FASB News
Investors Urge Movement on Government Assistance Project
FASB should move ahead with its work to provide accounting disclosure rules around government assistance companies receive—but with a broader scope to include more items, according to the board’s Investor Advisory Committee (IAC). The definition of government assistance should be kept broad, Nichole Burnap, who spoke on IAC’s behalf, told the board during a virtual meeting on November 10. It should “include tax concessions, tax incentives, below market government contracts, and below market interest rates, among other things, to provide investors with additional color to help determine the sustainability of earnings,” she said. The remarks were part of a slew of updates the IAC provided FASB regarding topics investors were interested in. FASB member Harold Schroeder observed that there is a fairly long list of items that fall under government assistance, including federal taxes, state taxes, property taxes, and employment taxes. “And the list goes on and on. How would you scope that?” he asked. “More information is better. Knowing there’s a property tax concession is very important. All of those things you listed I would be interested in,” said Burnap, a director of accounting research at Glenview Capital. “An example that I know of in GAAP is when a U.S. company has a foreign tax abatement. The benefit of that is actually disclosed in a rate footnote.”
Joint Educational Discussions Held on Virus-Response, Other Matters
FASB and the IASB will hold joint virtual discussions on November 19 regarding their responses to the COVID-19 crisis and on mutual projects related to goodwill, leases, and supply chain financing arrangements. The meeting is for educational purposes only, the boards said. The boards have been monitoring the application challenges companies have faced with respect to COVID-19 to determine whether the accounting standards hold up. The IASB found that IFRS standards are generally working well, and where necessary and appropriate, targeted, urgent action was taken in line with the board’s due process, according to a board handout, released on November 6. One of the most common challenges companies raised involved developing assumptions in times of heightened uncertainty. Companies find estimating items in the financial statements to be challenging, and the current crisis highlights the need for reasonable and supportable information at the reporting date, developed through a robust process, with transparent and relevant disclosure, the handout states. Application challenges also surrounded the basis of accounting to use when an entity is no longer a going concern and the sufficiency of disclosure requirements in IFRS Standards. Presentation of the effects of COVID-19, impairment testing, and subsequent events were also flagged for discussion.
PCAOB News
Guide to Highlight Audit Inspection Observations During Pandemic Coming Soon
The PCAOB will soon publish a spotlight document to highlight what its inspectors have observed in June 30, 2020, year-end audits. This is intended to get a better grip on how auditors have been performing during the COVID-19 pandemic, according to board member Duane DesParte. Efforts to contain the virus have led many people to work remotely since March. This means that much, if not all, of audits have been done virtually, presenting some challenges in performing certain procedures such as inventory counts. Moreover, many companies have suffered significant financial losses, because much economic activity was halted in the spring. This economic downturn and uncertainty has made it even more important for auditors to closely scrutinize companies’ financial reporting for accuracy and fairness. In response, DesParte said that the PCAOB decided to change its normal inspection schedule this year. “The 2020 inspections for the first time, we included a sampling of June 30, 2020, year-end audits; usually, they would not be looked at until the next cycle in 2021. We usually cut off at March 31,” DesParte said. “But given June 30th was where the pandemic most starting to come to play with year-ends … we wanted to get in early to start to see what issues auditors might be facing, what preparers might be facing.”
