One New Standard and Three Proposals Expected this Quarter
FASB plans to issue one new standard and three proposals by the end of this reporting quarter, according to its February 2 technical agenda. The provisions will be the first set of GAAP-related documents to come from the board this year. Specifically, the board will issue, in either February or March, a new accounting standard on investments in tax credit structures. The guidance will extend a simple accounting approach that today is limited to low-income housing tax credit (LIHTC) investments to other federal tax credit programs that attract tax equity investments. The rules will take effect next year for public companies. Two of the three proposals are set for publication by the end of March: accounting for and disclosure of crypto assets that are fungible and deemed to be intangible assets; and disclosure rules about income taxes companies pay in the U.S. and in foreign countries. Companies will have 75 days to comment on each of the proposals.
Accounting Standards Advisory Forum to Discuss International Tax Reform
The Accounting Standards Advisory Forum (ASAF), a panel of national and regional accounting standard-setters, will meet on February 10 to discuss the sole topic of international tax reform rules, according to IASB meeting papers. The panel, which typically discusses a list of various accounting topics, will focus only on reporting around Pillar Two model rules, provisions that provide a template for the implementation of a minimum corporate tax rate of 15% that large multinational companies would pay on income generated in each jurisdiction in which they operate. The discussions come as some countries are expected to enact the tax rules as early as the first half of 2023, but questions have been raised about the implications for IASB tax accounting standards, the papers explain. ASAF members will discuss the implementation of the Pillar Two model rules in their countries or jurisdictions and clarify any questions they may have about the IASB’s exposure draft 2023-1, “International Tax Reform—Pillar Two Model Rules Proposed amendments to IAS 12,” issued in January. Pillar Two model rules were published in December 2021 by the Organisation for Economic Co-operation and Development (OECD) as part of a two-pillar solution to address the tax challenges arising from the digitalization of the economy. CPAs have expressed concerns about how a company would account for the top-up tax arising from the Pillar Two model rules and the usefulness of the information that could result from accounting for deferred taxes related to top-up tax. Commenters have also stressed the urgent need for clarity in the light of the imminent enactment of tax law to implement the rules in some jurisdictions.
Auditing Standards Board Finalizes Proposed Group Audits Standard
The AICPA’s Auditing Standards Board (ASB) voted to finalize its proposal on group audits during a video meeting held on January 30/31. The board finalized—with some changes—“Proposed Statement on Auditing Standards (SAS), Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors and Audits of Referred-to-Auditors),” which was issued in March 2022. The AICPA is preparing to issue SAS 149, which will supersede SAS 122, “Statements on Auditing Standards: Clarification and Recodification, as amended, section 600, Special Considerations, Audits of Group Financial Statements (Including the Work of Component Auditors),” according to Ahava Goldman, an associate director with the Association of International Certified Professional Accountants. “The most significant change introduced by SAS 149 is that it provides a risk-based approach to planning and performing a group audit,” noted Goldman, who is the staff liaison for the ASB. According to a January 2023 draft of the standard, the “determination is based on the group auditor’s understanding of the group and its environment, and other factors such as the ability to perform audit procedures centrally, the presence of shared service centers, or the existence of common information systems and controls.” In particular, the draft standard notes that the determination of significant risks allows auditors to pay more attention on those risks that are close to the upper end of the spectrum of inherent risk. When SAS 149 is issued, it will be effective for audits of group financial statements for periods ending on or after Dec. 15, 2026.