Investors Call for More Detailed Note Disclosure on Cash Taxes
As FASB prepares to draw up a new slate of income tax disclosures, the board’s main panel of investors wants the standards setter to require businesses to report more details about the cash taxes they pay, as well as a greater breakdown between domestic and foreign taxes. Members of the Investor Advisory Committee on November 29 impressed upon FASB the importance of detailed tax information for their analysis of companies’ financial health. They said that they especially want more information about what companies pay to U.S. versus foreign tax authorities, not just the effective tax rates. “From the preparer side, the actual cost to provide this additional information is not necessarily material, but the value that it provides to investors when reviewing financials can be hugely material,” IAC member Matt Schecter said. “This data can help to determine, effectively, the cash taxes and effective tax cash rate that we can use to model cash flows going forward.”
SAG Says Quality Control Standards Should Address Firm Governance and Leadership
As the PCAOB carries out research on quality control standards, which deal with an accounting firm’s systems of employee training and compliance, its Standing Advisory Group (SAG) has said the standards could be updated to include firm governance and leadership. The regulatory board believes that strong quality controls are important to audit quality, but it has been researching the standards to determine if they need to be updated, as the inspections staff has continued to find deficiencies in audit engagements. PCAOB Chairman William Duhnke told reporters at the SAG meeting that the board is likely to elevate the project to standards setting in 2019 but is still in the process of making that determination. The board’s current quality control standards require accounting firms to implement systems with “reasonable assurance” that a firm’s employees comply with professional standards and the firm’s standards of quality. Firm governance and leadership encompass such concepts as firm culture, organization, assignment of authorities and responsibilities, and incentive systems, but the current standard largely does not directly address them despite their importance, PCAOB Deputy Chief Auditor Keith Wilson said at the SAG meeting on November 29.
Changes to Insurance Standard to be Weighed
One of the IASB’s most anticipated accounting standards could see changes before businesses have to start following it. At its December 11 meeting, the IASB plans to discuss concerns and challenges businesses have raised about following IFRS 17, Insurance Contracts, and decide whether to offer relief to insurers on how they break down the presentation of insurance contracts on the statement of financial position, according to an early agenda. The board’s research staff plans to recommend that the IASB change the accounting standard so that a business would separately present in the statement of financial position the carrying amounts of portfolios of the following: issued insurance contracts that are assets, issued insurance contracts that are liabilities, reinsurance contracts held that are assets, and reinsurance contracts held that are liabilities. The standard as written says this information needs to be presented by “groups.” Changing the term to “portfolios”—a level above “groups”—would alleviate concerns from insurers about the cost and the time it would take to break down contracts on a more detailed level while still giving investors and securities analysts relevant information, according to background materials for the upcoming meeting.