Accounting Research Manager^TM

The accounting updates below are provided courtesy of Accounting Research Manager, a subscription service that provides a timely and comprehensive online database of analytical accounting, auditing and SEC information as well as authoritative literature. KnowledgeLeader members are eligible to receive a 15% discount if they would like to subscribe to Accounting Research Manager. Experience the full database by requesting your free trial.

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ACCOUNTING AND SEC HEADLINES:
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Government Grants – FASB Improves Transparency Around Government Grants

The FASB issued Accounting Standards Update (ASU) No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which is expected to increase transparency in financial reporting by requiring business entities to disclose, in notes to their financial statements, information about certain types of government assistance they receive. Examples of such government assistance include cash grants and grants of other assets.

The amendments in the ASU require the following annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy to other accounting guidance such as a grant model within FASB Accounting Standards Codification® Topic 958, Not-for-Profit Entities, or International Accounting Standards (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance:

• Information about the nature of the transactions and the related accounting policy used to account for the transactions;
• The line items on the balance sheet and income statement that are affected by the transactions, and the amounts applicable to each financial statement line item; and
• Significant terms and conditions of the transactions, including commitments and contingencies.

The amendments are effective for all entities within their scope, which excludes not-for-profit entities and employee benefit plans, for financial statements issued for annual periods beginning after December 15, 2021. Early application is permitted.

Leases – FASB Improves Discount Rate Guidance for Lessees

The FASB issued ASU No. 2021-09, Leases (Topic 842): Discount Rate for Lessees That Are Not Public Business Entities. This ASU improves discount rate guidance for lessees that are not public business entities, including private companies, not-for-profit organizations, and employee benefit plans. The amendments should reduce the cost of implementing the lease standard (Topic 842) for those entities while retaining the expected benefits for users of financial statements.

Topic 842 currently provides lessees that are not public business entities with a practical expedient that allows them to make an accounting policy election to use a risk-free rate as the discount rate for all leases. The FASB originally provided this practical expedient to relieve those lessees from the cost and complexity of having to calculate an incremental borrowing rate.

Some private company stakeholders expressed reluctance to use the risk-free rate election for all leases. Those stakeholders noted that a risk-free rate (e.g., a U.S. Treasury rate) is low compared with their expected average incremental borrowing rates, and that using the risk-free rate election could increase an entity’s lease liabilities and right-of-use assets.

To address these concerns, the amendments in the ASU allow lessees that are not public business entities to make the risk-free rate election by class of underlying asset, rather than at the entity-wide level. It also requires that, when the rate implicit in the lease is readily determinable for any individual lease, a lessee use that rate (rather than a risk-free rate or an incremental borrowing rate), regardless of whether it has made the risk-free rate election.

An entity that has not yet adopted Topic 842 as of November 11, 2021, should apply ASU No. 2021-09 to all new and existing leases when the entity first applies Topic 842. An entity that has adopted Topic 842 as of November 11, 2021, should apply ASU No. 2021-09 for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Earlier application is permitted as of the beginning of the fiscal year of adoption.

Checklist – New Edition of Summary Checklist of Recent Authoritative U.S. Accounting Standards Published

We have published a new edition of our Summary Checklist of Recent Authoritative U.S. Accounting Standards. This new edition has been updated to reflect the issuance of ASUs 2021-10 and 2021-09, which are discussed above.

Leases – FASB Decides Against Further Delay of Effective Date of Leases Standard for NFPs and Private Companies

The FASB met on Wednesday, November 10, 2021, and among other topics, considered the issue of further postponement of the effective date for implementation of Accounting Standards Update No. 2016-02, Leases (Topic 842), as amended, and the requirements of Topic 842, Leases.

Given the complexity of the new standard and later, due to implementation issues caused by the pandemic, in November 2019 and June 2020, respectively, the FASB deferred the effective dates of Topic 842 for certain not-for-profit organizations and private companies.

At its November 2021 meeting, the FASB decided against providing a further delay of Topic 842 for private companies and certain not-for-profits, entities within the scope of ASC paragraph 842-10-65-1(b).

ESG – New Edition of GAAP Update Service Discusses ESG Disclosures and the SEC

We have published a new edition of the GAAP Update Service, ESG and SEC Disclosures. This new edition summarizes existing SEC disclosure guidance for public companies related to ESG topics and recent developments. It also provides an overview of issuer and investor comments on the SEC’s request for input on climate change disclosures.

ESG – SEC Commissioner Crenshaw Discusses Internal Accounting Controls and ESG Risks

SEC Commissioner Caroline A. Crenshaw recently discussed internal accounting and controls and ESG risks facing companies today. Crenshaw indicated that “internal accounting controls must be dynamic enough to consider and respond to changes in the markets, such as those posed by ESG issues. Companies have to evolve over time because the market place is constantly changing in response to new developments and challenges. These changes can be prompted by new technology, developments in the global economy, or even by our planet. Change drives innovation for not just corporate America, but investors, consumers and citizens. Change can be a good thing. But as markets change, so do the risks that can impact a company’s financial statements. Corporate internal accounting controls must evolve as well. Although these are relatively technical matters often thought of as within the remit of accounting and legal professionals of a specific company, I am regularly reminded that, in the aggregate, these details matter to all Americans.”

Structured Data – SEC Commissioner Crenshaw Discusses Structured Data (XBRL)

SEC Commissioner Caroline A. Crenshaw recently discussed structured data (XBRL) and the need to provide better data going forward. Crenshaw indicated that she believes XBRL data is delivering a myriad benefits, “there is room for improvement in terms of the quality and accuracy of the data. Some users have found material error rates in data tagged in our filings, including errors in tags that are likely to be crucially important to investors like Revenues, Net Income, and Assets, and scaling errors that can be impactful.”

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AUDITING AND INTERNAL CONTROL HEADLINES:
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HUD Programs – 2021-2022 Edition of Knowledge-Based Audits of Housing and Urban Development Programs (Post-SAS-134) Published

We have published the 2021-2022 edition of Knowledge-Based Audits of Housing and Urban Development Programs (Post-SAS-134). This publication highlights professional standards, including recent pronouncements, for CPAs involved in audit and attestation engagements.

This edition also provides guidance on the implementation of the standards and rules promulgated by the ASB, as well as selected best practices based on the guidance promulgated by the PCAOB and other regulators. This guide has been updated to incorporate the provisions of the following ASB Statements on Auditing Standards (SASs):

• SAS No. 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements;
• SAS No. 135, Omnibus Statement on Auditing Standards—2019;
• SAS No. 137, The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports;
• SAS No. 138, Amendments to the Description of the Concept of Materiality;
• SAS No. 139, Amendments to AU-C Sections 800, 805, and 810 to Incorporate Auditor Reporting Changes from SAS No. 134;
• SAS No. 140, Amendments to AU-C Sections 725, 730, 930, 935, and 940 to Incorporate Auditor Reporting Changes from SAS Nos. 134 and 137; and
• SAS No. 141, Amendment to the Effective Dates of SAS Nos. 134-140.

Public Entities – 2021-2022 Edition of Knowledge-Based Audits of Public Entities Published

We have published the 2021-2022 edition of Knowledge-Based Audits of Public Entities. The tools in this publication are designed to help the auditor efficiently and effectively perform financial statement audits and, when applicable, audits of internal control over financial reporting, of nonpublic commercial entities in accordance with auditing standards promulgated by the PCAOB.

This new edition reflects current authoritative literature, including PCAOB auditing standards, and is current through standards and rules issued through June 2021. The 2021-2022 tools include links to specific guidance that provides instant access to detailed analysis related to the steps and processes discussed in the workpapers. Many new tips and examples have been incorporated. Also included are revised financial statement disclosures checklists that provide a centralized resource of the required and recommended U.S. GAAP and SEC disclosures and key presentation items currently in effect, using the style referencing under the FASB Accounting Standards Codification.TM

Real Estate Entities – 2021-2022 Edition of Knowledge-Based Preparation, Compilation, and Review Engagements of Real Estate Entities (Post-SSARS-25) Published

We have published the 2021-2022 edition of Knowledge-Based Preparation, Compilation, and Review Engagements of Real Estate Entities (Post-SSARS-25). This publication examines all applicable review, compilation, and preparation engagement standards and shows you how to conduct engagements in the most efficient and thorough manner possible.

This new edition is current through and incorporates the provisions of Statement on Standards for Accounting and Review Services No. 25 (SSARS-25), Materiality in a Review of Financial Statements and Adverse Conclusions, issued in 2020, and the AICPA Guide Preparation, Compilation and Review Engagements. SSARS-25 is effective for engagements performed in accordance with SSARSs for periods ending on or after December 15, 2021. Early implementation is permitted.

Misstatements – New Edition of GAAS Update Service Discusses AU-C Section 450

We have published a new edition of the GAAS Update Service, A Refresher on Evaluating Misstatements in an Audit: AU-C Section 450, "Evaluation of Misstatements Identified During the Audit." This new edition addresses the evaluation of misstatements identified during the audit pursuant to the requirements of AU-C Section 450. The October 30, 2021, GAAS Update Service focused on materiality in planning and performing an audit pursuant to the requirements of AU-C Section 320.

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GOVERNMENT HEADLINES:
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Conduit Debt Obligations – New Edition of Governmental GAAP Update Service Discusses GASB 91

We have published a new edition of the Governmental GAAP Update Service, GASB-91 – A Sleeper That Will Wake Soon. This new edition discusses GASB No. 91, Conduit Debt Obligations, and the pronouncement’s potential impact on your government.

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