FASB News
Report: Revenue Changes for Software Industry May be Significant
FASB’s sweeping new revenue recognition rules go into effect in 2018, removing approximately 200 pieces of industry-specific revenue rules, coming up with a single way for most companies to recognize the top line in their income statements. For software, the standard eliminates the need for “vendor-specific objective evidence” showing that some elements of a contract are still undelivered, allowing companies to recognize revenue from those undelivered elements immediately, which will make a significant impact. “When you look across the spectrum, it’s not that clear what the heck is going to happen,” said a CEO of a financial data firm.
Conceptual Framework’s Assets, Liabilities Definitions up for Debate
At its August 30 meeting, FASB discussed fundamental concepts in financial reporting: the definitions of assets and liabilities. The discussion was part of the board’s effort to revise its Conceptual Framework, the document that guides FASB when it sets accounting standards. The board issued its first Concepts Statement in 1978, five years after it was founded, and six more by 2000, but the overall Conceptual Framework is considered incomplete. Critics, including some FASB members, often claim that the accounting board makes standards-setting decisions on a case-by-case basis, which sometimes leads to contradictory requirements for similar transactions.
PCAOB News
Forum for Auditors of Broker-Dealers to Include Discussion on Inspection Results
The PCAOB is scheduled to review its 2016 audit inspection results during a forum for auditors of broker-dealers in Las Vegas on October 20, 2017. The board recently released its Annual Report on the Interim Inspection Program Related to Audits of Brokers and Dealers, which showed problems at 73 of the 75 accounting firms serving securities brokers. The 97% deficiency rate is slightly worse than the 96% rate for 2015 inspections, when problems were uncovered at 72 of 75 audit firms. The PCAOB inspected parts of 115 audit engagements and found problems with 96 of them, or 83%, which is an increase from 77% in 2015. “The board continues to be concerned by the nature and number of deficiencies identified by the inspections,” the annual inspection report said. “Many of these deficiencies relate to the fundamentals of audit, examination, or review procedures and are similar to those described in previous annual reports.”
