Private Company Council to Mull Project on Distinguishing Liabilities from Equity
The Private Company Council (PCC) will consider whether it is feasible to find a narrow way to address complex rules on liabilities with characteristics of equity, a project the FASB recently dropped from its technical agenda. “It is very complex, but we might be able to find some narrow areas where we could maybe [provide] help for the private company stakeholder group,” PCC Chair Candace Wright said during April 21 discussions. “It’s something that we’ll definitely consider and talk about at a future meeting.” The PCC was established in 2012 to work with the FASB to develop GAAP modifications for private companies. If FASB rejects a PCC decision, it has to do so in writing and explain why. So far, one PCC member signaled the topic would be a tough one for the panel to address, stating there is no quick and easy fix. FASB staff “did reach out to me, perhaps a month ago or so—we spent about 45 minutes to an hour to brainstorm the various options and propose solutions on the various branches in the current model,” said Yan Zhang, a partner at EisnerAmper LLP. “At the end of the discussion, I think we all sort of scratched our heads and said it’s really hard to get to any simplification after the discussion—it’s just a very complicated area; there’s not going to be a quick easy fix.”
ASB to Vote on Final Quality Management Rules
The AICPA’s Auditing Standards Board (ASB) is scheduled to vote to issue final quality management standards during a meeting on May 11–12. The board has been discussing feedback in response to its February 2021 exposure draft (ED) “Proposed Quality Management Standards,” which introduces a new proactive risk-based approach. The proposal deals with an audit firm’s system of employee training and compliance with professional standards and its standards of quality. The ASB believes it will improve the scalability of the standards and promote a quality management system that is tailored to the firm and its engagements. Before voting, the board will discuss a matter related to documentation by the engagement quality reviewer (EQR), brought up by the U.S. Government Accountability Office (GAO), according to a discussion paper prepared ahead of the meeting.
Proposal to Amend Disclosure Rules for SMEs Discussed
The IASB plans to propose amending disclosure rules in 16 sections of the IFRS for SMEs (Small and Medium-sized Entities) guidance, according to April 27 board discussions. The proposed disclosures would include areas related to financial instruments and exploration and evaluation of mineral resources. IFRS for SMEs is a package of rules for private companies that publish general purpose financial statements for external users. More than 80 countries, including the United States, permit the use of IFRS for SMEs. The board has been discussing a proposal on its second comprehensive review of the SME standard, including changes to rules on recognition and measurement. The proposed disclosures would carry a flexible principle that could allow disclosures to be aligned or partially aligned with those decisions, board discussions indicated.