Recognition of Acquired Liabilities in Customer Contracts Moved to Research Agenda
On July 31, FASB removed a project from the Emerging Issues Task Force’s (EITF) agenda about the recognition of an assumed liability from revenue contracts in a business combination and subsumed it into its current research on measuring those contracts. The board said more research was necessary on the topic after companies submitted mixed responses to an invitation to comment and the EITF did not affirm its preliminary consensus on a related proposal. “There is an inconsistency between timing of cash flows, and I think there’s also now a bigger question about variable consideration and its treatment in business combinations in terms of its alignment with the theory,” FASB Vice Chairman James Kroeker said during the meeting. “Once you identify an issue like this, it’s hard to put the toothpaste back in the tube. People start to ask those questions, whether it’s in a regulatory review or otherwise. We are now aware of the issue, we’re aware it creates the potential for diversity or inconsistency.”
More Changes Planned for Hedge Accounting Rules
Companies in sectors such as food and agribusiness, oil and gas, insurance, and banking—many of which utilize hedge accounting rules—should watch for a narrow-scope proposal that FASB plans to issue this year to amend the hedging rules in the codification literature. The board voted at its July 31 meeting to issue a proposal aimed at clarifying issues accountants raised after applying new hedge accounting rules that took effect this year for public companies. If finalized, the changes would be effective for all companies’ fiscal years beginning after December 15, 2020. For public companies, they would be effective for interim periods within fiscal years beginning after December 15, 2020; for all other entities, they would be effective for interim periods within fiscal years beginning after December 15, 2021.
Auditing Standards Board Moves Closer to Finalizing Attestation Standards
The AICPA’s Auditing Standards Board (ASB) ironed out the remaining issues in its effort to change its attestation standards during a meeting in late July 2019. If finalized, the standard will supersede AT-C section 105, “Concepts Common to All Attestation Engagements”; AT-C section 205, “Examination Engagements”; AT-C section 210, “Review Engagements”; and AT-C section 215, “Agreed-Upon Procedures Engagements.” Most significantly, the standard will allow an accountant to report on the information being measured or evaluated without obtaining a written assertion that the information complies with an underlying criterion, such as a law or regulation, from the party that is responsible for the it. The exposure draft said the attestation standard can be applied to many types of information, such as a statement about greenhouse gas emissions or the effectiveness of the controls for the security of a system. The ASB will vote in October to finalize the revisions.