Clarified Rules for Reporting Cloud Computing, Subscription-Based IT Arrangements
GASB issued new accounting rules on June 5 to clarify how to report cloud computing and other subscription-based forms of software arrangements, use of which have skyrocketed among state and local governments. Governmental entities have been shifting from traditional information technology (IT) based on a purchasing and perpetual licensing model to cloud computing and similar arrangements. The new rules will bring more uniformity to financial reporting in that area, a text of the statement explains. The standard takes effect for fiscal years beginning after June 15, 2022, a year later than the board proposed. The extension was provided in order to give state and local governments more time to deal with circumstances arising from the COVID-19 pandemic, the board said. Early application is encouraged.
IFRS Interpretations Committee to Discuss Supply Chain Financing, Other Topics
On June 16, the IFRS Interpretations Committee will determine its next steps regarding disclosure and presentation reporting issues arising from supply chain financing arrangements—a process that enables buyers and sellers to minimize risk across a supply chain. Committee discussions on supply chain financing started in April following a company’s request to clarify a matter related to the presentation and disclosure of reverse factoring arrangements, according to a board handout published on June 5. The panel has been studying how an entity presents its obligations to which reverse factoring arrangements relate, and what to disclose in financial statements about reverse factoring arrangements. Separately, the committee will discuss the feedback it received on its published tentative agenda decision in response to a submission on International Accounting Standard (IAS) 12, Income Taxes.
Broad Support to Build on International Approach to Revise Quality Control Standards
The PCAOB has received broad support to build upon a proposed approach taken by an international standards-setter to update the board’s audit quality control (QC) standards. A firm’s quality control deals with its system of employee training and compliance with professional standards and its standards of quality. The regulatory board believes that strong quality controls are important to audit quality, and for the past several years the board has been researching the standards to determine if they need to be updated as the inspections staff has continued to find deficiencies in audit engagements as well as problems in firms’ quality control systems in certain areas. Currently, the PCAOB uses the AICPA’s quality control standards issued in 1997 when the board did not exist. The audit environment has changed dramatically since then, especially with advances in technology. “There is no need to reinvent the wheel; the existing International Auditing and Assurance Standards Board’s (IAASB) standards, when complete, will represent a good starting point for the PCAOB that can be tailored to fit the specific needs of the U.S. market,” wrote Marcie Frost, CEO of the California Public Employees’ Retirement System (CalPERS). “Many accounting firms are multi-national organizations using world-wide auditing practices and are already familiar with the IAASB standards which will ease the transition.”