‘Last-of-Layer’ Hedging Renamed, Expanded Model Proposed

FASB said it changed the name “last-of-layer” to the “portfolio layer” hedging method, and will propose expanding the accounting model that was introduced about four years ago. Specifically, the current single-layer model will be expanded to a multiple-layer hedge accounting model, according to board discussions. The guidance will be proposed for public comment later in the spring. A multiple-layer model would more closely align hedge accounting with an entity’s risk management activities, which would in turn provide better information to financial statement users, board members said. The proposal would allow banks and financial institutions to reclassify debt securities from held to maturity (HTM) to available for sale (AFS) in transition if the reclassified securities would qualify for the portfolio layer method. “All we’re doing is keeping in line with what Sarbanes-Oxley requires us to do, as the business environment changes we must think about the implications of those changes in accounting,” FASB member Harold Schroeder said.


Extension to Virus-Related Rent Concession Rules Published

The IASB has published an extension to the application period for COVID-19-related rent concession accounting rules to next year. Under the change, the period for applying the amendments to concessions that reduce rent payments is extended by one year to June 30, 2022. Board members Nick Anderson and Zachary Gast dissented on the change because they are concerned it would hinder comparability and be counterproductive to the needs of financial statement users. The original amendment, issued in May 2020, was intended to make it easier for lessees to account for COVID-19-related rent concessions, such as rent holidays and temporary rent reductions, with the goal of continuing to provide useful information about their leases to investors. The board gave the extension after considering the ongoing significant effects of the pandemic and with support from most investors.


2021 Edition of Audit and Accounting Guide for Revenue Recognition Issued

The AICPA has published the 2021 edition of the Audit and Accounting Guide (AAG) for Revenue Recognition (AAG-REV). FASB’s Topic 606 erased about 180 pieces of industry-specific revenue guidance in U.S. GAAP and provides a principles-based, five-step process by which businesses must calculate the top line in their income statements. It also requires new disclosures, such as qualitative and quantitative information about revenue recognized from contracts with customers and significant judgments and changes in judgments. “Revenue Recognition (AAG-REV) FASB ASC 606, Revenue from Contracts with Customers, replaced most existing revenue recognition guidance and brought unprecedented challenges for private companies in 2020,” the AICPA said. “This guide will help preparers and auditors unravel the complexities of the new standard and avoid areas of concern as they continue working to meet the requirements of this complex standard.”

The AICPA said that AAG-REV addresses the following areas:

  • Aerospace and Defense
  • Airlines
  • Asset Management
  • Broker-Dealers
  • Construction Contractors
  • Gaming
  • Health Care
  • Insurance
  • Not-for-Profits
  • Oil and Gas
  • Power and Utility
  • Software
  • Telecommunications
  • Timeshare