earnings before interest, taxes, depreciation, and amortization (EBITDA), are not. Hoogervorst said the board might look to develop principles-based definitions of such key terms.