Final Version of Amended Debt Classification Guidance Approved
At its August 22 meeting, FASB agreed to publish a final version of its amended guidance for classifying debt as long-term or short-term. FASB’s staff is planning to draw up a final version of the guidance for the accounting board’s approval, but the board still wants to solicit feedback about its decision that a long-term financing arrangement to support a debt agreement should be ignored in determining how the debt should be classified. FASB plans to bring the issue up with its Not-for-Profit Advisory Council during the panel’s upcoming September 13–14 meeting before issuing the final amendments. A FASB spokesperson said the board expects to publish the final update during this year’s fourth quarter.
Fine-Tuning of Liability Definition Continues
FASB still needs time to nail down a definition of a liability. Discussions on August 22 revealed continuing divisions among FASB members on how to update the elements portion of the board’s Conceptual Framework, the internal document FASB uses to help it set consistent accounting standards. While the existing framework has a definition of a liability, FASB has not always referred to it when making standards setting decisions. This means inconsistent guidance throughout U.S. GAAP on what is a liability versus an asset, which has created “a complex accounting model for financial instruments that have characteristics of both liabilities and equity,” according to FASB background materials. “This has been debated for 40-plus years at some level,” said FASB Vice Chairman James Kroeker toward the end of the meeting.
Staff Guidance Updated to Provide More Help With Expanded Auditor Reporting
On August 23, the PCAOB updated its Staff Guidance to help accounting firms comply with the requirements for the expanded audit reports. The guidance deals with the requirement that the extended auditor reports address such issues as the number of years the firm has served the client and the other firms that worked on the audit, as well as the rule’s other requirements. In addition, it adds examples of matters that could be included in emphasis paragraphs in the auditor’s report, such as a catastrophe that has a significant effect on the company’s financial position or an uncertainty about the outcome of a litigation or regulatory action. The latest edition of the interpretive guidance updates a previous version published on December 28, 2017.