Businesses, Auditors Repeat Concerns about Debt Classification.
Businesses, professional groups, and audit firms repeated concerns they raised to the FASB while the board crafted its proposal to make businesses more clearly distinguish between the debts they must repay right away versus those on which they have time to make payments. The criticism boils down to fears that the proposal, originally released in January 2017, would result in more companies having to classify their debt as current. This could upend debt-to-equity ratios, make borrowing more expensive, and turn off investors, critics warned the FASB. “The committee might support a principle for classification of debt, but if the principle does not accommodate classification of short-term debt that is refinanced on a long-term basis after the balance sheet date as non-current, then we believe the Board should remove the project from the board’s agenda,” the California State Society of CPAs wrote in a comment letter submitted to the board.
After Two Decades, Standard on Insurance Accounting Released
The IASB published its much-anticipated overhaul for insurance accounting, ushering in a major change to how insurers report the risks they take and the promises they make to their customers. Two decades in the making, IFRS 17, Insurance Contracts, calls for fundamental changes to an industry whose balance sheets are considered impenetrable to all but the most specialized analysts. The standard goes into effect in 2021, but insurers—an estimated 450 companies with $13 trillion in assets—can adopt the provisions ahead of time. “This is a game changer in a lot of senses,” IASB member Darrel Scott said. “It means you’re going to have consistent accounting for an industry historically seen as difficult to understand, difficult to compare, and difficult to set up against other investment opportunities.”
Standing Advisory Group to Explore Technology’s Effect on Audit Quality
The PCAOB’s Standing Advisory Group plans to discuss technology’s effect on audit quality at its next meeting. The board put increased use of technology and data among audit firms on its research agenda to determine whether new guidance or updated standards are needed. “An increased use of these new data analytic tools could significantly affect the audit, including the nature, timing, and extent of audit testing, the amount of information available to auditors to make significant judgments in critical areas of the audit, such as risk assessment, and the staffing of audit engagements,” the PCAOB said in a briefing paper prepared ahead of the SAG meeting.