Accounting Research Manager^TM

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ACCOUNTING AND SEC HEADLINES:
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Goodwill – FASB Seeks Input on Certain Identifiable Intangible Assets and the Subsequent Accounting for Goodwill

The FASB issued an Invitation to Comment (ITC) seeking stakeholder input on the accounting for certain identifiable intangible assets acquired in a business combination and subsequent accounting for goodwill. Stakeholders are asked to comment on the ITC by October 7, 2019.

Private companies and not-for-profit organizations currently have accounting alternatives on this topic. However, in preliminary outreach with public company stakeholders, the FASB staff received mixed feedback on whether the utility of the information currently being provided justifies the cost of providing it. Therefore, the staff is seeking further input from a broader base of stakeholders to inform the FASB’s future deliberations.

After receiving comments, the FASB will host a formal roundtable (at a to-be-determined date) to supplement stakeholders’ feedback.

Related Parties – New Editions of Related Party Interpretations Published
We have published updated editions of our Related Party accounting interpretations Accounting for Sales, Purchases and Transfers of Assets between Related Parties, and Sample Disclosures for Related-Party Transactions, These editions have been updated for requirements issued through May 31, 2019. Users of this content should consider guidance issued subsequent to this date to determine their effect.

See our Literature Update for complete details.

Digital Assets – Joint Staff Statement on Broker-Dealer Custody of Digital Asset Securities Published
Market participants have raised questions concerning the application of the federal securities laws and the rules of the Financial Industry Regulatory Authority (“FINRA”) to the potential intermediation of digital asset securities and transactions. The staffs of the Division of Trading and Markets and FINRA have issued a joint statement that articulates various considerations relevant to many of these questions, particularly under the SEC’s Customer Protection Rule applicable to SEC registered broker-dealers.

Volker Rule – SEC and Other Agencies Adopt Rule to Exclude Community Banks from the Volcker Rule
The SEC and four other federal financial regulatory agencies announced that they adopted a final rule to exclude community banks from the Volcker Rule, consistent with the Economic Growth, Regulatory Relief, and Consumer Protection Act.

The Volcker Rule generally restricts banking entities from engaging in proprietary trading and from owning, sponsoring, or having certain relationships with hedge funds or private equity funds. Under the final rule, which is unchanged from the proposal, community banks with $10 billion or less in total consolidated assets and total trading assets and liabilities of 5 percent or less of total consolidated assets are excluded from the Volcker Rule.

The final rule also permits a hedge fund or private equity fund, under certain circumstances, to share the same name or a variation of the same name with an investment adviser as long as the adviser is not an insured depository institution, a company that controls an insured depository institution, or a bank holding company.

Codification Improvements – New Edition of GAAP Update Service Discusses ASU 2019-04
We have published a new edition of the GAAP Update Service. This new edition discusses ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815 Derivatives and Hedging, and Topic 825, Financial Instruments. ASU 2019-04 makes numerous changes that clarify or otherwise improve the accounting for financial instruments.

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AUDITING AND INTERNAL CONTROLS HEADLINES:
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Employee Benefit Plans – AICPA Issues New Auditing Standard on Employee Benefit Plans Subject to ERISA
The Auditing Standards Board (ASB) of the AICPA has published Statements on Auditing Standards (SAS), 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA.

A long-awaited standard, SAS 136 creates new AU-C section 703 in AICPA Professional Standards to address the auditor’s responsibility to form an opinion on the financial statements of employee benefit plans (EBPs) subject to the Employee Retirement Income Security Act of 1974 (ERISA).

The ASB developed SAS 136 to enhance the communicative value and transparency of the auditor’s report for ERISA plan financial statements. SAS 136 also includes performance requirements specific to auditing ERISA plans relating to engagement acceptance, audit risk assessment, and response relating to plan provisions, communication of reportable findings to those charged with governance, and responsibilities relating to the ERISA-required supplemental schedules.

Among other requirements, the new SAS 136 includes provisions that:

• Relate to acceptance of ERISA plan engagements;
• Provide that the auditor’s opinion should be based on an evaluation of the audit evidence obtained, including evidence obtained about comparative financial statements;
• Cover communications with management and those charged with governance;
• Requires the auditor to request additional written representations from management specifically relating to ERISA rules; and
• Relate to ERISA Form 5500 reporting requirements.

SAS 136 is effective for audits of ERISA plan financial statements for periods ending on or after December 15, 2020. Early implementation is not permitted.

Other Information – AICPA Issues New Auditing Standard on Other Information
The Auditing Standards Board (ASB) of the AICPA has published SAS, 137, The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports.

SAS 137 addresses an auditor’s responsibilities relating to other information, whether financial or nonfinancial information, included in an entity’s annual report. The ASB designed the new requirements with the expectation that they would provide transparency related to the auditor’s responsibility for other information included in an annual report when the auditor has obtained all the other information at the date of the auditor’s report on the financial statements. For purposes of SAS 137, an entity’s annual report may be a single document or a combination of documents that serve the same purpose.

SAS 137 provides that other information is financial or nonfinancial information (other than financial statements and the auditor’s report thereon) included in an entity’s annual report. Other information may include amounts or other items that are intended to be the same as, to summarize, or to provide greater detail about amounts or other items in the financial statements and other amounts or other items about which the auditor has obtained knowledge in the audit. Other information may include nonfinancial information.

The AICPA also expects SAS 137 to reduce diversity in practice with respect to other information and documents considered to be within its scope.

The new ASB Other Information standard supersedes SAS 118, Other Information in Documents Containing Audited Financial Statements, as amended (AICPA, Professional Standards, AU-C sec. 720).

SAS 137 is effective for audits of financial statements for periods ending on or after December 15, 2020. Early implementation is not permitted.

Public Entities – 2019-2020 Edition of Knowledge-Based Audits of Public Entities Published
We have published the 2019-2020 edition of Knowledge-Based Audits™ of Public Entities. The tools in this publication is designed to help the auditor efficiently and effectively perform financial statement audits and, when applicable, audits of internal control over financial reporting, of public entities in accordance with auditing standards promulgated by the PCAOB.

This edition of the publication reflects current authoritative literature, including PCAOB auditing standards, and is current through standards and rules issued through June 2019. The 2019-2020 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™. The audit program specific to broker/dealers has been removed and the procedures related to the audit of broker/dealers have been integrated into the appropriate related financial statement line item area for better workflow.

See our Literature Update for complete details.

Auditing Standards – New Edition of GAAS Update Service Discusses SAS 135
We have published a new edition of the GAAS Update Service. This new edition discusses the AICPA’s Auditing Standards Board (ASB) issued Statement on Auditing Standards No. 135 (SAS-135), Omnibus Statement on Auditing Standards—2019, to more closely align the AICPA’s standards for auditors of nonpublic companies with the auditing standards of the PCAOB.

Critical Audit Matters – PCAOB Publishes Resource for Audit Committees
Beginning in 2019, certain public companies’ auditors will be required to communicate critical audit matters (CAMs) in the auditor’s report. The new requirement for CAMs is a result of the PCAOB’s 2017 standard AS 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, which made significant changes to the auditor’s report. The PCAOB has published a document, Audit Committee Resource: Critical Audit Matters. This document aims to inform audit committees as they engage with their auditors on the new CAM requirements.

Critical Audit Matters – PCAOB Publishes Resource for Investors
Beginning in 2019, certain public companies’ auditors will be required to communicate critical audit matters (CAMs) in the auditor’s report. The new requirement for CAMs is a result of the PCAOB’s 2017 standard AS 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, which made significant changes to the auditor’s report. The PCAOB has published a document, Investor Resource: Critical Audit Matters. This document aims to inform investors of the auditor’s report and CAMs.

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GOVERNMENT HEADLINES:
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GASB Omnibus – GASB Proposes Omnibus Standard on Accounting and Financial Reporting Issues
The Governmental Accounting Standards Board (GASB) has issued the exposure draft, Omnibus 20xx. This proposal includes draft guidance addressing various accounting and financial reporting issues identified during the implementation and application of certain GASB pronouncements. The comment deadline is October 4, 2019.

Proposed amendments in this Omnibus exposure draft include:

• The effective date of GASB Statement No. 87, Leases, to address concerns regarding interim financial reports;
• Reporting of intra-entity transfers of assets between a primary government employer and a component unit pension plan or other postemployment benefit (OPEB) plan;
• The applicability of Statement 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68, as amended, and Statement 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, as amended, to reporting assets accumulated for pensions and OPEB;
• The applicability of certain requirements of Statement 84, Fiduciary Activities, to pension and OPEB arrangements; and
• Measurement of liabilities and assets, if any, related to asset retirement obligations in a government acquisition.

IT Arrangements – New Edition of Governmental GAAP Update Service Discusses GASB Proposal
We have published a new edition of the Governmental GAAP Update Service. This new edition discusses the GASB proposal on Subscription Based Information Technology Arrangements (SBITAs). Comments are due to the GASB by August 23, 2019. If approved as proposed, implementation would be for fiscal years beginning after June 15, 2021.

Critical Audit Matters – PCAOB Publishes Resource for Audit Committees
As discussed above, beginning in 2019, certain public companies’ auditors will be required to communicate critical audit matters (CAMs) in the auditor’s report. The new requirement for CAMs is a result of the PCAOB’s 2017 standard AS 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, which made significant changes to the auditor’s report. The PCAOB has published a document, Audit Committee Resource: Critical Audit Matters. This document aims to inform audit committees as they engage with their auditors on the new CAM requirements.

Critical Audit Matters – PCAOB Publishes Resource for Investors
As discussed above, beginning in 2019, certain public companies’ auditors will be required to communicate critical audit matters (CAMs) in the auditor’s report. The new requirement for CAMs is a result of the PCAOB’s 2017 standard AS 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, which made significant changes to the auditor’s report. The PCAOB has published a document, Investor Resource: Critical Audit Matters. This document aims to inform investors of the auditor’s report and CAMs.

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