FASB News
Response to Consolidated Reporting Amendment Mixed
FASB’s recently proposed amendment of its consolidated reporting standard has generated a mixed response. The amendment would allow private companies to avoid using the guidance for the class of off-balance-sheet vehicles called variable interest entities for some common control lease arrangements and similar legal structures. Under the variable interest entity model, a business has a controlling financial interest when it has both the power to direct the activities that most significantly affect the economic performance of the entity, and it also holds both the right to receive significant benefits from the entity and the obligation to absorb its losses. The private companies that would be eligible for the option tend to support the amendment, but large public companies tend to oppose it.
AICPA News
Proposed Amendments Issued for Ethics Guidance Involving Lease Contracts
On October 19, the AICPA issued proposed amendments to its ethics guidance that address how FASB’s new standard for lease contracts will affect the independence guidelines. These amendments clarify how an accountant can ensure that a lease contract with a client is an “arm’s length” agreement which offers terms in line with the going rate on the market. “While the GAAP lease categorization requirements have been eliminated from the proposed revised interpretation, the other requirements remain in the proposed revised interpretation as minimum safeguards,” the AICPA said in the exposure draft. “Once these minimum safeguards are met (where applicable), the member is required to use a threats and safeguards approach, evaluating any other threats identified and applying safeguards when necessary.”
IASB News
Comment Letters on Discussion Paper Disagree on Path to Disclosure Reform
When in March the IASB issued an early-stage proposal to improve disclosures in financial statements, the board wanted to help businesses and other organizations communicate more effectively and help itself write better disclosure requirements in new accounting standards. Commenters on the proposal, however, have been dissatisfied on a number of points. Some groups have said the board missed the mark by failing to offer a detailed discussion of the role of technology in new disclosure requirements. Other groups raised alarms about giving businesses too much leeway to determine what is important, risking the loss of crucial information, while still others said the IASB did not go far enough in allowing more judgment. “While we were looking for a proposal that would solve the issue of disclosure overload by developing principles to fix disclosure requirements for the future and what form and level of aggregation the disclosures should have, the [discussion paper] seems to us to be more of a piecemeal mix of questions and answers,” one group wrote. After reviewing the feedback, the board plans to decide whether to develop an exposure draft of proposals to amend or replace parts of IAS 1.
