Accounting Research Manager

image of a marble-sized globe sitting on a pile of paperwork
Weekly Summary of Accounting, SEC and Auditing Developments: July 1-5, 2024

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.

==============================

ACCOUNTING AND SEC HEADLINES:

==============================

A Closer Look – New Edition of A Closer Look Published

We have published a new A Closer Look, New SEC Rules for SPACs. This new edition discusses the SEC’s new rules to enhance the disclosure requirements for initial public offerings (IPOs) and business combinations by special purpose acquisition companies, commonly referred to as SPACs.

The new rules address shortcomings in rules governing SPAC transactions. Most of the changes focus on legal matters such as the safe harbor for forward-looking statements, and disclosures regarding sponsors, sponsor compensation, conflicts of interest, fairness, and dilution.

Some of the new rules affect the financial statement requirements of a private operating company that is acquired by a SPAC. This reflects the SEC’s goal of better aligning the disclosures provided through the SPAC process with the disclosures investors receive when a company goes public via a traditional IPO.

The new rules become effective July 1, 2024.

SEC Disclosure Review – Corp Fin Director Provides Update to Disclosure Review

Gerding, Director of the SEC’s Division of Corporation Finance (Corp Fin), recently discussed the state of disclosure for fiscal year 2023 and provided some of Corp Fin’s disclosure priorities for fiscal year 2024. Corp Fin’s annual report review program is the primary mechanism that it uses to monitor and enhance compliance with disclosure rules and accounting requirements in periodic reports filed by public companies.

Gerding indicates that while the nature of comments varies significantly depending on the specific facts for each company, the top areas of comment in fiscal year 2023 included, among others, China-related matters, non-GAAP disclosures, Management’s Discussion and Analysis, revenue recognition, and financial statement presentation. Emerging areas of focus in 2023 included:

  • Market disruptions in the banking industry;
  • Cybersecurity risks;
  • The impact of inflation; and
  • Disclosure related to newly adopted rules, such as pay versus performance.

Priorities identified by Gerding for 2024 include certain financial reporting topics, especially areas that involve judgment or where the FASB or the IASB have recently issued accounting standards, are generally areas of particular focus, including:

  • Segment reporting, including compliance with new U.S. GAAP disclosures effective in annual periods beginning after December 15, 2023;
  • Compliance with non-GAAP regulations and rules;
  • Critical accounting estimates disclosure in Management’s Discussion and Analysis; and
  • Disclosures related to supplier finance programs in the notes to the financial statements and any related information in Management’s Discussion and Analysis.

In addition to the above 2024 financial reporting topics, Corp Fin anticipates that many of the disclosure priorities from 2023 will continue through the upcoming year, including:

  • Corp Fin continues its focus on China-Based Companies and eliciting disclosure from companies on material risks they face from the PRC government intervening in, or exercising control over, their operations in the PRC.
  • While it appears that inflation is beginning to come down, this is not the time for issuers to revert to boilerplate disclosures. Any material ongoing impacts should be disclosed and Corp Fin asks companies to not just note high level trends, but discuss the more particularized risks and impacts on their specific company.
  • Given the market disruptions in the banking industry that began about a year ago, Corp Fin will be continuing to take a close look at updated disclosures related to interest rate risk and liquidity risk.

Environmental Credits – New Edition of GAAP Update Service Published

We have published a new edition of the GAAP Update Service, Environmental Credits. This new edition provides background on the specific types of environmental credits under discussion at the FASB and related accounting questions. The Appendix summarizes how the IASB is addressing similar issues.

=========================================

AUDITING AND INTERNAL CONTROL HEADLINES:

=========================================

A Closer Look – New Edition of A Closer Look Published

As discussed above, we have published a new A Closer Look, New SEC Rules for SPACs. This new edition discusses the SEC’s new rules to enhance the disclosure requirements for initial public offerings (IPOs) and business combinations by special purpose acquisition companies, commonly referred to as SPACs.

The new rules address shortcomings in rules governing SPAC transactions. Most of the changes focus on legal matters such as the safe harbor for forward-looking statements, and disclosures regarding sponsors, sponsor compensation, conflicts of interest, fairness, and dilution.

Some of the new rules affect the financial statement requirements of a private operating company that is acquired by a SPAC. This reflects the SEC’s goal of better aligning the disclosures provided through the SPAC process with the disclosures investors receive when a company goes public via a traditional IPO.

The new rules become effective July 1, 2024.

Quality Management – SSAE No. 23 Published

The AICPA’s Auditing Standards Board (ASB) has published Standard for Attestation Engagements (SSAE) No. 23, Amendments to the Attestation Standards for Consistency With the Issuance of AICPA Standards on Quality Management. SSAE 23 revises the standards pertaining to attestation engagements and are intended to “align them with the AICPA standards pertaining to quality management, and related financial statement audit and non-audit standards.”

The most significant change introduced by SSAE No. 23 is the deletion of the defined term “other practitioner” and replacing it with two new terms, “participating practitioner” and “referred-to practitioner.” Respectively, these terms refer to other practitioners who are part of the engagement team and those who are not. The performance and reporting requirements were also revised to differentiate between the types of other practitioner.

The standards amended by SSAE 23 are:

  • SSAE No. 18, Attestation Standards: Clarification and Recodification;
  • SSAE No. 19, Agreed-Upon Procedures Engagements;
  • SSAE No. 21, Direct Examination Engagements; and
  • SSAE No. 22, Review Engagements.

SSAE No. 23, along with the quality management standards, is effective for engagements performed in accordance with the SSAEs beginning on or after December 15, 2025.

Audit Sampling – New Edition of GAAS Update Service Published

We have published a new edition of the GAAS Update Service, A Refresher on Audit Sampling: AU-C Section 530, “Audit Sampling.” This new edition discusses AU-C Section 530, Audit Sampling, which applies when the auditor decides to use audit sampling in performing audit procedures to draw conclusions about the population from which the sample is selected.

=======================
GOVERNMENT HEADLINES:
=======================

Governmental GAAP Guide – 2025 Edition of Governmental GAAP Guide Published

We have published the 2025 edition of Governmental GAAP Guide. This publication is written with the recognition that financial professionals who work with state and local governments must stay current with emerging governmental standards or face unfortunate consequences.

This edition of the publication has been updated throughout with the very latest information on the following GASB standards either recently implemented or in the process of being implemented as of the date of this publication:

  • GASB-99 (Omnibus 2022);
  • GASB-100 (Accounting Changes and Error Corrections);
  • GASB-101 (Compensated Absences);
  • GASB-102 (Certain Risk Disclosures);
  • GASB-103 (Financial Reporting Model Improvements); and
  • GASB-104 (Disclosure and Classification of Certain Capital Assets).

Green Book – GAO Issues Draft Updates to "Green Book”

The U.S. Government Accountability Office (GAO) issued for public comment an exposure draft of proposed revisions to Standards for Internal Control in the Federal Government, also known as the Green Book. The Green Book provides the overall framework for establishing and maintaining an effective internal control system that helps management adapt to shifting environments, evolving demands, changing risks, and new priorities.

Since the Green Book was last revised in September 2014, events such as a pandemic and cyber-attacks have highlighted the challenges managers face when addressing risks related to fraud, improper payments, information security, and the implementation of new or substantially changed programs, including emergency assistance programs. This Green Book revision provides additional requirements, guidance, and resources for addressing these risk areas when designing, implementing, and operating an effective internal control system. This update also emphasizes preventive control activities and the need for internal control at all levels and within all functions of an entity’s organizational structure.

To ensure that the standards meet the needs of the federal community and the public it serves, the Comptroller General convened an advisory council of those knowledgeable in internal control systems drawn from federal, state, and local government; the private sector; and academia. This Green Book 2024 exposure draft includes the advisory council’s input.

The draft is available for public comment from June 27 through August 26, 2024.

Financial Audit Manual – New Edition of GAO’s Financial Audit Manual Published

The GAO has published a new edition of its Financial Audit Manual (FAM), Volumes 1 and 2. The FAM presents a methodology for performing financial statement audits of federal entities in accordance with professional standards.

The current revision reflects changes in auditing financial statements of federal entities since the last revision of FAM volumes 1 and 2 in May 2023. The revisions are primarily based on changes in:

  • Professional auditing standards of the Auditing Standards Board of the AICPA (Statements on Auditing Standards Nos. 143, 144, 145, and 147); and
  • Audit guidance in the Office of Management and Budget’s Bulletin No. 24-01, Audit Requirements for Federal Financial Statements, issued on October 19, 2023.

GASB Technical Plan – New Edition of Governmental GAAP Update Service Published

We have published a new edition of the Governmental GAAP Update Service, Tearing Open the Current GASB Technical Plan. This new edition reviews the current GASB Technical Plan and what may be in store for practitioners in the future.

================================================

ACCOUNTING RESEARCH MANAGER CUSTOMER SERVICE:

================================================

To access the detailed information that accompanies these weekly summary announcements, you will need to request a free trial of Accounting Research Manager. Once you complete your request and accept the license agreement, you will receive an email with your password/ID to access the database. As a KnowledgeLeader member, you will receive a 15% discount on your subscription to Accounting Research Manager if you decide to purchase. To ensure you receive this discount, please input the promo code "KnowLead" in the Contact field when requesting your trial.

Discover more about Accounting Research Manager's various product offerings.

For inquiries, contact Accounting Research Manager: 

Monday through Friday, between 8:00 a.m. to 5:00 p.m. U.S. Central Time:

US, Canada, Mexico: 1-800-872-2454

All International calls: 1-781-718-4841

Email: [email protected]

Free Trial

Sign up for a free, no-obligation trial to start exploring our timesaving, valuable resources.