Nine Members Appointed to Advisory Council
The Financial Accounting Foundation (FAF), FASB’s parent organization, has appointed nine members to the accounting board’s Financial Accounting Standards Advisory Council (FASAC) to replace the 11 FASAC members whose terms expire at the end of this year. The FASAC draws its members from a range of backgrounds, including for-profit businesses, not-for-profit organizations, academia, and investment companies. It meets four times a year with FASB and provides input on the board’s current projects as well as offers insight on how the accounting board should set its priorities. The appointees are: Avi Berg, managing director and portfolio manager with Elm Ridge Capital Management in Irvington, New York; Rudolf Bless, chief accounting officer at Bank of America Corp. in Charlotte, North Carolina; Gordon Edwards, CFO of Marshfield Clinic Health System in Marshfield, Wisconsin; Zachary Gast, global head of research at CFRA; Elizabeth Graseck, managing director for research at Morgan Stanley; David Schmid, a partner with PricewaterhouseCoopers LLP; Amie Thuener, vice president and chief accountant at Alphabet Inc., the parent company of Google, in Mountain View, California; John White, a partner with the law firm Cravath, Swaine & Moore LLP in New York; and Teri Yohn, the Conrad Prebys Professor of Accounting at Indiana University.
Exposure Draft Released on Interest Expenses from Construction Projects
On December 8, GASB released Exposure Draft (ED) 9-5, Accounting for Interest Cost During the Period of Construction, which proposed that interest expenses from construction projects be reported during the period in which they are incurred. The board said that the new accounting should be adopted through what it calls ”the prospective method of application,” which does not require altering the financial results of prior reporting periods to reflect the change to accounting. If the proposed change is finalized, interest expenses from construction projects will no longer be part of the project’s historical cost that is reported as a business activity or enterprise fund. GASB wants the proposal to be effective for reporting periods that begin after December 15, 2018, but the board is encouraging state and local governments to adopt the change ahead of the effective date. Comments on the proposal are due by March 5, 2018.
Improvement in Audit Quality Slows Down at Large Audit Firms
Audit quality has significantly improved over the past few years, but the PCAOB is concerned that the pace of improvement at big accounting firms is leveling off. The board is thinking through the actions it will pursue to ensure a continuation of the gains that have been achieved so far. “The percentage of inspected audits with … deficiencies among the largest U.S. firms has declined over the past few years, along with the severity of the findings overall,” Jeannette Franzel said in a speech at the AICPA Conference on Current SEC and PCAOB Developments on December 5 in Washington. “We are, however, starting to see some of these firms ‘plateau’ in terms of reducing the number of findings.” The Center for Audit Quality, an affiliate of the AICPA, could not immediately respond to a request for comment.