Small Private Construction Companies Not Complying With New Revenue Rules
Small private companies in the construction sector appear oblivious to the fact that revenue recognition rules have changed and have been using old rules to report earnings, according to Dec. 16 Private Company Council (PCC) discussions. Some companies have been claiming compliance with ASC Topic 606, Revenue from Contracts with Customers, but in fact have not complied with the rules. “This comes down to the smaller firms, who I just don’t believe they understand they are following the standard. We’ve had to go back a couple of times and say ‘you did the statement, it’s not correct, it’s not a GAAP statement you’re following the old guidance and either reject or have them redo the statements,’” said David Pesce, head of surety at Munich Re Specialty Insurance. “Disclosures are missing; items are missing; items are classified incorrectly. In the construction world we see it especially in over billings, under billings and retainage and how those are accounted for and noted and so I think there is a lack of understanding of how to actually implement the 606 requirements at the small firm level. [At] the large firm level and even at the medium firms we see it very well applied.” Topic 606 was issued in 2014 to replace hundreds of pieces of industry-specific accounting guidance with a principles-based, five-step model for reporting revenues earned. The standard, after being deferred, took effect for calendar year-end filers in 2018 for public companies and a year later for private companies. In 2020, private companies who had not yet adopted the rules got a third deferral to annual periods beginning after Dec. 15, 2019 and interim reporting periods within annual reporting periods beginning after Dec. 15, 2020.
Former Chair of Canadian Accounting Standards Board appointed IASB Vice Chair
Linda Mezon-Hutter, former chair of the Canadian Accounting Standards Board, will take up the post of vice chair of the IASB on January 1, 2023, trustees of the IFRS Foundation announced. The IASB is a 14-member board that develops IFRS Accounting Standards for more than 140 jurisdictions worldwide. Mezon-Hutter joined the IASB in September 2022 as a board member. “Linda brings a wealth of experience and is highly regarded in the accounting standard-setting community,” Trustee Chair Erkki Liikanen said in a statement. “Having served as chair of the Canadian accounting standard-setter for nine years, she has demonstrated strong leadership skills which are also vital for her new role on the IASB.” Mezon-Hutter has served as chair of the Canadian Accounting Standards Board (AcSB) since 2013. During her tenure, the AcSB made changes to enhance its effectiveness and efficiency, according to the announcement. She also worked closely with the IASB and standard-setters around the world as the Canadian representative on the Accounting Standards Advisory Forum (ASAF). Mezon-Hutter also participated in the IFRS Foundation’s annual World Standard-Setters Conference and the International Forum of Accounting Standard Setters. Before serving as chair of the AcSB, Mezon-Hutter gained extensive executive experience working in senior financial positions in various industries, including as chief accountant at the Royal Bank of Canada where she was responsible for the interpretation and application of IFRS Accounting Standards and U.S. GAAP.
ISSB Mulling Rules for Biodiversity, Human Capital, Human Rights
On December 14, the International Sustainability Standards Board (ISSB) narrowed its list of potential new standards-setting work to four topics, including biodiversity, human capital and human rights. The board is also aiming to work with the IASB, the body that develops IFRS, on connectivity in reporting with respect to management commentary and integrated reporting, according to the discussions. Next year, companies will get to weigh in on a Request-for-Information (RFI), which will be issued to solicit public input about whether those topics or others should be added to its technical or research agendas. Investors “have set out why they need better insights into biodiversity and ecosystem services that our global economy relies on, such as air and water purification, the provision of raw materials, and pest and flood control,” ISSB Chair Emmanuel Faber said. “Biodiversity underpins all human activities, including business, and as such has substantial implications for market participants,” he said. “As we work relentlessly to deliver a global baseline of sustainability-related disclosures that meet capital markets’ needs, comprehensive biodiversity disclosure will be key.”