Roundtable on Credit Losses Standard Set
FASB plans to hold a public roundtable on January 28 for banks, auditors, investors, and regulators to air questions and concerns about the board’s accounting standard for credit losses [Accounting Standards Update (ASU) 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments]. Topics will include a proposal several banks submitted to FASB in November 2018 to tweak key pieces of the standard, as well as a discussion of how to assess chargeoffs and recoveries as a component of the vintage disclosures in the new rules. As the date approaches when all public companies must comply with ASU 2016-13, bankers are especially wary. While the standard applies to all businesses, it is expected to affect banks the most; many financial reporting professionals consider it the biggest change to bank accounting in decades.
Eight Months Later, No News on Next Board Member
FASB has been short a member since May 2018, when former member Harold Monk unexpectedly resigned, citing personal reasons. FASB’s parent organization, the Financial Accounting Foundation (FAF), is still looking for Monk’s replacement, a FAF spokesperson said. “The search is progressing,” the spokesperson said. “It is too early to say when an announcement will be made.” Monk’s five-year term did not expire until 2022. As the search continues, all eyes are on whom the FAF could choose as the next member of the board. The experience and background of the new member could help shape the views of the board as a whole as it grapples with implementation questions on some of the major accounting standards the board has published in recent years, including revenue recognition, leases, and credit losses.
FinREC Issues Draft on Implementation of Revenue Recognition for Broker-Dealers
On January 9, the AICPA’s Financial Reporting Executive Committee (FinREC) issued a working draft of an example broker-dealers could use to implement FASB’s wide-ranging revenue recognition accounting standard [ASU 2014-09, Revenue from Contracts with Customers (Topic 606)]. Under the standard, companies must consider commission income and fees, including fees from investment banking and asset management services if they are broker-dealers. The recognition and measurement of revenue is based on the assessment of individual contract terms. The AICPA’s working draft offers examples of how to assess brokerage commissions, distribution fees, and underwriting fees, among other topics specific to broker-dealers. If finalized, the guidance will be included in the 2019 print edition of the AICPA’s Guide for Brokers and Dealers in Securities as well as the final version of the AICPA’s Audit and Accounting Guide (AAG): Revenue Recognition. Comments on the draft are due by March 4.