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Streaming entertainment providers back update to accounting for television program costs.
Major players in the on-demand entertainment industry have backed FASB’s proposal to update the accounting for the costs to make a television show to reflect the changing industry. In comment letters, the companies supported the idea of aligning U.S. GAAP guidance on accounting for costs to create “episodic content” with the guidance for the costs to make films. The proposal, crafted by FASB’s Emerging Issues Task Force (EITF), calls on creators of content produced for television and streaming services to use the same accounting for production costs that film-makers follow. The reasoning is that on-demand cable and streaming Internet services have changed how viewers watch network television shows and how the original programming is produced for these services. “We believe the amendments proposed by this ASU would increase consistency in reporting across the industry and greatly streamline operational application,” Hulu wrote in response to the proposal.
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.
Postimplementation review finds engagement quality review standard works well.
The PCAOB’s standard on engagement quality review has worked well, according to the staff’s postimplementation review of the standard. “The evidence indicates that engagement quality reviewers have greater involvement earlier in the audit process, and that audit firms have reassessed their engagement quality review assignment practices,” the PCAOB said in a report published on December 19, 2018. “The staff’s review also provides some evidence of improvements in audit quality after the effective date of AS 1220.” The review also found that the standard did not have significant unintended consequences. “In terms of direct costs, although engagement quality reviewers, on average, spend more time performing their reviews in the post–AS 1220 period, increases in reviewer hours are overall very small relative to average total audit hours and the average total cost of an audit,” the PCAOB said. To conduct the postimplementation review, the PCAOB said the staff analyzed information collected through inspection and enforcement programs, third-party data, and a public request for comment.
Proposed implementation guide addresses questions on fiduciary activities standard.
On January 3, GASB released a proposed implementation guide (Project 3-13) offering answers to questions about its Statement 84, Fiduciary Activities, issued in January 2017. The standard sets guidance for state and local governments managing funds such as pensions, trusts, and custodial funds. It establishes criteria for identifying a fiduciary activity, focusing on the government’s control of the assets involved and the beneficiaries of the managed funds. Comments on the proposal are due February 28. If GASB finalizes the proposed implementation guide, it will become effective for reporting periods beginning after December 15, 2018, with the exception of two pieces of guidance that are also covered in a separate proposed GASB implementation guide (Project 24-16d, Implementation Guidance Update—2019), which GASB released in November. Comments on that guide are due January 31.