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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.”
Simplifications to share-based payments and debt accounting considered.
Standards setters plan to tweak narrow areas of the stock compensation and debt accounting guidance, according to an agenda released by FASB on July 25. FASB will determine whether to draft final rules on a March 2019 proposal aimed at providing consistency to reporting share-based payments made to customers. The proposed changes would require companies to measure share-based payment awards issued to customers at the grant date of the award, a clarification that would remove any confusion and provide consistent reporting on the issue. The guidance has been viewed by some companies as costly and complex. The board received 12 comment letters on the changes, issued under proposed Accounting Standards Update (ASU) 2019-400, “Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements—Share-Based Consideration Payable to a Customer.”
Clarification proposed on transitioning to rules for small and midsized companies.
On August 7, the IFRS Foundation released a draft question-and-answer (Q&A) document to clarify the application of the undue cost or effort exemption for investment property on the date a company transitions to the IFRS for SMEs (small- and medium-sized entities); the guidance is tailored to fit the reporting needs of small and midsized companies. The document addresses “if an entity bases its assessment of whether, at the date of transition, an investment property can be measured reliably at fair value without undue cost or effort on information about the costs and benefits at the date of transition to the IFRS for SMEs Standard or the costs and benefits at the date when preparing the first IFRS for SMEs financial statements,” the main text states. The Q&A concludes that additional cost or effort due to the elapse of time between the date of transition and the date of preparing the first IFRS for SMEs financial statements is not considered. The foundation is seeking comments by October 7.
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 standards 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 standards 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 it. The exposure draft said the attestation standards 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.