FASB News
Lawmakers Call for Delay of Credit Loss Standard
Twenty-six Republican members of Congress asked FASB and the SEC to delay the effective date of the accounting standard considered to be the board’s chief response to the 2008 financial crisis. In a letter dated October 5, the group, led by Representatives Lee Zeldin (R-NY) and Ted Budd (R-NC), called on the accounting board and the market regulator to further examine how the Current Expected Credit Losses (CECL) standard affects the stability of the banking sector and the availability and affordability of credit. By calling for losses to be calculated on the day a loan is originated, instead of when borrowers fall behind on payments, the standard will fundamentally change the accounting for capital and credit, potentially tightening the availability of loans, the lawmakers said. “We also urge a delay in the full implementation of this standard until the completion of such an analysis,” the group wrote. “The FASB values input of all stakeholders, including members of Congress, and is in the process of evaluating the letter,” a FASB spokesperson said. The SEC declined to comment.
Definitions for Fundamental Terms May Be Updated
FASB discussed its effort to update its Conceptual Framework at its October 10 meeting. The meeting focused on the definitions for some fundamental terms in the financial statements, such as revenues, expenses, gains, and losses, and other key concepts. In May, the board agreed to examine potential revisions to the framework, which was published in 1985, and defines the fundamental terms in financial statements. Separately, the board met with its Emerging Issues Task Force on October 12 to make a second attempt at providing guidance for the costs of setting up a cloud computing contract.
PCAOB News
Audit Practice Alert Provides Guidance for Revenue Standard
On October 5, the PCAOB issued an Audit Practice Alert to aid auditors examining their clients’ implementation of FASB’s revenue recognition standard, which is scheduled to go into effect in 2018. The 20-page interpretive guidance provides a highlight of board requirements and other considerations for auditing revenue. The update is expected to usher in major changes, as it would erase approximately 180 pieces of individual, industry-specific revenue guidance in U.S. GAAP and provide a single, principles-based, five-step process by which all businesses must calculate the top line in their income statements. It also requires new disclosures, such as qualitative and quantitative information about revenue recognized from contracts with customers and significant judgments and changes in judgments. “As companies implement the new revenue standard, they may need to change their systems, processes, and controls, or to develop new ones,” the PCAOB said. “Done poorly, such changes could pose heightened risks of material misstatement, including fraud risks.”
