FASB Weighs Linkage of Debt Arrangements

At its March 20 meeting, FASB continued to discuss its proposal to simplify the classification of debt on the balance sheet, which will enable investors to assess a company’s overall financial health. Proponents claim that FASB’s proposed changes will help companies show a more accurate and stable financial position. The board’s staff has been researching the underlying economics of and the markets for those arrangements following its January 2019 discussions. The staff also researched illustrative examples related to unused long-term financing arrangements, according to the board’s prior discussions. FASB has raised the topic with some of its advisers; members of FASB’s Not-for-Profit Advisory Committee (NAC), for example, told the board on March 4 that they prefer linking the arrangements if specific criteria are met. The linkage is more relevant to financial statement users because it better reflects the underlying economics of the redeemable debt arrangement, NAC members said. FASB staff will work on revising the proposed standard, to be released for public comment.

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Cesario, Lafond Appointed to Small Business Advisory Committee

FASB has added two chief financial officers (CFO) to its Small Business Advisory Committee (SBAC), its body of advisors on small public company issues. On March 14, the board said Frank Cesario, CFO of CTI Industries Corp., and Christopher Lafond, CFO of Insurity, had joined its 15-member advisory committee. The next SBAC meeting will take place on May 2. Cesario and Lafond will “bring valuable perspectives to the SBAC and its mission to provide the FASB with input on issues of importance to small public companies,” FASB Chairman Russell Golden said. The SBAC provides focused input and feedback to FASB from a small public company perspective. It also assists FASB and its staff on matters for which the board may seek guidance.


Staff Guide Explains Key Areas of Inspections in 2019 for Audit Committees

On March 14, the PCAOB published a staff guide, the 2019 Inspections Outlook for Audit Committees, to better inform public company audit committees about the board’s key areas of focus for 2019 audit inspections. The guide is part of the board’s effort to communicate more frequently with relevant stakeholders such as audit committees and investors. It is also part of the PCAOB’s new strategic plan, which was finalized late last year and lays out a broad outline of the board’s long-term priorities and goals. The board has always had five-year plans, but when he became PCAOB Chairman in January 2018, William Duhnke said he wanted to take a fresh look at every aspect of the board. As part of that review, members of audit committees said they want more outreach from the board to learn and understand what the PCAOB does, for example, to improve audit quality. In its 2019 cycle, the inspections staff is focusing on technological developments, audit firms’ systems of quality control, and audit procedures on new accounting standards, among other areas of focus. “In addition to required communications from their auditors, audit committees may—at their discretion—choose to further engage with their auditors on current issues of inspection focus as they work to positively affect audit quality in those areas,” the guide states.