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House passes new tax bills.
On September 27 and 28, the House of Representatives passed three sections of the second phase of the Republicans’ tax agenda. House lawmakers voted to approve the Protecting Family and Small Business Tax Cuts Act of 2018, the Family Savings Act of 2018, and the American Innovation Act. The Protecting Family and Small Business Tax Cuts Act would make the individual tax changes that were passed in the Tax Cuts and Jobs Act of 2017 permanent; the Family Savings Act would make several changes affecting retirement, education, and general savings in the United States; and the American Innovation Act is designed to encourage taxpayers to start their own businesses. While the combined tax bill is not expected to come to the floor of the Senate, a bipartisan group of Senators has expressed interest in the Family Savings Act, which encourages retirement savings through tax incentives.
EITF proposes aligning accounting for television, movie production costs.
Television producers will be able to account for the production costs of television shows the same way that film-makers account for the costs to make movies under a proposal FASB’s Emerging Issues Task Force (EITF) developed on September 27. The proposed amendment to U.S. GAAP, which must be approved by FASB before it is issued as a draft for public comment, would alter Accounting Standards Codification (ASC) Topic 926-20, “Entertainment—Films—Other Assets—Film Costs,” formerly Statement of Position (SOP) 00-2. The change would make the guidance for the cost of producing television shows, which FASB calls episodic content, the same as the guidance for films. If FASB approves the plan, the board expects to release it for comment in November, a FASB spokesperson said.
Performance reporting project becomes major priority.
Now that the IASB has moved its broad project to improve how companies communicate their financial performance to its formal standards setting agenda, the board considers the project the centerpiece of its current work. Speaking at the World Standard Setters forum in London on October 2, IASB Executive Technical Director Nili Shah said the board is focusing on several areas related to improving financial reports: the primary financial statements, disclosures, and management commentary. “We’re looking at improving the content and structure of the financial statement, including the addition of more subtotals on the statement of performance, additional line items, additional disaggregation, and the removal of optionality,” Shah said.
Comment letters back more relevant release of inspection results.
In comment letters to the PCAOB, investors and auditors said they support the board’s plans to provide more timely and relevant feedback following its audit inspections. Despite monthly posts from the PCAOB, there is typically a long delay between an inspection and the public disclosure of findings. For example, the PCAOB on September 25 posted on its web-site 19 reports completed in July of audit firm inspections conducted from 2016 through 2018. “The current communication regarding inspection findings is challenging for investors to contextualize and incorporate broadly into their investment decision-making process,” Sandra Peters, head for global financial reporting policy with the CFA Institute, wrote in an August 31 comment letter. “Investors do need some information on the major issues and trends which provide them with a sense of the quality of the audits which they rely on to protect their interests. Without this, it is challenging to value the audit process.”
Comments sought on plan to update government financial reporting model.
On September 28, the GASB released two early-stage documents to gather public comments about its long-range plan to update the financial reporting model for state and local governments. The accounting board wants comments submitted for Preliminary Views (PV) 3-20, “Recognition of Elements of Financial Statements,” and PV 3-25, “Financial Reporting Model Improvements,” by February 15, 2019. The proposals are designed to improve the model’s effectiveness in providing information for decision making and assessing a government’s accountability. PV 3-20 addresses the concepts related to recognition of assets and liabilities and other elements of financial statements, while PV 3-25 presents the GASB’s thinking on targeted improvements to the financial reporting model for annual financial reports from state and local governments. “What the Board ultimately is trying to do through these companion projects is provide better information to financial statement users,” GASB Chairman David Vaudt said in a statement. “These proposals are designed to enhance both the value and clarity of the information reported in financial statements.”