Proposal Raises Red Flags Over Definition of Joint Venture
FASB may need to revise the definition of a joint venture in order for its related October 2022 proposal to effectively work with its accompanying rules, some companies said in comment letters. The proposal was issued to provide specific accounting rules where there are currently none in U.S. GAAP for joint business ventures—working partnerships that are popular in the technology sector where new products are often developed jointly. But the guidance would apply only to entities that meet the definition of a joint venture or a corporate joint venture in the FASB’s Master Glossary as of their formation date. “The proposed amendments define the formation date as the date an entity initially meets the definition of a joint venture. We believe this definition is subject to interpretation and could be refined,” Mary-Lee Stillwell, Vice President–Accounting & External Reporting at Verizon Communications, said in a December 21, 2022 letter. Three of the Big Four accounting firms also made similar remarks in their letters. The board plans to redeliberate the proposal this year based on the feedback.
Global ESG Rulemaker Establishes Office in Beijing
The International Sustainability Standards Board (ISSB) will open an office in Beijing next year, Trustees of the IFRS Foundation announced on December 29, 2022. The foundation said it signed a Memorandum of Understanding (MoU) with the Ministry of Finance of China to establish the Beijing office, effective mid-2023. The agreement is for an initial three-year period. The MoU comes amid goals for a global and multi-national ISSB presence. A similar agreement was also signed earlier this year with Canada in order to establish a Montreal hub. “When we announced the ISSB at COP26, we confirmed the new board would have a global presence through a multi-location model,” Trustee Chair Erkki Liikanen said in a statement. “The announcement of the Beijing office is an important step towards the establishment of our global footprint in the ISSB’s inaugural year,” he said. “I would like to thank our Chinese colleagues for their commitment to the work of the ISSB and look forward to the successful opening of the office in 2023.” The Beijing office will work in collaboration and cooperation with other IFRS Foundation offices around the globe, according to the announcement. Staff will be focused on “leading and executing the ISSB’s strategy for emerging and developing economies, acting as a hub for stakeholder engagement in Asia, facilitating deeper co-operation and engagement with stakeholders, and undertaking capacity-building activities for emerging economies, developing countries and SMEs.”
Technical Q&A on Ethics Provisions Updated
The AICPA added several technical questions and answers (TQA) related to ethics issues, among other updates made in late December 2022.
The AICPA added TQA Section 10,” Definitions,” which included the following items:
- TQA section 10.01, “Examples of a Compliance Audit”
- TQA section 10.02, “Multiple Compliance Audit Clients”
- TQA section 10.03, “Trivial and Clearly Inconsequential”
- TQA section 10.04, “Changes in the Entities That Are the Compliance Audit Clients”
- TQA section 10.05, “Using the Conceptual Framework in a Compliance Audit”
- TQA section 10.06, “Evaluating Independence When Performing a Financial Statement Audit and a Compliance Audit for the Same Client”
For example, TQA section 10.01 asks for some examples of a compliance audit. The technical guide responds that a compliance audit is attest work performed following AU-C section 935, “Compliance Audits.” This standard includes separate reporting under AU-C section 725, “Supplementary Information in Relation to the Financial Statements as a Whole” or AU-C section 805, “Special Considerations—Audits of Single Financial Statements and Specific Elements, Accounts, or Items of a Financial Statement.”