FASB News
Staff Document Advises Private Companies, Not-for-Profits to Follow SEC Guidance on Tax Reform
Private companies and not-for-profit entities should be able to apply recent SEC staff guidance allowing companies to use “reasonable estimates” and “provisional amounts” to quantify the effects of the Tax Cuts and Jobs Act, FASB’s staff said in a question-and-answer document released on January 11. The document covers discussions that FASB held at its January 10 meeting about the accounting ramifications of the law, which President Trump signed on December 22, 2017. SEC staff accounting bulletins, which express views on the application of FASB accounting standards and other disclosure requirements, do not directly apply to private companies, but privately held businesses and not-for-profit organizations often have analogized to them. “It is not unusual for larger private companies, especially, to look to the SABs for guidance,” FASB member Harold Monk said at the meeting. “And this of course is still not required in the private company arena. It’s something they can take advantage of … but it’s not going to get pushed down on them.”
Proposed Technical Corrections to Classification, Measurement Guidance
At its January 17 meeting, FASB reviewed feedback it had received on a September proposal that included technical corrections to the standard for classifying and measuring financial instruments. The proposal offers six changes to the classification and measurement standard, all of which FASB characterized as minor. One provision raised concerns for auditors, however, with many writing to the board that the proposed correction needed further clarification. The section covers the measurement of equity securities that do not have a fair value that can be readily determined but do not qualify for other measurement techniques; an entity may elect to measure these instruments at their cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Banks and audit firms asked FASB about other situations where the measurement technique could apply, and FASB’s proposed amendment clarified that it could also be applied to “all other securities of the same type.” Audit firms wrote to FASB and said the phrase “of the same type” was unclear. “Without clarification, we are unsure what would constitute an equity security of the same type, and believe this term could be interpreted in vastly different ways in practice,” one firm wrote in its comment letter.
AICPA News
ASB to Address Comments on Selected Procedures Proposal
The AICPA’s Auditing Standards Board (ASB) is scheduled to address some of the issues raised in comment letters that the board has received on the so-called “selected procedures” proposal at a meeting in New Orleans on January 16-19. In September 2017, the AICPA issued Exposure Draft (ED): Proposed Statement on Standards for Attestation Engagements—Selected Procedures, which is intended to give accountants flexibility in performing and reporting some selected procedures; comments were due by December 1. The majority of the 27 comment letters received expressed support for the proposal, but some asked for changes before finalizing the standard. The proposal expands the services permitted for accountants in AT section 215, “Agreed-Upon Procedures Engagements,” according to a discussion paper prepared ahead of the meeting. The procedures include a range of activities an accountant might perform during an engagement, such as a review of documents and confirmation of information with a third party.
