No Need to Amend 2020 Returns for Unemployment Exclusion.
The IRS has announced that taxpayers who already filed their 2020 individual tax return without taking advantage of the 2020 unemployment benefit exclusion do not need to file an amended return to take advantage. The American Rescue Plan Act of 2021 (ARPA), which wasn’t signed into law until March 11, 2021, provides that, for taxpayers whose 2020 modified AGI is less than $150,000, the first $10,200 of unemployment compensation received in 2020 is not included in the taxpayer’s 2020 gross income. In the case of a joint return, the first $10,200 per spouse is not included in gross income. While the IRS says an amended form is not needed, it does point out that, in some cases, it will be beneficial for taxpayers who didn’t take advantage of the exclusion to file an amended 2020 return.
Special Meeting on Board’s Five-Year Agenda.
The Financial Accounting Standards Advisory Council (FASAC), FASB’s main advisory body, held a special session on April 8 to drill down on accounting projects the board should consider during the next five years. The meeting will help shape an agenda consultation document the board plans to issue mid-year for public comment about financial reporting agenda topics, and how to prioritize them. FASB consults on its agenda every five years to set up its long-term work program. The last document of this ilk was issued in 2016. The board has been reaching out to other groups and advisory bodies about potential accounting topics that could be floated in the forthcoming consultation document. During its March 11 meeting, the board’s Emerging Issues Task Force (EITF) suggested the board consider software development as a project because current accounting rules have not kept pace with innovation. The EITF also suggested that guidance was needed in the following areas: preferred stock; secondary stock sales; acquisition accounting and disclosures; cryptocurrencies; recognition rules for government assistance (excluding taxes) for when a government gives money or provides resources to a company; and taxes related to asset acquisitions.
FASB Renames ‘Last-of-Layer’ Hedging, to Propose Expanded Model.
FASB said it changed the name of the “last-of-layer” method 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 in either late April or early June, for 60 days. 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.
Substantial Turnover Underway.
The IFRS Foundation said it is seeking four candidates to fill seats this year and next on the IASB, the accounting body that develops international financial reporting standards. The foundation is seeking two IASB members from Europe to start from June 30, 2021, and two from the Americas to start April 1 and July 1, 2022, respectively. The initial appointments are for a five-year term and can be reappointed to a second term for at least three more years. Applications should be received by June 30, the foundation said. The IASB comprises 13 members including the chairman. Current Chair Hans Hoogervorst will vacate that seat at the end of June due to term limits. Incoming chair Andreas Barckow will be the third person to hold the chair post since the board’s inception in 2001. By next year, under Barckow, most of the IASB will comprise new members or relatively recently appointed members. The turnover comes at a time when the IASB is also seeking to establish its new five-year work program for 2022 to 2026.
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.
PCAOB outlines audit inspection changes for 2021.
The PCAOB outlined some changes to its audit inspections for the 2021 cycle in a new document published on April 6. “We developed our 2021 inspection plans with two primary objectives: (1) respond to the financial reporting and audit risks posed by the COVID-19 pandemic, and (2) reduce the predictability of our inspections,” according to “Spotlight: Staff Outlook for 2021 Inspections.” The focus on the pandemic comes as efforts to control COVID-19 have had a significant impact on companies, auditors, and audit committees. With this in mind, the PCAOB has designed its 2021 inspection to focus on the effects of the pandemic on public company financial reporting. “We believe this approach will encourage firms to consistently strive for the performance of quality audits on all public companies, and discourage an approach that might only focus on those audits or areas that may be perceived as more likely to be selected for review as part of a PCAOB inspection,” the document stated.
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
- Asset Management
- Construction Contractors
- Oil and Gas
- Power and Utility