Segment Reporting Discussions Continue
On March 10, FASB discussed segment reporting issues, work that ultimately could provide investors with more useful disclosures about the profitability of components within a public company. The board will “continue initial deliberations on developing a principle to disclose the significant segment expenses that the chief operating decision maker is regularly provided,” according to a March 4 board alert. Five issues will be discussed with respect to the disclosure principle. The topic was last discussed by FASB on January 20, with a focus on how to operate the disclosure principle it decided to develop last year for the reporting of significant segment expense categories. The disclosure principle is based on the significant segment expense categories that are regularly provided to the chief operating officer and included in the reported measure of segment profit or loss.
Auditing Standards Board to Discuss Refinements to Proposed Standards on Risk Assessment
The AICPA’s Auditing Standards Board (ASB) met on March 10 to discuss selected issues in a proposal that would revise audit standards. In August 2020, the ASB issued a Proposed Statement on Auditing Standards (SAS), “Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement.” If finalized, it would supersede SAS 122, Statements on Auditing Standards: Clarification and Recodification, as amended; AU-C section 315, “Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and its Environment”; and revise various other AU-C sections. The AICPA said that the proposed standards enhance the requirements and guidance on identifying and assessing risks of material misstatement. In particular, the guidance addresses a company’s system of internal control and information technology. The proposal also revises the definition of significant risk so that auditors will be focused on where the risks lie on a spectrum of inherent risk. It includes new guidance aimed at enhancing the auditor’s professional skepticism. According to a discussion paper prepared ahead of the meeting, comment letters supported the overall objectives of the exposure draft and the general direction of the project. But the letters suggested refinements.
Foundation Advances on Forming International Sustainability Board
The IFRS Foundation said it will issue a proposal to change its constitution in order to establish an international sustainability reporting standards board. The proposal would be issued with a 90-day comment period. A summary analysis of responses received to its 2020 consultation document on whether the board should be formed will be published in tandem with the proposal. Trustees will continue to engage with the IFRS Foundation Monitoring Board and be informed of their views on proposed changes, the foundation said. “The Trustees remain on track to make a final determination about a new board in advance of the November 2021 United Nations COP26 conference, including the detailed analysis of feedback on the requirements for success outlined in the 2020 Consultation and other conditions to be satisfied prior to that consideration.” The effort has also garnered support from the International Organization of Securities Commissions Organisations (IOSCO), the announcement stated. In February, IOSCO publicly stated that it would work with the foundation in developing a plan to establish a new board for setting sustainability reporting standards that meet the needs of the capital markets.