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ACCOUNTING AND SEC HEADLINES:
Goodwill – FASB Issues Alternative to Goodwill Triggering Event Assessment
The FASB has issued an Accounting Standards Update (ASU) that provides an accounting alternative expected to reduce the complexity for private companies and not-for-profit organizations when performing the goodwill triggering event evaluation.
Under current GAAP, goodwill must be tested for impairment when a triggering event occurs that indicates that it is more likely than not that the fair value of the reporting unit is below its carrying value. Companies and organizations are required to monitor for and evaluate goodwill triggering events when they occur throughout the year.
Some stakeholders raised questions about the value of evaluating a triggering event at an interim date when certain private companies and not-for-profit organizations only issue GAAP-compliant financial statements on an annual basis. They noted the cost and complexity of preparing interim balance sheets and projecting cash flows that, according to those stakeholders, may not be relevant at the annual reporting date when financial statements are issued.
To address this, FASB Accounting Standards Update (ASU) No. 2021-03, Intangibles—Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events
, provides an accounting alternative that allows private companies and not-for-profit organizations to perform a goodwill triggering event assessment, and any resulting test for goodwill impairment, as of the end of the reporting period, whether the reporting period is an interim or annual period. It eliminates the requirement for companies and organizations that elect this alternative to perform this assessment during the reporting period, limiting it to the reporting date only.
The scope of the alternative is limited to goodwill that is tested for impairment in accordance with Subtopic 350-20, Intangibles—Goodwill and Other—Goodwill
. The amendments in the ASU are effective on a prospective basis for fiscal years beginning after December 15, 2019. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance as of March 30, 2021. An entity should not retroactively adopt the amendments in this Update for interim financial statements already issued in the year of adoption.
The amendments in the ASU also include an unconditional one-time option for entities to adopt the alternative prospectively after its effective date. No additional disclosures would be required.
Checklist – New Edition of Summary Checklist of Recent Authoritative U.S. Accounting Standards Published
We have published a new edition of our “CCH Accounting Research Manager Summary Checklist of Recent Authoritative U.S. Accounting Standards." This new edition reflects the issuance of Accounting Standards Update (ASU) No. 2021-03, which is discussed above.
GAAP Checklists – New Edition of U.S. GAAP Disclosures Checklists Published
We have published new editions of the General U.S. GAAP Financial Statement Disclosures Checklist
, the General U.S. GAAP Interim Financial Statement Disclosures Checklist
, and our various Industry-Specific Disclosures Checklists
. These new editions have been updated as necessary for the disclosure and presentation requirements in effect as of March 31, 2021.
These checklists include changes made by the FASB to the FASB Accounting Standards Codification™
through ASU No. 2021-03, which is discussed above.
SEC Checklists – New Edition of SEC Checklists Published
We have updated the following SEC disclosure related checklists through March 31, 2021:
- Financial Statement Disclosures This checklist outlines the required SEC disclosures for financial statements included in 1934 and 1933 Act domestic filings that are incremental to U.S. GAAP. The checklist is organized by topic.
- Management's Discussion and Analysis This checklist outlines the required SEC disclosures for MD&A included in 1934 and 1933 domestic filings, including Forms 10-K and S-1 .
- Incremental Certifications, Disclosures, and Reporting Mandated by Sarbanes-Oxley This checklist outlines the certification, disclosure and reporting requirements resulting from the SEC rules mandated by the Sarbanes-Oxley Act of 2002.
- SEC Form 10-Q checklist This checklist is for financial and nonfinancial information included in Form 10-Q and is organized by form item number.
We have updated these checklists to reflect SEC Final Rule, Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information. This final rule eliminates certain disclosures within MD&A.
We have also updated these checklist to reflect SEC staff guidance on confidential treatment requests for certain documents. This process permits companies to object to the public release of confidential information that is otherwise required to be filed.
Industry-Specific Checklists – New Editions of Industry-Specific Checklists Published
We have published new editions of the following industry-specific checklists thru March 31, 2021:
Revenue Recognition – FASB Ratifies EITF Consensus
- Depository and Lending Institutions;
- Employee Benefit Plans;
- Health Care Entities;
- Not-for-Profit Entities;
- Oil and Gas; and
- Real Estate.
As reported in its “Summary of Board Decisions” publication, the FASB met on March 24, 2021, and ratified EITF Issue No. 19-B, “Revenue Recognition: Contract Modifications of Licenses of Intellectual Property.” The FASB discussed the project direction based on the recommendation of the EITF at its March 11, 2021 meeting. The FASB removed the project from its technical agenda and will consider the issue as part of the Post-Implementation Review process of Topic 606, Revenue from Contracts with Customers
IFRS – IASB Proposes New Approach to Developing Disclosure Requirements in IFRS
The IASB is seeking public comments on a new approach to developing disclosure requirements in IFRS Standards and new disclosure requirements for the Standards on fair value measurement and employee benefits. These proposals would enable companies to enhance their judgment and reduce ‘boilerplate’ information, giving investors more useful information.
The notes in financial statements sometimes include too little relevant information, too much irrelevant information and information disclosed ineffectively. Stakeholders say this typically occurs when the requirements in IFRS Standards are treated like a checklist without applying effective judgment.
Responding to stakeholder demand for the IASB’s help in addressing these issues, the IASB has set out a new approach to developing the disclosure requirements in IFRS Standards. Disclosure requirements developed using this approach are intended to better enable companies, auditors and others to make more effective materiality judgments and thus provide disclosures that are more useful to investors.
The new approach is written as draft guidance for use by the IASB when developing disclosure requirements in individual Standards. In applying this guidance, the IASB aims to:
- Enhance investor engagement to ensure the IASB has an in-depth understanding of investors’ information needs and clearly explains those needs in the Standards;
- Give greater prominence to the objective of disclosure requirements, requiring companies to apply judgment and provide information to meet the described investor needs; and
- Minimize requirements to disclose particular items of information, and instead to help companies focus on disclosing material information only.
The IASB has tested this new approach using two IFRS Standards—IFRS 13, Fair Value Measurement
and IAS 19, Employee Benefits
—and has proposed amendments to the disclosure requirements in those Standards in the Exposure Draft.
The IASB is seeking stakeholder feedback on whether the proposed new approach to developing disclosure requirements and proposed amendments to IFRS 13 and IAS 19 would help companies and others improve the usefulness of information disclosed.
The IASB developed the proposals as part of its Disclosure Initiative—Targeted Standards-level Review of Disclosures project. The project is part of the IASB’s work under the theme Better Communication in Financial Reporting and is one of several projects aimed at improving disclosures in the financial statements.
PPP Loans – AICPA’s Center for Plain English Accounting Publishes Guide on PPP Loans
The AICPA’s Center for Plain English Accounting has published Accounting for PPP
. This publication provides guidance on accounting for PPP loans.
AUDITING AND INTERNAL CONTROLS HEADLINES:
Revenue Recognition – New Edition of AICPA Audit and Accounting Guide Published
The AICPA has published a new edition of Audit and Accounting Guide, Revenue Recognition
. This new edition has been developed by the AICPA Industry Revenue Recognition Task Forces, Revenue Recognition Working Group, and Auditing Revenue Task Force, to assist practitioners in performing and reporting on their audit engagements and to assist management in the preparation of their financial statements in accordance with U.S. generally accepted accounting principles (GAAP).
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