FASB’s Special Task Force Will Decide on Convertible Debt-Related Issues in September

An educational session held by  FASB’s Emerging Issues Task Force (EITF) on June 15 signaled that approaches being studied by staff members would likely solve tricky accounting issues that have been raised around induced conversion of convertible debt instruments. No decisions were made. The session provided FASB staff with direction on the viability of potential improvements to the existing induced conversion model in ASC Subtopic 470-20, “Debt—Debt with Conversion and Other Options” for the early settlement of convertible debt instruments. FASB added the project to the EITF’s agenda in April. Staff research could establish an underlying premise to guide the assessment of existing induced conversion guidance so that the rules are consistently amended and applied, according to the discussions. This principle would reduce the need to provide case-by-case implementation guidance and field ad hoc questions for similar issues that have not already bee specifically raised. Two approaches are being studied: a preexisting contract approach and an incremental fair value approach.

Thank you for reading this post, don't forget to subscribe!


Hub Office Opened in Beijing for International ESG Rulemaking Board

The IFRS Foundation said it has established an office in Beijing, China for the International Sustainability Standards Board (ISSB) which will act as “a hub for stakeholder engagement in Asia.” The organization also appointed Zhengwei Zhang as Beijing Office Director and special adviser to ISSB Chair Emmanuel Faber. Zhang was most recently Director-General at the Ministry of Finance of China. He has more than 20 years of leadership experience in international economic and financial cooperation, covering sustainable development, financial stability, and regional economic cooperation and integration. He also has extensive experience in development finance, having worked for the Asian Development Bank, the Asian Infrastructure Investment Bank and other investment institutions. Zhang is a qualified accountant. The ISSB will hold its first meeting in China this year in the week of Nov. 13; on Nov. 17, the IFRS Foundation will also co-host its first sustainability-focused conference there, according to the announcement. The office launch follows the signing of a Memorandum of Understanding (MoU) between the IFRS Foundation and the Ministry of Finance of China in December 2022. The ISSB has had regular engagement with the Ministry of Finance of China through the Jurisdictional Working Group. Through its Ministry of Finance’s Accounting Regulatory Department, China is also represented on the Sustainability Standards Advisory Forum, an advisory body to the ISSB. “We are delighted to work with our Chinese partners to open an office in Beijing,” IFRS Foundation Trustee Chair Erkki Liikanen said in a statement. “China, as the world’s second largest economy and a major component in global supply chains, is an important jurisdiction in enabling the ISSB’s delivery of a global baseline of sustainability disclosures to meet the information needs of investors.”


PCAOB’s Investor Panel Discusses Potential Fixes to Fraud Auditing Standards

Judging from an advisory panel’s discussion on the auditor’s role regarding corporate fraud, it was clear that there was no clear consensus—thus, no easy solution—because of varying views among members of the PCAOB’s Investor Advisory Group (IAG). Currently, the PCAOB has two related but separate projects, and some IAG members questioned whether there should be two projects. First, on the board’s near-term agenda is non-compliance with laws and regulations (NOCLAR); a proposal was issued on June 6. With this project, the board aims to strengthen its standard to require auditors to identify, evaluate and communicate instances of a company’s NOCLAR more proactively. The board’s proposal comes as investor advocates have for years stated that a AICPA standard—renamed as the PCAOB’s Auditing Standards (AS) 2405, Illegal Acts by Clients, has not protected investors. There have been many high-profile frauds that either went undetected or unreported, perhaps because they were outside the scope of an auditor’s responsibility.