Banks to Air Concerns on Credit Losses Standard at January Roundtable
In January, FASB plans to hold a roundtable with bankers, auditors, and investors to talk about the board’s much-watched credit losses standard. In recent months, banks have been increasing pressure on FASB to either change the sweeping standard or halt its implementation. “The objective of the roundtable is to talk about implementation issues related to credit losses,” FASB Chairman Russell Golden said. Specifically, FASB plans to vet the plan a group of mid-size banks submitted to the FASB in November to ease the income statement impact of reporting earlier credit losses under Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. “Since issuing the credit losses standard in 2016, FASB members and staff have been working with stakeholders to facilitate a smooth transition by addressing questions and obtaining feedback on the guidance,” Golden said in a statement released after his announcement. “The roundtable will provide stakeholders yet another opportunity to discuss cost-effective issues they believe the board should address.”
Proposal Clarifies Costs to Assess when Deciding Whether Contract is ‘Onerous’
The IASB has issued a proposal to clarify which costs to assess when determining whether a contract with a customer is considered “onerous.” The proposal specifies that the costs of fulfilling a contract include both incremental costs, such as the cost of materials, and an allocation of other costs directly related to the contract, such as the depreciation charge for equipment the company uses to fulfill a contract. Some financial reporting professionals believe only the incremental costs, such as the costs of materials or labor to build something, should be included. Others interpret the standard such that they assess all costs directly related to the contract. Comments are due by April 19, 2019.
2019 Budget of $273.7 Million Approved
On December 19, the SEC unanimously voted to approve the PCAOB’s 2019 budget of $273.7 million, an increase of about 5.3% from 2018. The commission’s action follows board’s unanimous vote in mid-November to approve a budget the board said would support its five-year strategic plan aimed at improving audit quality. “The PCAOB plays a key role in our capital markets through the oversight of the auditors of public companies and broker-dealers registered with the SEC,” Commission Chairman Jay Clayton said in a statement. “We should all recognize that these important PCAOB responsibilities are a means to a fundamental end—reliable, consistent, and meaningful financial reporting and high audit quality. I am appreciative of the PCAOB’s continued commitment to use their resources effectively for enhancing the quality of audit services and evaluating whether any changes are needed to its program and operations.” Caryn Kauffman, the SEC’s Chief Financial Officer in the Office of Financial Management, said the increase in the PCAOB’s budget is primarily attributed to increases in personnel, consulting and professional fees, and information technology costs.