FASB News
Proposal to Clarify 34 Narrow Accounting Issues
In a move aimed at bringing greater accuracy to financial reporting, FASB voted on September 18 to issue a proposal clarifying 34 narrow issues in U.S. accounting rules, including earnings per share (EPS) and credit losses. Currently, when a company reports a loss from continuing operations, no potential common shares are included in the denominator of a diluted EPS calculation. The proposed change would involve evaluating the combined impact of adjustments to both the numerator and denominator, meaning that basic EPS would not always be the same as diluted EPS when a loss exists. The board agreed to amend the Accounting Standards Codification to reduce inconsistencies in financial reporting, allowing companies to report financial information in a more consistent and accurate manner. The proposal will be issued in December with a 90-day comment period. FASB Chair Richard Jones praised the collaborative effort that went into addressing the topics, noting that “a lot of work went into this from both our team and the people who had the care to raise these issues to us.”
IASB News
Project to Address Amortized Cost Accounting Complexities
The IASB has advanced its project aimed at tackling issues related to amortized cost accounting, a key measurement method used for certain financial assets and liabilities, primarily debt instruments. On September 17, the board defined the direction and scope of a new project, officially moving it from the research phase to the active work plan. The project would introduce targeted revisions to International Financial Reporting Standard (IFRS) 9, Financial Instruments, related to amortizing cost accounting, rather than a fundamental review or disclosure-only changes, according to the discussions. It would clarify requirements, eliminate inconsistencies, and preserve the overall effectiveness of the standard. The IASB’s decision to launch the project stems from feedback received during post-implementation reviews (PIR) of IFRS 9. While the PIR found the standard to be generally effective, stakeholders have raised application questions and accounting challenges related to the amortized cost measurement requirements, particularly concerning the effective interest method and the modification of financial instruments, including modifications that lead to the derecognition and write-off of financial assets. “IFRS 9 works well overall based on feedback from post-implementation reviews,” noted IASB member Anne Tarca. “A targeted approach makes sense to address specific application questions, similar to our equity method project.”
PCAOB News
Guidance Coming for Auditors to Implement Quality Control Standards
Now that the PCAOB’s new quality control (QC) standard will go into effect in December 2025, following its approval by the SEC on September 9, a senior PCAOB official said that the board will start to engage with accounting firms to help auditors implement the new standard. This was in response to a question at a conference about what guidance the PCAOB intends to provide on the adoption of new auditing standards, in particular QC 1000, by Barbara Vanich, chief auditor of the PCAOB. In addition to QC 1000, the SEC in August also approved two additional PCAOB standards and one rule: contributory liability; Auditing Standard 1000, General Responsibilities of the Auditor in Conducting an Audit; and aspects of designing and performing audit procedures that involve technology-assisted analysis of information in electronic form. According to Vanich, the type of guidance the PCAOB intends to provide “depends, right? Not all standards are created the same,” she said at the AICPA’s banking conference on September 10 in National Harbor, Maryland. “Not all of them probably need as much guidance as others. QC 1000 is probably a special animal where I anticipate we would put out more guidance,” Vanich continued. “We will, now that the standard is approved, start to engage with firms some through your monthly or quarterly inspection meetings to understand the status of implementation, to understand what questions you might have.”
