FASB to Drop Obsolete Guidance for Steamship Companies
FASB has agreed to delete an outdated piece of guidance from U.S. GAAP governing a soon-to-expire income tax deferral related to funds that U.S. steamship companies set aside to buy new vessels or update existing ones. The IRS and the Department of Transportation program from which the statutory reserve deposits originate provided a 25-year limit in which businesses had to use the reserves or forfeit the tax deferral, and it expires this year. Steamship companies will have to recognize deferred income taxes by following the guidance for reporting income taxes.
Comment Letters Back Proposal Strengthening Auditors’ Scrutiny of Accounting Estimates
Comment letters by banking regulators and investors support the PCAOB’s June 2017 proposal to increase auditors’ responsibilities for scrutinizing accounting estimates. Release 2017-002, Proposed Auditing Standard—Auditing Accounting Estimates, Including Fair Value Measurements and Proposed Amendments to PCAOB Auditing Standards, calls on auditors to apply greater professional skepticism and pay more attention to potential management bias when auditing accounting estimates. The proposed standard has specific requirements to address certain aspects of auditing the fair value of financial instruments, including the use of information from third-party pricing sources. It also focuses on estimates with greater risk of error. “We believe proposed Auditing Standard (AS) 2501 on auditing estimates … will improve the quality and the consistency of audits in this important area, reinforce the need for auditors to apply professional skepticism, and enhance market discipline,” wrote the chief accountants of the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) in a joint comment letter. “High-quality external audits play an important role in ensuring the reliability of institutions’ financial information and contribute to financial stability.”