SEC Chief Accountant Wesley Bricker addressed the importance of objective financial reporting and the role of accountants and auditors in his speech before the Baruch College Financial Reporting Conference on May 3, 2018 (see page 20). He specifically mentioned the new accounting standards for revenue recognition, leases, and credit losses, as well as non-GAAP measures and other disclosures. CPAs know quite well that healthy capital markets and the economy in general depend on high-quality financial reporting; however, accounting guidelines do not seem to “rest in place” for very long.
This month’s column takes a broader look at financial reporting, with a review of some interesting items presented by the author’s colleagues at the CFA Institute. Readers who have never looked into the CFA Institute will expand their practice toolkits. In addition, the longstanding websites of FASB and the AICPA are now providing familiar content on new webpages, giving CPAs easy access so they can keep up with financial accounting–related standards.
CFA Institute, https://www.cfainstitute.org/
The CFA Institute (http://www.cfainstitute.org) is a membership organization for investment management professionals that seeks to provide education, knowledge, professional development, and ethical standards for investment management practitioners to improve outcomes for investors. The Institute’s website offers several free resources that can aid CPAs in guiding their client or employer organization’s financial reporting, as well as strengthen their own investment knowledge and expertise. Materials available include articles, reports, infographics, and archived webcasts. The Take 15 Series is a quick and easy selection of short interviews, many on tech-related topics (https://cfa.is/2v8sptg).
“FinTech and RegTech in a Nutshell, and the Future in a Sandbox,” published in the Research Foundation Briefs for July 2017, is available as a webpage or a 20-page PDF (https://cfa.is/2Ac4tuR). This interesting and easy-to-read study describes the interaction between finance and technology, the use of technology in the regulatory process, and how regulatory technology differs from finance technology. A Take 15 webcast from August 2017, “How the ABCD of FinTech is Changing Financial Services in China,” discusses the impact of artificial intelligence, blockchain, cloud computing, and big data on investing issues in China (https://cfa.is/2NNRBx3).
The institute also offers several resources on environmental, social, and governance (ESG) issues, including a survey report on “Global Perceptions of Environmental, Social, and Governance Issues in Investing,” which can be downloaded as a 4-page summary and a 79-page full report with bar chart and table summaries of the responses (https://cfa.is/2uRwhzL). According to the study, ESG integration was more typically found in equity investments as opposed to fixed income, and attitude toward risk management was a major factor. Not surprisingly, ESG issues are a higher priority for institutional investors than for private investors.
“Fundamentals of ESG: Concepts and Principles” is a 40-minute presentation from April 2015 that covers the basic concepts of ESG, sustainability, and corporate social responsibility, as well as the business case for sustainability, theories and evidence of ESG, and the future of ESG investing (https://cfa.is/2uQ9K6l).
The institute’s Future of Finance initiative seeks to promote an investing environment that recognizes investor interests and allows markets to function effectively, and several resources on its website highlight its efforts and results (https://www.cfainstitute.org/en/research/future-finance). Under this mission, the institute offers some useful documents for advisors to share with their clients, including “Tips for Avoiding the Top 20 Common Investment Mistakes,” such as using someone else’s expectations and focusing on the wrong type of performance. The feature “7 Steps to Financial Fitness” is a quick look at investing goals and debt planning. “Essentials of a More Secure Retirement” is a positive look at how to start saving for retirement, stay with the retirement savings plan, and invest effectively.
The institute has also released its third annual survey of investor expectations, “The Next Generation of Trust: A Global Survey on the State of Investor Trust,” which is available on the Future of Finance page and on a subsidiary site, The Next Generation of Trust (https://nextgentrust.cfainstitute.org/). The survey was conducted in late 2017 and includes responses from over 3,000 individual investors and over 800 institutional investors. The results are available in five formats: a downloadable 20-page PDF report (https://nextgentrust.cfainstitute.org/report/), an archived 50-minute webinar from April 2018 (https://cfa.is/2v4wi2t), a downloadable infographic titled “8 Steps to Increasing Credibility and Professionalism at Your Firm”(https://nextgentrust.cfainstitute.org/infographic/), market snapshots of survey data summarized individually for the 12 countries covered; and an interactive data interface (https://nextgentrust.cfainstitute.org/survey-data/). The data can also be downloaded in Excel format.
FASB: Implementing New Standards
FASB (http://www.fasb.org) created a new webpage in September 2017 that serves as a starting point for locating implementation guidance on major FASB standards (http://www.fasb.org/implementation). Resources are organized by topic: revenue recognition, leases, credit losses, not-for-profit financial reporting, hedge accounting, Tax Cuts and Jobs Act, and other standards. Each subject page includes connections to standards update materials, educational resources, and background on the particular subject with a link to the full project information. One upside to FASB’s new presentation is that materials are available in multiple locations, so users do not have to execute perfect searches or work in a particular order to find them. Related to the new webpage, FASB also released a two-minute “FASB Implementing New Standards” video on its outreach for new standards implementation (http://bit.ly/2OgTGCN).
The best place to start is the educational resources, which organize the content in a quick view format that makes it easy to find the desired materials. Users can access the particular standards update, amendments to the standard, press releases, “FASB in Focus” articles, videos, project summaries, technical inquiries, and a taxonomy implementation guide.
AICPA Financial Reporting Center
The AICPA’s Financial Reporting Center (FRC) (https://www.aicpa.org/interestareas/frc.html) brings together materials on accounting and financial reporting, audit and attest, review and compilation, assurance and advisory, and industry insights. The FRC is a great place to start a search for financial reporting–related AICPA resources, many of which are publicly available or accessible with general AICPA membership. The FRC main page includes news, links to AICPA TV videos, and featured resources under the five topical sections.
The FRC main page provides direct links to two “competency frameworks.” The AICPA Competency Framework for Assurance Services is a downloadable 33-page PDF (http://bit.ly/2mLLCgQ) that covers competencies necessary for client acceptance or continuation, engagement planning, engagement analysis or testing, and concluding the engagement, along with guiding principles for engagement activities. The concepts are organized in easy-to-follow tables by level of expertise: foundational, intermediate, advanced, and expert. The CGMA Competency Framework (http://bit.ly/2JXnYH7) is presented in webpage format and as a 63-page PDF. Readers can also separately download the individual sections of technical skills, business skills, people skills, and leadership skills.