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Tax News

U.S. retailers, restaurants say tax law drafting error delays investments.

A coalition of retailers and restaurants has asked Congress to fix a drafting error in the Tax Cuts and Jobs Act that they say is deterring companies from investing in their stores. The coalition said the mistake “has caused economic hardship for some retailers and restaurants and is also delaying investments across the economy.” According to the coalition, lawmakers had intended to change the law so that costs of remodeling or improving stores or restaurants would be eligible for bonus depreciation. Instead, the law requires that the depreciation be stretched out over 39 years, which the retail and restaurant groups say members of Congress have admitted was an error. “This very large difference in the after-tax cost of making improvements is causing a delay in some store and restaurant remodeling projects, as well as causing some retailers to decline opportunities to purchase or lease new store locations that would require substantial improvements,” the letter said. Officials at the tax-writing panels of the Senate and House of Representatives were not immediately available for comment.

FASB News

Final amendments for life insurance accounting approved for August publication.

Eleven years, four proposals, and more than 300 meetings later, FASB agreed on June 6 to finalize an update to U.S. GAAP’s insurance standard to shed more light on an opaque area of accounting. A unanimous board agreed to publish an update that will fundamentally change how life insurers and other underwriters of long-term policies estimate their liabilities. The plan will require insurers to regularly update the key assumptions they use to estimate what they owe to their customers. Under existing accounting standards, when an insurer sells a life insurance policy, the company bases the price of the policy on the buyer’s current health and family history, making complex calculations about life expectancy or the potential to miss payments. The assumptions are then set for the remainder of the policy’s life, which means that calculations about future liabilities as the buyer ages are years or even decades out of date. FASB’s planned amendments to insurance accounting update will correct that defect. “The changes that we’re making are absolutely going to make it more understandable for investors,” FASB member Marc Siegel said.

PCAOB News

Accounting firms use test runs to prepare for expanded audit report rule.

Some CPA firms are doing test runs to prepare for the PCAOB’s new requirement for an expanded auditor report to make the reports more useful for investors. “Our focus is really making sure that we get it right the first time,” David Kane, Americas vice chair of the assurance professional practice at Ernst & Young, said during a meeting of the PCAOB’s Standing Advisory Group (SAG) on June 6 in Washington, D.C. Similarly, Grant Thornton is testing the expanded reports with 10 clients and setting up brainstorming sessions to talk about critical audit matters (CAM) with the 10 teams. Auditors of public companies will have to add a description of the most difficult issues they faced as they examined a client’s financial statements, which the rule calls CAMs. The CAM requirement applies to audits of year-end 2019 financial statements for large accelerated filers, which the SEC defines as companies with market capitalization of $700 million or more. Auditors of smaller companies will have an extra year to prepare.

SEC News

Proposed rollback of Volcker rule seeks to loosen proprietary trading restrictions.

The SEC has issued a set of proposed amendments to the restrictions on bank trading known as the Volcker Rule. If the proposed amendments are finalized, the new requirements will be based on a bank’s trading activities, with the goal of reducing the burdens of Volcker Rule compliance on small- and mid-sized banks. The commission voted 3–2 in favor of the proposed amendments, with Democrats Kara Stein and Robert Jackson casting dissenting votes. The Volcker Rule, one of the most high-profile provisions of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, restricts banks’ proprietary trading and bars them from ownership in hedge funds and private equity funds. “To effectively implement the Volcker Rule, one size does not fit all, and its terms should reflect our collective experience,” said SEC Chair Jay Clayton in a statement prior to the vote. The SEC wants comments within 60 days.