IRS issues temporary regulations on erroneous refunds of COVID-19 credits.
The IRS has issued temporary regulations for reconciling advance payments of refundable employment tax credits provided under the Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and recapturing the benefit of the credits when necessary. The determination of any amount of credits erroneously refunded must take into account any credit amounts advanced to an employer under the process established by the IRS. The temporary regulations apply to all credit refunds under section 7001 and 7003 of the Families First Act advanced or paid on or after April 1, 2020 and all credit refunds under section 2301 of the CARES Act advanced or paid on or after March 13, 2020.
IRS recording of power of attorney appointments delayed due to COVID-19.
The IRS has said that recording information about third parties appointed under a power of attorney into its Centralized Authorization File (CAF) is currently taking about 15 business days, rather than five business days, due to COVID-19. The IRS has established a CAF into which information regarding the authority of persons appointed under a power of attorney is recorded. The IRS says that taxpayers should consider the additional time and plan accordingly. It also requests that taxpayers not submit duplicate authorizations, as these will only cause further delays.
Investor advocates push back for disclosures of customer accounts.
Some commenters hope FASB will rethink its July 29 decision not to add a disclosure project about companies’ customer accounts, work they said would provide investors with better information about a company’s future cash flows. New rules would compel senior executives to have more of a customer-focused business approach, as opposed to a short-term profit approach pump up stock prices, investor advocates said on August 7. “It is to get the rules changed about disclosures so that the information companies disclose is reliable and serves the purpose of informing investors, and ultimately so that leadership teams—CEOs, boards, senior management—feel accountable for growing the value of the customer base, not just pumping up a stock price,” said Rob Markey, vice president, Bain & Company, Inc. Currently, GAAP does not require the quality and quantity of customer relationships to be disclosed.
Simpler rules for convertible instruments, own equity.
On August 5, FASB issued new rules to simplify the accounting for convertible instruments and contracts in an entity’s own equity. Though narrower than initially proposed, the board believes the changes will provide investors with more comparable information that is easier to understand. “The ASU is an important step in simplifying a complex area of accounting guidance that has been a frequent source of financial statement restatements,” FASB Vice Chairman James Kroeker said in a statement. “We expect it to improve comparability of information for financial statement users and reduce cost and complexity for preparers and auditors.” For large public companies, the rules are effective for fiscal years beginning after December 15, 2021.
Auditing Standards Board expected to issue proposal revising risk assessment standards.
The AICPA’s Auditing Standards Board (ASB) has voted to issue a proposal that would revise its audit standards related to risk assessment. The board wants to revise AU-C Section 315, Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and its Environment, so auditors would gain a better understanding of direct and indirect components of internal controls over financial reporting (ICFR) and the work required based on each component. “The proposed SAS [Statement on Auditing Standards] is intended to enhance auditors’ ability to appropriately understand the entity’s system of internal control, in particular relating to the auditor’s work effort to obtain the necessary understanding and determine significant risks, and modernize the standard in relation to information technology considerations, including addressing risks arising from entity’s use of IT,” according to Ahava Goldman, associate director for audit and attest standards with the AICPA.
What are audit committee chairs discussing during COVID-19?
The risks of teleworking was the most prevalent topic of discussion among many audit committee chairs of public companies about the impact of COVID-19. This is based on the PCAOB’s discussions with audit committee chairs on July 31. The board issued “Conversations with Audit Committee Chairs: COVID-19 and the Audit,” as a summary document. “The transition to an almost entirely remote workforce for both issuer personnel and the external auditors was rapid, but most audit committee chairs stated that the transition was effective,” a PCAOB guide noted. “Specifically, many noted that internal control over financial reporting (ICFR) was managed, maintained, or adjusted as necessary.” The PCAOB added that the effect of the COVID-19 crisis has varied by company and industry. Some audit committee chairs said the impact has not been significant so far, while others said it was greater than they initially anticipated.